News Analysis: Wall Street ends mixed as Fed casts doubt on future moves

Source: Xinhua| 2019-09-19 07:47:53|Editor: ZD
Video PlayerClose

NEW YORK, Sept. 18 (Xinhua) -- U.S. equities closed mixed on Wednesday after the Federal Reserve cut interest rates but failed to signal clearly about its future policy, disappointing investors.

The Dow Jones Industrial Average rose 36.28 points, or 0.13 percent, to 27,147.08. The S&P 500 increased 1.03 points, or 0.03 percent, to 3,006.73. The Nasdaq Composite Index fell 8.62 points, or 0.11 percent, to 8,177.39.

Six of the 11 primary S&P 500 sectors finished higher, with utilities and financials up 0.47 percent and 0.43 percent, respectively, outpacing the rest. Energy dropped 0.42 percent, the worst-performing group.

"The market doesn't like uncertainty and although the much anticipated quarter of a point cut was put into play, it seems as though the Federal Open Market Committee (FOMC) is a house divided when it comes to making decisions regarding the way forward," Mark Otto, an experienced trader at the New York Stock Exchange, told Xinhua on Wednesday.

"S&P 500 utilities which are seen as a defensive play during times of uncertainty outperformed all other sectors. The biggest laggard was the energy sector which is seen as a growth play," he said, when commenting on the market movement after the Fed's decision.

U.S. Federal Reserve on Wednesday lowered interest rates by 25 basis points amid growing risks and uncertainties stemming from trade tensions and a global economic slowdown, following a rate cut in July that was its first in more than a decade.

The FOMC, the Fed's rate-setting body, trimmed the target for the federal funds rate by 25 basis points to a range of 1.75 percent to 2 percent after concluding its two-day policy meeting, largely in line with market expectation.

Despite strong labor market and robust growth in household spending, "business fixed investment and exports have weakened," the FOMC said in a statement.

Meanwhile, seven out of the 17 Fed officials expect one more rate cut this year, and the central bank's median forecasts for rates suggested no more cut this year, according to the latest FOMC participants' assessments of appropriate monetary policy, which was also released on Wednesday.

"Our eyes are open, we're watching the situation," Fed Chairman Jerome Powell said at a press conference Wednesday afternoon, without specifying the Fed's next move.

"It is a double-edged sword that we are dealing with," said Otto, adding that "it's easier to make predictions when the Fed consistently uses dovish language that leads us to believe that they are ready and waiting to support the economy in an accommodating manner."

Calling "the Fed communication is tricky," Chris Low, chief economist at FTN Financial, said in a note on Wednesday that a 50 basis points cut would be preferable as it would come closer to normalizing the curve, "but the Fed is hung up on moving slowly, despite its own advice to the contrary when operating in a low rate environment."

U.S. President Donald Trump again lashed out at the central bank shortly after the rate cut announcement, saying in a tweet that "Jay (Jerome) Powell and the Federal Reserve Fail Again. No 'guts,' no sense, no vision! A terrible communicator!" The president had repeatedly demanded a larger cut.

In response to a question regarding Trump's comment, Powell reaffirmed the central bank's independence. "I assure you that my colleagues and I will continue to conduct monetary policy without regard to political considerations. We're going to use our best judgment based on facts, evidence and objective analysis in pursuing our goals," he said. Enditem