S&P widens loss after Fed statement, energy shares tumble

NEW YORK (Reuters) – The S&P 500 extended its losses slightly on Thursday afternoon after a Federal Reserve statement, and energy stocks led the declines as oil prices fell.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., November 7, 2018. REUTERS/Brendan McDermid

The U.S. central bank said ongoing strong job gains and household spending were keeping the economy on track but business investment “moderated from its rapid pace earlier in the year,” creating a possible drag on future economic growth.

Aside from the Fed’s comment about business investments, many investors said the statement was largely as expected and suggested that the Fed’s next rate hike would be in December.

But some investors were hoping for a change in tone.

“There are those people who are unsatisfied by this statement because they were looking for a more dovish tone after last month’s market volatility,” said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle in Minneapolis. “That’s why we see short-term yields ticked up and stocks down here. They are still on track.”

At 3:17PM ET, the Dow Jones Industrial Average .DJI fell 33.22 points, or 0.13 percent, to 26,147.08, the S&P 500 .SPX lost 11.76 points, or 0.42 percent, to 2,802.13 and the Nasdaq Composite .IXIC dropped 55.15 points, or 0.73 percent, to 7,515.61.

The S&P bank index .SPXBK erased its gains and turned negative after the news as bank profits benefit from rising rates.

Energy stocks were the S&P’s biggest drag with a 2.1 percent decline as U.S. crude oil futures CLc1 entered a bear market, falling more than 20 percent from their Oct. 3 high. [O/R]

The Wall Street Journal reported that Saudi Arabia’s top government-funded think-tank is studying the possible effects on oil markets of a breakup of OPEC in a story citing unnamed people familiar with the matter.

Declining issues outnumbered advancing ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.24-to-1 ratio favored decliners.

The S&P 500 posted 33 new 52-week highs and two new lows; the Nasdaq Composite recorded 72 new highs and 71 new lows.

Additional reporting by Richard Leong, April Joyner, Caroline Valetkevitch, Lewis Krauskopf and Jessica Resnick-Ault in New York and Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and James Dalgleish

Our Standards:The Thomson Reuters Trust Principles.

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