The benchmark S&P 500 index ended almost flat on Wednesday as Federal Reserve policymakers gave mixed signals about their next move after cutting interest rates by a quarter of a percentage point in a widely expected move.
The U.S. central bank, on a 7-3 vote, lowered the Fed funds target rate to a range of 1.75 per cent to 2.00 per cent “in light of the implications of global developments for the economic outlook as well as muted inflation pressures,” although it said the U.S. economy continues to grow at a “moderate” pace and the labor market “remains strong.”
The rate cut fell short of the more aggressive reduction in borrowing costs that President Donald Trump had demanded.
At a news conference following the policy decision, Fed Chair Jerome Powell said rates were lowered to keep the economy strong and provide insurance against risk, adding that the Fed is closely monitoring economic data, trade and global growth risks.
"The Fed's cut was in line with consensus expectations," said Mark Grant, managing director and chief global strategist at B. Riley FBR, Inc in Fort Lauderdale, Florida. "Their future outlook will certainly not please our president. Chairman Powell's position that we are in a 'mid-cycle adjustment' seems to be what has driven the Fed to their conclusion."
The Dow Jones Industrial Average rose 36.35 points, or 0.13 per cent, to 27,147.15, the S&P 500 gained 1.02 points, or 0.03 per cent, to 3,006.72 and the Nasdaq Composite dropped 8.62 points, or 0.11 per cent, to 8,177.39.
In Toronto, S&P/TSX Composite index was unofficially down 34.46 points, or 0.2 per cent, at 16,800.29.
Six of the index’s 11 major sectors were higher.
The energy sector dropped 1.5 per cent as oil prices extended their decline after Saudi Arabia said it would quickly restore full production following last weekend’s attacks on its facilities.
The materials sector, which includes precious and base metals miners, lost 1.4 per cent as copper prices fell on Wednesday as concern about demand and economic growth dominated sentiment.
Leading the index were West Fraser Timber Co Ltd., up 5.4 per cent, Bombardier Inc., up 2.7 per cent, and SNC-Lavalin Group Inc., higher by 2.6 per cent.
Lagging shares were Ensign Energy Services Inc., down 10.2 per cent, Birchcliff Energy Ltd., down 6.2 per cent, and Precision Drilling Corp., lower by 4.7 per cent.
The MSCI world equity index, which tracks shares in 47 countries, fell 0.35 per cent.
The U.S. Treasury yield curve flattened as Powell spoke, with the 2-year gaining ground against the benchmark 10-year.
Benchmark 10-year notes last rose 6/32 in price to yield 1.7944 per cent, from 1.814 per cent late on Tuesday. The 30-year bond last rose 27/32 in price to yield 2.2413 per cent, from 2.28 per cent late on Tuesday.
The U.S. dollar strengthened to a near seven-week high against the yen following the Fed’s rate cut. The dollar index rose 0.27 per cent, with the euro down 0.36 per cent to $1.1031.
The Japanese yen weakened 0.19 per cent versus the greenback at 108.37 per dollar, while sterling was last trading at $1.2494, down 0.05 per cent on the day.
Oil prices edged lower after Saudi Arabia said it would quickly restore full production following last week’s attacks on its facilities and as U.S. crude stockpiles unexpectedly increased.
Tension in the Middle East remained elevated, however. Saudi Arabia on Wednesday displayed remnants of what it described as Iranian drones and cruise missiles used in the attack, calling them “undeniable” evidence of Iranian aggression. Trump ordered a major increase in sanctions on Iran on Wednesday, following repeated U.S. assertions that Iran was behind the attack.
U.S. crude oil futures settled down 2.07 per cent at $58.11 per barrel, while Brent crude oil futures settled at $63.60 per barrel, a 1.47-per-cent decline.
Spot gold reversed early gains after the Fed released its statement. Spot gold dropped 0.8 per cent to $1,489.80 an ounce.
Copper lost 0.27 per cent to $5,805.00 a tonne.