US stock markets swung between big gains and losses after the Fed kept interest rates near zero. Investors struggled to decide how to interpret the decision and what it means for the health of the US economy.
Wall Street gave up a rally of more than 1 percent on Thursday, after the Federal Reserve decided to hold off on a long-awaited interest rate increase.
The three major US indexes all hit session highs, rising more than 1 percent for awhile during Fed Chair Janet Yellen’s press conference. But right after the central bank’s announcement, trading was choppy with the major US indexes briefly turning negative, before reversing course and turning positive again.
The Dow Jones industrial average fell 0.30 percent to close at 16,674, while the S&P 500 lost 0.26 percent to 1,990. The Nasdaq Composite added 0.10 percent to 4,893.
George Rusnak – from Wells Fargo Investment Institute in Princeton, New Jersey – said there were some “hints or guidance” in the Fed statement that a rate hike may not even happen this year.
“There’s a little bit of relief obviously that it’s not happening today, but there are questions and head-scratching as to when it will happen,” he told the news agency Reuters.
The guessing game about when the Fed will change monetary policy has dogged Wall Street for months – a situation that has been complicated in recent weeks by market turbulence linked to slowing growth in China and to worries about the health of the global economy.
“There was just too much global uncertainty right now, and the risk of raising rates from zero is different from raising rates if you’re at 4 percent,” Steve Gutch, Senior Portfolio Manager with Federated Investors, told Reuters. He expects market volatility to continue, while investors wait again.
US Fed winners and losers
Utility stocks loved the Fed’s decision to stand pat. Investors are betting these high-dividend stocks will continue to feast on cheap borrowing costs. Big winners include PG&E and DTE Energy.
On the other hand, banking stocks like those from Bank of America, Fifth Third Bancorp and Comerica retreated. The industry had been hoping the Fed would move because higher rates make it easier for banks to earn money from loans.
uhe/el (Reuters, AFP, dpa)