By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Energy, materials stocks sell off as oil slide resumes
NEW YORK (MarketWatch) -- U.S. stocks ended Wednesday's choppy
trading session sharply lower after the Federal Reserve's
policy-making committee reiterated it plans to remain patient and
watch the data as it decides when to raise interest rates.
Sharp losses added to declines from Tuesday, when markets sold
off after disappointing earnings and economic data. A renewed slide
in oil prices Wednesday sent energy and materials stocks sharply
lower.
The Fed gave no sign that it is wavering on hiking interest
rates some time in the second half of 2015. The U.S. central bank
was upbeat about the economy, while the policy makers repeated that
they think inflation will move back to the 2% target after being
pushed down by temporary factors.
The statement was taken as hawkish and sent the dollar and
Treasurys sharply higher, as investors sought the safety of
havens.
The S&P 500 (SPX) closed 27.39 points, or 1.4%, lower at
2,002.23, with all 10 main sectors finishing in the red. The energy
sector fell 3.9%, as oil fell to lowest levels since March
2009.
The Dow Jones Industrial Average (DJI) dropped 195.84 points, or
1.1%, to 17,191.37, with 27 of its 30 components ending lower.
Boeing Co (BA) was the top gainer, while Chevron (CVX) , Exxon
Mobil Corp (XOM) and Microsoft (MSFT) were the laggards.
The Nasdaq Composite (RIXF) turned a big opening advance into a
loss by the end of the session, falling 43.50 points, or 0.9%, to
4,637.99, as Apple's big gain was not enough to keep the index in
the green.
Apple's earnings surprised even the most bullish analysts as the
tech giant reported an $18 billion profit in the latest quarter,
sending its share price up 5.7%.
Also read: Apple's secret weapon isn't a new product
Joseph Saluzzi, co-founder and co-head of equity trading at
Themis Trading, said stocks reacted to big swings in currency and
bond markets.
"Stock markets would like to see zero rates forever, but the Fed
statement did not give them any hopes of that. Meanwhile, bond
yields dropped dramatically, signalling that the economy is not
doing as well as the Fed is suggesting," Saluzzi said.
Treasurys rallied after the announcement. The yield on 10-year
Treasury notes, which moves inversely to prices, dropped 11 basis
points to 1.72%.
Quincy Krosby, market strategist at Prudential Financial, said
investors are realizing the Fed is intent on beginning to normalize
interest rates.
"The Fed is very careful with their language in the statement,
and they are signalling to the markets that they want to start
raising rates sometime this year," Krosby said.
Goldman Sachs and others expect the first hike in short-term
interest rates by September. But Ellen Zentner, an economist at
Morgan Stanley, said Tuesday that she doesn't expect a Fed hike
until March 2016, partly because the downward pressure on inflation
is stronger than expected.
Apple earnings: Apple shares jumped 5.7% after the company
reported another record for its flagship iPhone, with 74.5 million
phones sold in the fiscal first quarter. Profit rose 38% to a
record high.
Also read: This is what Apple analysts are worried about
Yahoo, Boeing in focus: Shares of Boeing (BA) gained 5.4% after
the company's fourth-quarter earnings beat forecasts.
Yahoo Inc. (YHOO) initially jumped after the Internet search
engine late Tuesday said it would spin off its Alibaba Group
Holding Ltd. (BABA) stake into a separate publicly traded company.
However, stock finished 3.2% lower.
U.S. Steel Corp. (X) jumped 11% after the steel producer's
earnings topped Wall Street estimates.
Abiomed Inc. (ABMD) surged 29% after the medical device maker
posted earnings that blew out Wall Street estimates.
On the downside, Ethan Allen Interiors Inc. (ETH) dropped 12%
after releasing weaker-than-expected results from its holiday
quarter.
Energy companies were selling off as oil prices fell nearly 4%.
Among S&P 500 components, Nabors Industries (NBR) dropped 12%,
while Denbury Resources (DNR) fell 9.4%.
Shake Shack Inc. (SHAK) raised the terms for its initial public
offering and said it would offer 5.75 million shares to be priced
at $17-$19 a share.
Overseas markets: Europe stocks ended mixed, with Greece
suffering from another selloff after Prime Minister Alexis Tsipras
stressed he will push for debt relief from the country's
international creditors.
The Nikkei 225 index rose to a fresh one-month high.
Oil futures fell Wednesday after a larger-than-expected increase
in U.S. crude supplies, which kept inventories at their highest
level in 80 years. Light, sweet crude for March delivery (CLH5)
dropped $1.78, or 3.9%, to $44.45 a barrel on the New York
Mercantile Exchange. That was crude's lowest settlement since March
11, 2009.
Barclays cut its forecasts for WTI crude to $42 a barrel for
2015 from $66 and $57 a barrel for 2016. For Brent crude, Barclays
cut its forecast to $44 a barrel for 2015 from $72 and forecast $60
for 2015.
Gold prices (GCG5) fell 0.5% to $1,285.90 an ounce as the U.S.
central bank reiterated its commitment to raising interest rates
some time in the latter part of the year.
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