U.S. Stocks Rise, but Gains Lose Steam After Fed Statement

Date | 05-02-2018 - 04:43 PM Article Type | Stock Markets Region | United States

By Amrith Ramkumar

  • U.S. stocks close higher
  • Boeing rallies after earnings
  • Treasury yields volatile after Fed leaves rates unchanged

The Dow industrials inched higher Wednesday, rebounding from two consecutive days of triple-digit losses, though concerns about higher interest rates continued to rattle markets.

Stocks and bonds swung widely, with the blue-chip index trading in a range of nearly 300 points on the busiest day of the month by trading volume.

Stocks surged out of the gate on the back of a flurry of strong corporate results, particularly from Dow component Boeing, but turned lower after Federal Reserve officials said they expect inflation will move higher this year and stabilize around 2%.

The yield on the benchmark 10-year U.S. Treasury note surged briefly following the Fed statement before settling at 2.722%, down from Tuesday’s nearly four-year high of 2.725%.

The moves came a day after investor concerns about higher inflation and less accommodative central-bank policy pushed stocks sharply lower. Some investors said those concerns remain after the Fed left interest rates unchanged but reiterated plans to gradually raise them moving forward.

Most analysts, though, said a positive earningsand economic backdrop remains intact, and interest rates are likely to remain low by historical standards.

“We think fundamentals are very strong,” said Alicia Levine, head of global investment strategy at BNY Mellon Investment Management. “Growth is strengthening throughout the world.”

The Dow Jones Industrial Average rose 72.50 points, or 0.3%, to 26149.39. The S&P 500 added 1.38 points, or less than 0.1%, to 2823.81, and the Nasdaq Composite rose 9.00 points, or 0.1%, to 7411.48.

Even with declines earlier this week, the Dow Industrials and S&P 500 posted their largest one-month percentage gains since March 2016. Both indexes are on their longest monthly winning streaks in almost 60 years.

After years of forecasts for higher interest rates and inflation that turned out to be inaccurate, some investors think steady economic growth will finally translate this year, pushing up Treasury yields and potentially weighing on stocks and other risky assets.

“What we’re reckoning with here is the end of this era of very easy money,” said Kathy Jones, chief fixed income strategist for Schwab Center for Financial Research.

In company news, Boeing shares added $16.66, or 4.9%, to $354.37, contributing 114 points to the Dow Industrials, after the aerospace giant forecast a higher profit margin and a big rise in cash generated from record jetliner deliveries.

Shares of Electronic Arts rose 8.26, or 7%, to 126.96 after posting sharp growth in live services revenue in the holiday quarter, while Xerox gained 1.45, or 4.4%, to 34.13 after shrinking its loss and sealing a deal in which Japan’s Fujifilm Holdings will take a majority stake.


Those gains helped offset losses in the S&P 500 health-care sector, which fell for the second straight session and closed down 1.4%. Eli Lilly was among the biggest laggards on new concerns about drug pricing and weakness in the company’s animal-drug business.

Elsewhere, the Stoxx Europe 600 closed down 0.2%. Hong Kong’s Hang Seng rose 0.9% to cap off its best month since April 2015. Japan’s Nikkei ended down 0.8% as the yen strengthened against the dollar.

—Riva Gold and Kenan Machado contributed to this article.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

Author: Heng V. Mony
Source: wsj.com
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