U.S. stocks end mildly lower; ECB up next
NEW YORK (MarketWatch) -- U.S. stocks fell Wednesday after the Federal Reserve held pat on monetary policy and paved the way to further stimulus, with investors bracing for a gathering of European central bankers.
"Today's announcement was priced in; the markets got exactly what they expected. The fireworks are tomorrow," Jim Russell, chief equity strategist for U.S. Bank Wealth Management, said of expected stimulus from the European Central Bank after its meeting Thursday.
The U.S. central bank refrained from further easing moves, but noted economic activity had decelerated somewhat during the first half of the year. Read text of FOMC statement.
"We feel that is an important acknowledgment by the Fed. We want the Fed to see what we are seeing, it opens up their ability to address with monetary policy, aggressively with scale," said Russell.Read Rex Nutting's First Take.
The Dow Jones Industrial Average (DJIA) retreated 32.55 points, or 0.3%, to 12,976.13.
The S&P 500 index (SPX) lost 4 points, or 0.3%, to 1,375.32, with energy the best performing and utilities the worst of its 10 major industry sectors.
The Nasdaq Composite (COMP) fell 19.31 points, or 0.7%, to 2,920.21.
Decliners outpaced advancers roughly nine to five on the New York Stock Exchange, where composite volume topped 4.3 billion. Nasdaq's composite volume edged past 1.7 billion.
Early trading was marked by unusual volumes and large swings in many large-cap stocks.
Compared to the Fed, the expectation bar is far higher for Thursday's European Central Bank meeting in the wake of comments last week. German Chancellor Angela Merkel and French President Francois Hollande echoed ECB President Mario Draghi in pledging to do whatever it takes to protect the euro. Read full story of expectations for Draghi.
"We got a very constructive and positive reaction from the markets on Thursday and Friday last week, and now the markets are expecting follow-through," said Russell of U.S. Bank Wealth Management.
"If we don't get it, the markets are possibly set up for disappointment," he said. "That is frankly why on Monday, Tuesday and Wednesday, [the markets] have done nothing but go sideways."
Art Hogan, equity strategist at Lazard Capital Markets LLC, said: "They'll have to produce something; promising to do whatever is needed and that it will be enough is a difficult act to follow." He was referring to statements last week by ECB President Mario Draghi.
Wednesday U.S. economic reports included better-than-expected data on the labor market, which boosted optimism ahead of the government's nonfarm payrolls data due on Friday. ADP Employer Services said companies added 163,000 jobs in July compared to a revised 172,000 in June. See details of ADP data.
"The interesting one would be the ADP employment change, ISM [the Institute for Supply Management] was a little lower, but nothing surprising," said Matt Lloyd, chief investment strategist at Advisors Asset Management.
For Lloyd, an uncertain climate has curbed hiring, but the underlying trends are largely positive, with average hours worked rising. Companies are using a "flexible labor pool, where they aren't hiring that much, but working employees longer," he said.
Lazard's Hogan said: "ADP was better than expected, but it also was last month and we still got a bad nonfarm payrolls report."
The Institute for Supply Management's manufacturing index remained under the 50% level for a second month. That was a cause for concern for Mickey North Rizza, vice president of strategic services at supply management consultant BravoSolution: "Portions of the industry are doing fairly well, and others are not. Everything is in a holding pattern." Read story on manufacturing.