Wall Street closed mostly lower on Thursday as the Federal Reserve kept interest rates unchanged while signaling another hike in December. Moreover, energy stocks tumbled as benchmark US crude oil futures entered a bear market. The S&P 500 and Nasdaq Composite ended in the red while the Dow maintained its winning run.
The Dow Jones Industrial Average (DJI) closed at 26,191.22, gaining 10.92 points. However, the S&P 500 Index (INX) declined 0.3% to close at 2,806.83. The Nasdaq Composite Index (IXIC) closed at 7,530.88, dropping 0.5%. A total of 7.23 billion shares were traded on Thursday, lower than the last 20-session average of 8.43 billion shares. Decliners outnumbered advancers on the NYSE by 1.26-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.18-to-1 ratio. The CBOE VIX increased 2.2% to close at 16.72.
How Did the Benchmarks Perform?
The Dow ended in positive territory for the fourth-straight day. Notably, 18 components of the 30-stock blue-chip index closed in the green while the remaining 12 finished in the red.However, the tech-laden Nasdaq Composite closed in negative territory after two-consecutive days of win, due to weak performance of large-cap technology stocks.
Meanwhile, the S&P 500 also closed in the red reversing its three-day winning streak. The Energy Select Sector SPDR (XLE) and Communication Services Select Sector SPDR (XLC) lost 2.2% and 0.9%, respectively. Notably, six out of total 11 sectors of the benchmark index closed in the red while five finished in the green.
Fed Signals for Tighter Monetary Policy
Per the statement issued at the conclusion of its two-day policy meeting, the Federal Open Market Committee (FOMC), the policymaking body of the Fed, unanimously agreed to keep benchmark interest rates unchanged for the time being.
However, the policymakers have also decided to maintain federal fund rate unchanged within the range of 2% to 2.25%. Absence of any major changes from the FOMC’s September commentary has prompted several industry watchers to believe that the central bank may raise rate for the fourth time this year in December.
The Fed stated that the risks to the economic outlook “appear roughly balanced”. Strong job gains and higher consumer spending will ensure near-term growth of the economy. However, the Fed has noted that the pace of business fixed investment has “moderated”. Inflation will likely to stay around the target rate of 2%.
The central bank refrained from commenting on the severe stock market volatility in October. It is widely believed in the industry circles that the Fed Chair Jerome Powell’s statements hinted at another rate hike this year, accelerated the stock market rout the last month.
US Crude Oil Price Plunges
On Nov 8, U.S. benchmark West Texas Intermediate (WTI) crude oil future price for December delivery fell $1 or 1.7%, to settle at $60.67 a barrel on the New York Mercantile Exchange. This was the ninth straight loss for the U.S. benchmark crude prices and its lowest close since March.
Further, the closing price of U.S. crude on Nov 8 was 20.6% lower than its recent high of a little over $76 per barrel recorded on Oct 3. A pullback of 20% or more from the recent peak has put U.S. crude in the bear market.
Consequently, shares of major oil producers like Exxon Mobil Corp. XOM, Chevron Corp. CVX and EOG Resources Inc. EOG declined 1.6%, 1.3% and 3.9%, respectively. EOG Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
On Nov 8, the Department of Labor reported that weekly initial jobless claims fell 1,000 to a seasonally adjusted 214,000 for the week ended Nov. 3, in line with the consensus estimate. Prior week’s data was revised upward by 1,000 to reflect 215,000 initial jobless claim. Moreover, continuing jobless claims figure dropped 8,000 to 1.62 million for the week ended Oct 27, its lowest level since July 28, 1973.
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