Late-Day Pullback Leads To Lower Close On Wall Street - U.S. Commentary

(RTTNews) - After seeing moderate strength throughout much of the trading session, stocks came under pressure going into the close on Wednesday. The late-day pull by the markets led to the fifth consecutive session of losses by the major averages.

The major averages ended the day modestly lower. The Dow slipped 34.65 points or 0.2 percent to 17,640.17, the Nasdaq edged down 8.62 points or 0.2 percent to 4,834.93 and the S&P 500 dipped 3.82 points or 0.2 percent to 2,071.50.

The lower close on Wall Street came even as the Federal Reserve seemed to offer a dovish assessment of the outlook for interest rates.

With the Fed leaving rates unchanged as was widely expected, the focus was largely on the central bank's accompanying statement and updated forecasts.

The statement said data received since the last Fed meeting indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up.

The comments about the labor market come after a Labor Department report showed that employment increased by much less than expected last month.

The Fed also said market-based measures of inflation compensation declined, although it was a little more upbeat on household spending.

The updated forecasts also showed that six Fed officials now expect only rate hike by the end of the year compared to just one who made that predication in March.

In her subsequent press conference, Fed Chair Janet Yellen suggested the upcoming referendum on Britain remaining in the European Union influenced the Fed's decision.

Responding to the news, Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "A July rate hike is still possible, but it would require a meaningful rebound in payroll employment growth in June and a decisive U.K. vote to remain in the European Union."

"The most likely scenario is that the Fed waits until September to raise interest rates again, to a range of between 0.50% and 0.75%," he added.

The Fed announcement largely overshadowed a slew of U.S. economic data released earlier in the day, including a report showing a bigger than expected pullback in industrial production in the month of May.

Sector News

Despite the late-day pullback by the major averages, substantial strength remained visible among gold stocks. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index surged up by 4.1 percent.

The strength among gold stocks came as the price of the precious metal moved to the upside in electronic trading in response to the Fed announcement.

Steel stocks also held on to strong gains, resulting in a 2.9 percent jump by the NYSE Arca Steel Index. U.S. Steel (X) posted a standout gain after Bank of America/Merrill Lynch upgraded its rating on stock to Neutral from Underperform.

Most of the other major sectors ended the day showing only modest moves, although some weakness emerged among utilities and health care stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both rose by 0.4 percent, while China's Shanghai Composite Index surged up by 1.6 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index jumped by 1 percent, the German DAX Index and the U.K.'s FTSE 100 Index advanced by 0.9 percent and 0.7 percent, respectively.

In the bond market, treasuries turned higher over the course of the session after seeing initial weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 1.596 percent.

Looking Ahead

Reaction to the Fed may continue to impact the markets on Thursday, although traders are also likely to keep an eye on reports on consumer prices, jobless claims, and homebuilder confidence.