The TSX, Dow and S&P 500 ended a choppy session lower on Wednesday after the Federal Reserve reassured investors of its support for the economy but projected a 6.5% decline in gross domestic product this year.
The Nasdaq, helped by gains in Microsoft and Apple, managed to hold onto a good chunk of its gains and registered a closing record high for a third straight session.
In its latest policy statement, the Fed also forecast a 9.3% unemployment rate at year’s end, and officials saw the key overnight interest rate, or federal funds rate, remaining near zero through at least 2022.
The S&P 500 and Dow both moved between gains and losses after the statement, which included the Fed’s first projections on the economy since the coronavirus outbreak, and following comments from Fed Chairman Jerome Powell.
“You may think about what you expected the Fed to say and do but then you might put a finer pencil to what the implications are. Clearly the implications are that rates are pegged at zero for a long time,” said Tom Martin, senior portfolio manager at Globalt in Atlanta.
“The projections for GDP and for unemployment are that it’s going to improve slowly from here, but it still takes a while to get back. And that’s a reality that takes a while to sink in, that it takes a while to get back to where you were.”
Unofficially, the Dow Jones Industrial Average fell 282.86 points, or 1.04%, to 26,989.44, the S&P 500 lost 17.12 points, or 0.53%, to 3,190.06 and the Nasdaq Composite added 66.59 points, or 0.67%, to 10,020.35.
The S&P/TSX Composite Index closed down 132.41 points, or 0.84%, at 15,701.33.
Bank shares, which tend to benefit from rising rates, fell in both the U.S. and Canada. Royal Bank of Canada was down 1.48% and the financials sector lost an even greater 1.77% overall. An S&P index of U.S. bank shares, fell 5.8% in its biggest daily percentage decline since April 15, and the S&P 500 financial index was the biggest drag on the benchmark index.
The S&P 500 was off as much as 0.8% before the Fed statement. The Fed’s pledge to keep monetary policy loose until the U.S. economy is back on track repeats a promise made early in the central bank’s response to the coronavirus pandemic.
On the TSX, energy stocks led decliners, with the sector falling 4.24%, even as oil prices closed higher, wiping out earlier losses.
Crude’s gains came despite U.S. data showing oil inventories rose to a record high, reviving worries of a persistent glut due to weak demand.
Crude stocks rose by 5.7 million barrels in the week to June 5 to 538.1 million barrels, according to a U.S. Energy Information Administration report.
Product demand rose, however, though it remains far below levels at this time last year. Distillate inventories were higher, but the increase was smaller than in prior weeks.
“We are seeing support in the market coming from products and not crude,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Brent crude settled up 55 cents to $41.73 a barrel. U.S. West Texas Intermediate (WTI) rose 66 cents to $39.60 after falling more than 2% in the session.
The U.S. Energy Department said on Wednesday that it had purchased 126,000 barrels of crude for the U.S. strategic reserve, supporting prices.
The inventory build exceeded analysts’ expectations and was built on the third consecutive week of big imports from Saudi Arabia, which came to more than 1.5 million bpd. During a price war between Saudi Arabia and Russia in March and April, the kingdom boosted exports.
Brent has more than doubled since falling to a 21-year low below $16 in April, but some analysts think prices have risen too far with the pandemic still cutting demand.
“The macro factor that has supported the energy complex for more than a month could subside significantly as the strong advance in the equities is beginning to appear overcooked,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and others, a group known as OPEC+, slashed oil supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand. OPEC+ agreed on Saturday to extend the record supply cut for another month until the end of July.
Read more: Stocks that saw action on Wednesday - and why
Reuters, Globe staff
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.