Major Wall Street indexes gave up a 1-percent rally to end lower on Thursday after the Federal Reserve cited concerns about global economic growth in its decision to hold off on raising interest rates.The U.S. central bank held rates steady in a bow to worries about the global economy, financial market volatility and sluggish inflation at home, but it left open the possibility of a modest policy tightening later this year.The S&P financial index .SPSY led the decline after being among the top performers throughout the prior five sessions. The decline in financial stocks, which benefit from higher rates, alongside the rise in utility stocks suggest that investors now believe interest rates will remain low for longer than previously expected. Investors’ focus turned to the next Fed meeting on Oct. 27-28 as they were still left to figure out the timing for the Fed’s first benchmark rate increase since 2006. Trading was extremely choppy after the Fed’s 2 p.m. statement, with major U.S. indexes swinging between session highs and lows. The three major U.S. indexes all rose more than 1 percent for a while during Fed Chair Janet Yellen’s 2.30 p.m. press conference, but then retreated.
“All the uncertainty that was in the market leading up to this meeting is still in place. There was very little clarity given,” said John Culbertson, chief investment officer of Context Asset Management in Philadelphia.”You’re going to hear the same conversation in the markets for the next 30 days that you heard in the last 90 days,” he said, citing difficulties making “high-conviction trades.”Questions about when the Fed will shift gears have dogged Wall Street for months – a situation complicated in recent weeks by market turbulence linked to slowing growth in China and worries about the health of the global economy.
“In our minds it was the correct decision. The inflation data does not support a rate hike at this time. You throw in some of the global turbulence and (that) supports the decision to leave rates unchanged,” said Brian Rehling, co-head of global fixed income at Wells Fargo in St. Louis. The Dow Jones industrial average .DJI fell 65.21 points, or 0.39 percent, to 16,674.74, the S&P 500 .SPX lost 5.11 points, or 0.26 percent, to 1,990.2 and the Nasdaq Composite .IXIC added 4.71 points, or 0.1 percent, to 4,893.95.Ahead of the news, U.S. interest rates futures had indicated only a 25-percent …Read More