By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The Dow Jones Industrial Average
snapped a four-day winning streak on Thursday, after the Federal
Reserve made official its plans to end the last round of its
recession-era stimulus program.
Most major stock benchmarks slipped lower, after an initial
knee-jerk bout of panic, in the wake of the Fed's policy decision,
which came just after 2 p.m. Eastern time. Stocks did recover
somewhat, but still ended Wednesday's trading session in the
red.
Although the Fed said it would keep fed funds rate at zero,
investors appeared to be caught off guard by the Fed's upbeat view
on the labor market and inflation. In its accompanying statement
after its two-day meeting, the Fed explicitly said it could raise
interest rates sooner than markets have forecast, if the economy
grows faster than the bank projects. It was the first time the Fed
made such explicit remarks about how quickly it could hike
rates.
Despite the choppy trading, there's good news to be gleaned from
the U.S. central bank's posture. The Fed's view implies the U.S.
economy is on firmer footing.
But the markets had hoped for more signs that a low-rate policy
would be maintained for an extended period.
The S&P 500 (SPX) closed 2.75 points, or 0.1%, lower at
1,982.30. The Nasdaq Composite Index, which was already under
pressure from Internet stocks (RIXF) lost 15 points, or 0.3%, to
4,549.23. Meanwhile, the Dow industrials (DJI) ended down 31.44
points, or 0.2%, at 16,974.
Read also: The end of QE may usher in an era of uncertainty,
volatility
Phil Orlando, chief equity strategist at Federated Investors,
expects more volatility in the next few days as investors fully
digest the Fed's decision, but ultimately believes that the end of
QE is a positive for stocks.
"The Fed is normalizing policy and the only reason they are
doing so now is because they believe the economy is in a good
shape. Now the focus is on the interest rate, which is likely to
stay at near zero until next June," Orlando said.
Tech stocks under pressure: Tech stocks were not shaping up for
a repeat of Tuesday's gains. In large part, Facebook is to blame.
The social-media giant issued a warning about increased expenses,
which overshadowed better-than-expected earnings. Although results
in the past year have been impressive and hard to beat, tougher
comparisons and higher spending are on investors' minds, said
Pacific Crest Securities' analyst Evan Wilson, in a note.
Facebook's stock selloff weighing on tech-sector tracker
Facebook Inc. joins Twitter Inc. (TWTR) in dealing with what's
been a tough week for some Internet stocks. Twitter fell nearly 10%
on Tuesday after the social-media company's results showed slowing
growth in new users and analysts downgraded the stock. Read:
Facebook user growth may be slowing too
More stocks to watch: Hershey Co.(HSY)(HSY) shares fell as the
chocolate maker missed profit expectations and cut its outlook.
WellPoint Inc.(WLP) shares rose after it posted adjusted
earnings that beat forecasts.
Goodyear Tire & Rubber Co.(GT) stock rallied after the tire
maker reported third-quarter profit that was well above
expectations.
U.S. Steel Corp. (X) shares jumped after posting a
narrower-than-expected loss and higher revenue late Tuesday.
InvenSense Inc.(INVN) shares slid after the
micro-electro-mechnical systems designer posted second-quarter
results that fell short of market expectations. Pacific Crest
downgraded shares to sector perform from underperform.
Orbital Sciences(ORB) slumped after one of the company's rockets
exploded soon after lift off. On Sunday, Orbital announced it was
launching an Antares rocket with a Cygnus logistics spacecraft to
the International Space Station. Here's the dramatic footage.
Electronic Arts Inc.(EA) rallied after second-quarter results
topped Wall Street forecasts and the video-game publisher raised
its outlook. See Movers & Shakers for more on individual
stocks.
Other markets: European stocks rose slightly, while Asian
markets took a cue from Wall Street's strong gains on Tuesday and
powered ahead.
In the wake of the Fed announcement, 10-year Treasury note yield
extended gains, but trimmed gains to trade 2 basis points higher to
2.35%. The dollar(DXY) strengthened against the Japanese yen to
Yen108.9, while Gold(GCZ4) futures dropped about 1.5%. Oil(CLZ4)
logged moderate gains.
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