A gauge of global stocks fell on Wednesday, while the dollar fell against a basket of peers after the Federal Reserve left interest rates unchanged and said it was still leaning towards an eventual rate cut and after a series of US economic data.
But the Fed put a red flag on recent disappointing inflation data and suggested a possible slowdown in the move toward more balance in the economy.
The central bank
plans announced
to slow the pace of its balance sheet reduction, after spending much of the early part of the year warning of such a shift.
Sam Stovall, chief investment strategist at CFRA Research in New York, said the Fed’s policy statement contained no major surprises.
“That statement is going through with a fine-tooth comb, and if there is any response up or down today, it will be as a result of the responses at the press conference,” he said.
He pointed to employment figures to be released at the end of this week, which will be closely watched. “But there are several things that I think will hold the market back,” Stovall said. “Among them is the persistence of inflation, the actual inflation rates, the concern that we are seeing a slowdown in economic growth based on the recent GDP numbers, combined with PMI data, and consumer confidence being weaker than expected.”
On Wall Street, the S&P 500 was slightly lower in choppy trading following the Fed’s policy announcement, after all major indexes ended April with their first monthly declines since October.
The Dow Jones Industrial Average rose 172.78 points, or 0.46%, to 37,986.53, the S&P 500 lost 3.66 points, or 0.07%, to 5,032.03, and the Nasdaq Composite rose 0.38 points, or 0.00%, to 15,658.20.
Previously, data from the ADP Employment Report showed that U.S. private payrolls rose more than expected in April, while data for the previous month was revised higher.
But a separate report from the Bureau of Labor Statistics in its Job Openings and Labor Turnover Survey, or JOLTS, showed that the number of U.S. job openings fell to a three-year low in March, while the number of people leaving their jobs fell, indicating an easing of labor market conditions that could potentially help the Fed in its fight against inflation.
Other data from the Institute for Supply Management pointed to continued sluggishness in the U.S. manufacturing sector, which contracted in April as orders fell after a brief expansion the previous month.
The data comes ahead of the government’s main employment report on Friday.
Markets have lowered expectations for the timing and amount of central bank rate cuts this year as inflation has proven stable and the labor market remains firm.
MSCI’s global stock index fell 0.94 points, or 0.12%, to 755.67.
Investors also grappled with a flood of U.S. corporate earnings, with Amazon.com up about 3% after its quarterly results, helping the Dow rise.
The dollar index fell 0.21% to 106.10 after the Fed statement, having previously reached 106.49, its highest since April 16, with the euro rising 0.22% to $1.0688.
The yield on the benchmark U.S. 10-year note fell 5.2 basis points to 4.632% from 4.684% late Tuesday, while the yield on 2-year notes, which normally keeps pace with interest rate expectations, fell 4.8 basis points fell to 4.9977%.
European bond markets were closed for the May Day holiday, as were most stock markets in Europe and those in China, Hong Kong and much of Asia.
Of the stock markets that did trade, the UK FTSE ended 0.28% lower and Japan’s Nikkei closed 0.34% lower.
Oil prices fell for a third day after rising hopes for a ceasefire in the Middle East and an extension of declines following the US EIA’s storage report.
U.S. crude lost 3.54% to $79.03 per barrel and Brent fell to $83.49 per barrel, down 3.29% on the day.
