NEW YORK: Wall Street stocks finished a volatile session mostly lower on Wednesday following a dovish Federal Reserve decision, while the pound dropped amid Brexit chaos as Britain tries to avoid a damaging no-deal exit.
US stocks rallied shortly after the Fed kept interest rates unchanged and released a forecast for no interest rate hikes in 2019, a shift from an earlier projection of two increases this year.
But stocks pulled back after a press conference at which Fed Chair Jerome Powell emphasized that the US economy remained solid, even as the central bank trimmed its growth outlook for 2019.
In the end, both the Dow and S&P 500 finished in the red, while the Nasdaq eked out a narrow gain.
Briefing.com analyst Patrick O’Hare described the market’s initial surge as a knee-jerk reaction to a dovish central bank that investors later rethought.
The Fed’s dovishness “invites some concerns about what it really implies about the global economic outlook,” O’Hare told AFP.
It raises the possibility “that US economy will disappoint,” he said, adding that low interest rates could depress bank lending.
Cresset Wealth Advisors’ Jack Ablin said the retreat in US stocks showed “investors are beginning to infer that the global economic slowdown is washing up on our shores.”
The dovish Fed decision also dragged the dollar down against both the euro and the yen, although the US currency was higher near 2100 GMT against the pound compared with the day-ago period.
Prime Minister Theresa May announced Britain was seeking a delay to its exit from the European Union until June 30, as she scrambled to contain a deepening political crisis and the risk that Britain could still crash out of the bloc in nine days.
European Council President Donald Tusk said the EU could approve Britain’s request for a short delay to Brexit but only if British MPs next week vote through the withdrawal deal they have twice rejected.
“I believe a short extension will be possible but it will be conditional on a positive vote on the withdrawal agreement in the House of Commons,” Tusk told reporters, a day before leaders were to gather in Brussels for a crucial summit.
The outlook for Sterling “remains troubling as the EU prepares for the possibility of a no-deal Brexit and rumors circulate around May’s possible resignation,” said BK Asset Management analyst Kathy Lien.
May “is jamming the twice rejected agreement down everyone’s throats and both parliament and the EU are putting up a fight,” Lien said.
Among individual stocks, shares of Bayer plunged nearly 10 percent after a US jury ruled weed killer Roundup was a “substantial factor” in an amateur gardener’s cancer, further exposing the German company to legal liability following its takeover on Monsanto, which developed Roundup.
“This could open the floodgates to further cases, and the group might have to set aside vast sums of money for potential cases,” said CMC Markets analyst David Madden.- AFP
