Stocks closed mixed after a brief rally in the afternoon as the Federal Reserve’s remark that it was ready to provide “additional accommodation” failed to have long-lasting impact on investors’ minds. Policymakers at the Federal Reserve appeared concerned about the low level of inflation and indicated they would take more steps to stimulate the economic recovery. As expected, the Federal Reserve kept the overnight interest rate unchanged near historic lows.
Even though there were no concrete promises in the central bank’s statement, it appeared the Fed was moving toward loose monetary policy. To spur economic growth, the Fed has the option of purchasing Treasury bonds and pumping in more money into the economy to encourage borrowing.
Yesterday, the Dow Jones Industrial Average edged up 7 points, or 0.1%, to close at 10,761. The broader S&P 500-stock index slipped nearly 3 points, or 0.3%, to 1139.78 and the tech-heavy Nasdaq Composite index fell more than 6 points, or 0.3%, to 2349.35. On the New York Stock Exchange, volume picked up slightly as declining stocks beat advancing shares by a two-to-one margin.
After the Fed’s announcement, Treasury prices rallied sending corresponding yields sharply lower. The yield on the 10-year note dropped to 2.576% from 2.70%. The market’s measure of volatility, the CBOE Vix index jumped 4% to 22.35. Crude prices, often viewed as a proxy for global growth expectations, declined $1.22 to $74.97. Gold prices spiked in late afternoon trading and touched a record high of $1292 an ounce.
Meanwhile, the dollar dropped to a 6-week low against the euro. The greenback was trading at its lowest in more than a month against a basket of foreign currencies.
Seven of the ten S&P 500 industry sectors closed with losses. Leading the declining sectors were financials (-1.1%), utilities (-0.5%), and materials (-0.4%). Those leading on the upside were telecommunication shares (+0.3%), health care (+0.04%), with industrials flat on the session.
This morning’s stock futures indicate a slightly lower opening. In Asia, the Nikkei 225-stock average dropped 0.4% as shares of exporters took a hit on a strengthening yen. The Hang Seng closed at a 5-month high, up 0.2%, as property shares rallied. However, European bourses retreated upon a weak auction for Portuguese debt that saw $1.0 billion raised versus the $1.3 billion initially sought. Yields were also high for the 4- and 10-year bonds, though demand was strong.
