Wall Street slides after Fed hints rate cuts unlikely

Source: Xinhua| 2019-05-02 12:37:00|Editor: Yamei
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NEW YORK, May 1 (Xinhua) -- U.S. equities staged a late-session pullback on Wednesday after the Federal Reserve announced to leave the interest rates unchanged and indicated early rate cuts unlikely.

The stocks traded on an upbeat note since market opening, underpinned by rally Apple shares and strong U.S. jobs data. However, volatility occurred in late session as Wall Street digested the Fed's announcement and the top-rank Fed official's remarks.

At the close, the Dow Jones Industrial Average decreased 162.77 points, or 0.61 percent, to 26,430.14. The S&P 500 was down 22.10 points, or 0.75 percent, to 2,923.73. The Nasdaq Composite Index dropped 45.75 points, or 0.57 percent, to 8,049.64.

The U.S. Federal Reserve on Wednesday left interest rates unchanged and downplayed concerns about weak inflation, as the central bank saw no need to alter its "patient" approach on interest-rate moves.

In a statement after concluding a two-day policy meeting, the Fed said the Federal Open Market Committee, the Fed's policy-making body, decided to maintain the benchmark rate in a range of 2.25 percent to 2.5 percent.

Soon after the Fed issued its statement, stock prices rose modestly, building on their early gains. But the positive tendency was short-lived.

The benchmark rate is important since it influences the cost of borrowing for mortgages and all sorts of consumer and business loans.

Investors had largely expected the U.S. central bank to hold off on a rate hike. They also came into the statement looking for clues on inflation from the Fed.

Data released earlier this week showed the core personal consumption expenditure (PCE) price index, a preferred inflation gauge by the Fed, remained unchanged in March and was up 1.6 percent year over year, below the central bank's target of 2 percent.

Some analysts expected the Fed might signal a rate cut to spur economic growth.

"A rate cut today would be the right call. It was a mistake to hike in December and the Fed's risk-management approach should acknowledge the risk of lower-than-desired inflation and slowing domestic demand," Chris Low, chief economist at FTN Financial, said in a note on Wednesday.

However, the Fed dashed hopes for any potential coming rate cuts.

Fed Chairman Jerome Powell said at a news conference that the central bank's policy stance "is appropriate" at the moment and "we don't see a strong case for moving in either direction," adding that the recent weakness in price pressures is likely transitory and inflation will return to the target of 2 percent over time.

All the three major indices turned negative after Powell's remarks.

Meanwhile, the U.S. dollar strengthened against its major rivals in late trading after Fed's stance on interest rates amid low inflation pressure.

"The Fed's comments may have had an effect on currency. The U.S. dollar reversed and rallied against the yen and euro this afternoon also adding more pressure to equities," John Monaco, an experienced trader at New York Stock Exchange, told Xinhua.

The dollar index, which measures the greenback against six major peers, rose 0.21 percent at 97.6878 in late trading.

In late New York trading, the U.S. dollar bought 111.59 Japanese yen, higher than 111.36 Japanese yen of the previous session. The euro fell to 1.1194 dollars from 1.1221 dollars in the previous session.