U.S. equities retreat, bonds gain after Fed
U.S. stocks fell, while Treasurys rose after the Federal Reserve maintained its support for the economy.
Policymakers strengthened their view of the economy and said that recent increases in inflation looked "transitory," reassuring investors that the central bank is in no hurry to tap the brakes on growth. The dollar was lower, the 10-year Treasury rate was at 1.61% and gold was little changed.
"No news is good news as far as the market is concerned because it means the Fed will remain accommodative for the near future," said Ellen Hazen, portfolio manager and principal at F.L. PutnamWealth Management. "This is a Goldilocks Fed. It is exactly what the equity markets are looking for."
The Fed decision came as investors parsed the latest batch of corporate earnings reports. Alphabet Inc. rose to a record after its results showed a surge in ad sales. Microsoft Corp. was among the biggest drags, dropping to a three-week low after the software maker failed to deliver the blockbuster results some analysts were looking for. All of the main U.S. equity gauges closed lower.
Among other earnings-related news, Boeing Co. dropped after it burned through more cash than expected in the first quarter, and Texas Instruments Inc. fell the most in two months after it gave a sales forecast that some analysts saw as weak.
With stock valuations about 25% above their five-year average, investors have been searching for new catalysts to sustain the bull market momentum.
A string of encouraging data and rapid vaccination progress have boosted optimism about growth prospects in the developed world, reviving the so-called reflation trade in recent days. A release Thursday may show the U.S. gross domestic product increased an annualized 6.8% in the first quarter.
Crude-oil futures rose after OPEC+ expressed confidence in the demand outlook with plans to boost supply, even India's raging covid-19 crisis is causing near-term pressure.
These are some of the main moves in markets:
Stocks
- The S&P 500 fell 0.1% as of 4:01 p.m. EDT
- The Nasdaq 100 fell 0.4%
- The Dow Jones industrial average fell 0.5%
- The MSCI Emerging Markets Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.2% to $1.2129
- The British pound rose 0.2% to $1.3947
- The Japanese yen rose 0.1% to 108.59 per dollar
Bonds
- The yield on 10-year Treasurys declined one basis point to 1.61%
- Germany's 10-year yield advanced two basis points to -0.23%
- Britain's 10-year yield advanced two basis points to 0.80%
Commodities
- West Texas Intermediate crude rose 1.2% to $64 a barrel
- Gold futures were little changed
