By Dan Strumpf
U.S. stocks fell Thursday, pulling back a day after the Federal
Reserve's cautious stance on interest rates spurred strong
gains.
The Dow Jones Industrial Average dropped 117.16 points, or
0.65%, to 17959.03, while the S&P 500 index lost 10.23 points,
or 0.5%, to 2089.27.
Shares of energy companies posted some of the sharpest losses as
oil prices retreated, with the S&P 500 Energy Index shedding
1.7%.
Other market barometers posted gains. The Nasdaq Composite Index
rose 9.55 points, or 0.2%, to 4992.38. The Russell 2000 index,
which tracks shares of small-capitalization companies, rose 2.72
points, or 0.2%, to 1254.86--its second straight all-time high.
In its statement on monetary policy Wednesday, the Fed dropped
its promise to remain "patient" before lifting interest rates, a
widely expected shift that opened the door to rate increases this
year. But downbeat economic forecasts and comments by Fed
Chairwoman Janet Yellen indicated the central bank remains in no
hurry to raise rates. That stance caught many investors off guard
and sent shares rallying, then prompted a modest pullback
Thursday.
"I just think it's a little bit of a breather, post that
somewhat surprising move" on Wednesday, said Brian Fenske, head of
sales trading at ITG. "We are in a period where [stocks] are
dominated by macro headlines."
On Thursday, the dollar resumed its climb, with the euro falling
1.6% to $1.0642.
Shares of Apple Inc. fell 0.8% on its first day of trading as a
Dow component. Shares of AT&T Inc., replaced by Apple in the
Dow, fell 1.2%.
Stocks have seen wide swings this month as investors wrestle
with the Fed's shifting monetary policy and the impact of the
strengthening dollar on corporate earnings. The Dow is down 1% this
month, but it's up 0.8% for the year.
Many investors say the Fed's caution on interest rates bodes
well for stocks. Michael Ball, portfolio manager at Weatherstone
Capital Management, which oversees $785 million, said the Fed's
actions on Wednesday have helped ease fears of an imminent rate
rise.
"I think that Janet Yellen played it masterfully," he said.
"They've given themselves more wiggle room than they have in the
past."
Mr. Ball said he recently sold out of his position in energy
stocks, amid the steep slide in oil prices. He boosted his
weighting in transportation and technology shares instead.
The Fed's first rate increase is likely to spark volatility
across markets. However, the Fed has linked rate increases to
evidence of an improving economy, which tends to boost corporate
profits, said Art Hogan, chief market strategist at Wunderlich
Securities. "By the time the Fed starts to lift off it's going to
see significant improvement in the economy, and that's good for
stocks," he said.
European markets were mixed. Germany's DAX slipped 0.2% while
France's CAC 40 gained 0.1%.
In commodity markets, crude-oil futures declined 1.6% to $43.96
a barrel. Gold futures gained 1.5% to $1169.10 an ounce.
Treasury prices fell, lifting the 10-year yield to 1.977%,
compared with 1.945% on Wednesday.
Home builder Lennar Corp. reported stronger-than-expected
results in the first quarter as a continuing recovery in the
housing market led to a rise in deliveries and prices. Shares fell
0.1%.
Shares of Target Corp. fell 0.6% after announcing plans to boost
the pay of all its workers to at least $9 an hour starting next
month, following similar moves by rivals Wal-Mart Stores Inc. and
TJX Cos.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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