Negative Reaction To Fed Statement Weighs On Wall Street - U.S. Commentary

(RTTNews) - With traders reacting negatively to the Federal Reserve's monetary policy announcement, stocks moved sharply lower over the course of the trading day on Wednesday. The losses on the day partly offset the rally seen in the previous session.

The major averages saw considerable volatility on the day before closing firmly in negative territory. The Dow tumbled 222.77 points or 1.4 percent to 15,944.46, the Nasdaq plunged 99.51 points or 2.2 percent to 4,468.17 and the S&P 500 slumped 20.68 points or 1.1 percent to 1,882.95.

Stocks came under pressure late in the session on the heels of the Federal Reserve's first monetary policy announcement of the new year.

As was widely expected, the Fed left interest rates unchanged after raising rates for the first time in nearly a decade last month.

The Fed stressed it is closely monitoring global economic and financial developments and reiterated its expectation that economic conditions will evolve in a manner that warrant only gradual rate increases.

The sell-off on Wall Street seemed to reflect dissatisfaction with the fact that the Fed did not completely rule out a rate hike at its next meeting in March.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, a March rate hike is still possible, but it will require signs of improvement in the incoming economic data and financial markets that may not show up quickly enough."

"Nevertheless, we still think that once the worst fears about China blow over and U.S. economic growth rebounds, the Fed will end up raising interest rates more rapidly than expected in the second half of this year," he added.

The Fed statement largely overshadowed a report from the Commerce Department showing that new home sales increased by much more than expected in the month of December.

The report said new home sales jumped 10.8 percent to an annual rate of 544,000 in December from the revised November rate of 491,000. Economists had expected sales to climb to a rate of 500,000.

With the much bigger than expected, new home sales reached their highest annual rate since hitting 545,000 last February.

Traders also shrugged off a rebound by the price of crude oil, as crude for March delivery climbed $0.85 to $32.30 a barrel after falling as low as $30.14 a barrel in early trading.

Earlier in the session, a negative reaction to earnings news from Boeing (BA) and Apple (AAPL) weighed on the major averages.

Shares of Boeing ended the day down by 8.9 percent after the aerospace giant reported fourth quarter results that exceeded estimates but forecast 2016 results below expectations.

Tech giant Apple also posted a notable loss after reporting better than expected fiscal first quarter earnings but on sales that came in shy of estimates. Shares of Apple fell by 6.6 percent.

The iPad and iPhone maker also provided disappointing guidance, forecasting its first drop in sales in thirteen years.

Sector News

Biotechnology stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 3.7 percent. With the drop, the index fell to its lowest closing level in well over a year.

Agios Pharmaceuticals (AGIO), Ionis Pharmaceuticals (IONS), and Alnylam Pharmaceuticals (ALNY) turned in some of the biotech sector's worst performances.

Significant weakness also emerged among internet stocks, as reflected by the 2.5 percent loss posted by the Dow Jones Internet Index. The index fell to a five-month closing low.

Networking, commercial real estate, software, and trucking stocks also came under pressure on the day, while strength was visible among gold and oil service stocks.

Other Markets

Overseas, stock markets across the Asia-Pacific region moved mostly higher on Wednesday. Japan's Nikkei 225 Index surged up by 2.7 percent, and Hong Kong's Hang Seng Index climbed by 1 percent. However, China's Shanghai Composite Index bucked the uptrend and fell by 0.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index jumped by 1.3 percent, the German DAX Index and the French CAC 40 Index advanced by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries jumped off their lows going into the close but still ended the day roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.001 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to earnings news from Facebook (FB), eBay (EBAY), and Qualcomm (QCOM), which are releasing their quarterly results after the close of today's trading.

Alibaba (BABA), Bristol-Myers (BMY), Caterpillar (CAT), Ford (F), Hershey (HSY), and JetBlue (JBLU) are also among the companies due to report their results before the start of trading on Thursday.

Traders are also likely to keep an eye on the release of U.S reports on weekly jobless claims, durable goods orders, and pending home sales.