UPDATE: Dow snaps four-day winning streak as stocks finish day with modest losses
By Mark DeCambre, MarketWatch , Sunny Oh
Bulls restrained by Fed outlook, lackluster U.S. economic data
U.S. stocks finished Thursday with losses, but were well off the session lows, as investors digested Federal Reserve Chairman Jerome Powell's dour economic outlook along with lackluster U.S. economic data.
How did equity benchmarks perform?
The Dow Jones Industrial Average closed 130.40 points, or 0.4%, lower at 27,901.98, after touching a low of 27,647.93. The S&P 500 index fell 28.48 points to end at 3,357.01, a decline of 0.8%, following a momentary dip below its 50-day moving average at around 3,339. The Nasdaq Composite Index retreated 140.19 points, or 1.3%, to 10,910.28.
On Wednesday (http://www.marketwatch.com/story/dow-futures-gain-altitude-for-a-third-session-as-investors-await-retail-sales-and-fed-update-2020-09-16), the Dow added 36.78 points, or 0.1%, to finish at 28,032.38, while the S&P 500 index shed 15.71 points, or 0.5%, closing at 3,385.49. The Nasdaq Composite Index fell 139.85 points, or 1.3%. The Russell 2000 index of small-capitalization companies, rose 14.18 points, or 0.9%, to close at 1,552.33.
What drove the market?
The Fed's warning Wednesday about a slow economic recovery that may need additional fiscal help, along with its expectation that near-zero interest rates will remain in force for a minimum of three years, created some uncertainty for investors hoping for further gains.
"We're at a point where we're wondering what's going to drive the next leg up, without an ongoing flow of positive developments," said Yung-yu Ma, chief investment strategist at BMO Wealth Management, in an interview.
A day after the Fed released its most recent policy update, (http://www.marketwatch.com/story/fed-sees-interest-rates-near-zero-until-end-of-2023-sets-new-economic-conditions-to-be-met-before-raising-rates-2020-09-16) investors said the U.S. central bank Chairman Jerome Powell may have unsettled the stock market by emphasizing the challenges facing the U.S. economy due to the pandemic.
The Fed's "dot plot" showed policymakers expect interest rates to stay near zero until at least 2023, despite the run-up in equity values this year, as the U.S. deals with millions of people who still are unemployed.
However, some analysts view the overall tone of the Fed's Wednesday statement as a positive for the market's future prospects.
"It is proof the Fed reaction function has changed. And it is bull fuel for the longer run," wrote Evercore ISI analysts Krishna Guha and Ernie Tedeschi in a note.
On U.S. fiscal policy, the prospects for another coronavirus aid package remain confused after news reports said Senate Republicans were unmoved (http://www.marketwatch.com/story/trumps-call-for-higher-numbers-for-fiscal-stimulus-meets-mixed-reactions-from-senate-gop-11600280704)by Trump's call for more spending.
Market participants also watched a reading of the health of the U.S. labor market. Weekly initial jobless benefit claims (http://www.marketwatch.com/story/us-jobless-claims-fall-in-mid-september-but-economy-still-appears-to-be-suffering-sizable-layoffs-2020-09-17)showed 860,000 Americans filed for unemployment benefits, lower than the estimated 870,000, with continuing claims at 12.63 million, but still reflecting very elevated unemployment levels.
Separately, the Philadelphia Fed manufacturing index (http://www.marketwatch.com/story/philly-fed-manufacturing-index-grows-at-slightly-slower-pace-in-september-2020-09-17) fell to 15 in September from 17.2 in prior month, suggesting a slowing pace of the recovery from the COVID-19 pandemic.
In other U.S. economic reports, U.S. home builders started construction (http://www.marketwatch.com/story/new-home-construction-slows-slightly-in-august-driven-by-pullback-in-multifamily-starts-2020-09-17)on homes at a seasonally adjusted annual rate of 1.42 million in August, representing a 5% decrease from the previous month, but a 3% uptick from a year ago, the U.S. Census Bureau reported Thursday.
There also were conflicting statements (http://www.marketwatch.com/story/trump-disputes-cdc-director-on-vaccine-rollout-blames-high-coronavirus-death-toll-on-blue-states-11600296669) on vaccine development from the government. The director of the U.S. Centers for Disease Control and Prevention, Robert Redfield, said a vaccine would be in "very limited supply" at the end of the year. President Trump claimed one would be ready for immediate use by the general public soon, potentially causing some downward momentum in equities.
Which stocks were in focus?
How did other markets fare?
The yield on the 10-year Treasury not (http://www.marketwatch.com/story/u-s-treasury-yields-slide-in-wake-of-fed-dovish-update-11600347937)e (http://www.marketwatch.com/story/u-s-treasury-yields-slide-in-wake-of-fed-dovish-update-11600347937) fell 0.4 basis point to 0.682%, the day after the Fed's decision. Bond prices move inversely to yields.
The ICE U.S. Dollar Index, which tracks the performance of the greenback against its major rivals, was off 0.3% at 92.90.
Gold futures (http://www.marketwatch.com/story/gold-prices-tumble-1-thursday-as-traders-react-to-fed-policy-2020-09-17) tumbled 1% to $1,949.90 an ounce on Comex. Futures for the U.S. crude oil benchmark (http://www.marketwatch.com/story/oil-prices-steady-as-traders-await-opec-committee-meeting-2020-09-17) gained 2% to settle at 40.97 a barrel after the Organization of the Petroleum Exporting Countries and its allies stressed the importance of complying with output cuts during their monthly meeting.
Global equities traded lower, with the Stoxx Europe 600 index (http://www.marketwatch.com/story/european-stocks-fall-dow-futures-slump-300-points-as-traders-react-to-fed-decision-11600328031) ending down 0.5%, and the U.K.'s benchmark FTSE 100 closing 0.5% lower. In Asia, Hong Kong's Hang Seng Index closed 1.6% lower and the Shanghai Composite lost 0.4%. Japan's Nikkei closed 0.7% lower.
-Mark DeCambre; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 17, 2020 16:42 ET (20:42 GMT)
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