Stocks Fade Late as Oil Dips 01/28 16:57
Investors struggled to figure out a barrage of signals from the Federal
Reserve, oil markets and Corporate America Wednesday, and stocks fell sharply
for second straight day.
(AP) -- Investors struggled to figure out a barrage of signals from the
Federal Reserve, oil markets and Corporate America Wednesday, and stocks fell
sharply for second straight day.
The Federal Reserve issued its first policy statement of the year, making
clear that it would remain "patient" in raising interest rates from near zero,
which was expected. But it also strengthened its assessment of the U.S.
economy, noting it is expanding at a solid pace and generating strong job
That's good news for Main Street and Corporate America, but signals that the
Fed is moving closer to raising rates, even if it's not contemplating an
imminent hike. When interest rates remain low they tend to make stocks more
attractive by comparison to bonds.
"The market is, on one hand, happy the Fed is saying things look solid, but
it means at some point we will get that first rate hike," said Quincy Krosby,
market strategist for Prudential Financial.
Investors were buffeted by other cross currents. Impressive earnings from
Apple and Boeing made investors optimistic and lifted stocks early. But when
benchmark U.S. oil later sank to its lowest level in nearly six years,
investors worried about worsening earnings prospects for energy companies.
The Energy Department reported that U.S. oil inventories rose to their
highest levels ever recorded. Those high supplies drove crude prices to the
lowest level since March 2009. Benchmark U.S. crude fell $1.78 to close at
$44.45 a barrel in New York. As recently as June, it traded above $100.
Inflation has stayed ultra-low partly because of the plunge in energy prices
and a steadily rising dollar. The Fed noted it anticipates inflation will
decline further before starting to rise gradually.
Prices for the benchmark 10-year Treasury jumped after the Fed statement
came out, knocking the yield to 1.70 percent, the lowest level this year. It
edged back up to 1.72 percent late in day, compared with 1.82 percent late
Tuesday. The yield on the 30-year bond, meanwhile, touched a record low of 2.27
"The Fed has a much more beneficial view on the drop in oil than the stock
market does," said John Canally, chief economic strategist at LPL Financial.
All told, the Dow Jones industrial average dropped 195.84 points, or 1.1
percent, to close at 17,191.37.The Standard & Poor's 500 index lost 27.39
points, or 1.4 percent, to 2,002.16.
The Nasdaq composite dropped 43.50 points, or 0.9 percent, to 4,637.99.
The market had been in a wait-and-see mode in advance of the Fed statement,
drifting between small gains and losses for much of the day. Falling oil prices
dragged the energy sector lower, while strong earnings from Apple helped lift
The market initially perked up after the Fed issued its statement at 2 p.m.
Eastern Time. But the gains were short-lived, and by late afternoon three major
indexes slumped, extending their losses for the year. The Dow in now 4.8
percent below its all-time high of 18,053.71 on Dec. 26. The S&P 500 index is
down 4.2 percent from its high of 2,090.57 on Dec. 29.
The 10 sectors in the index fell Wednesday, with energy stocks falling the
Among the biggest decliners were several oil and gas exploration companies,
as well as drilling services and equipment providers.
Nabors Industries lead declines. It slid $1.39, or 11.7 percent, to $10.49.
Denbury Resources lost 67 cents, or 9.4 percent, to $6.47. Hess Corp. tumbled
$5.59, or 7.8 percent, to $66.02.
Apart from the Fed, investors have been closely monitoring company earnings
this week. They're trying to assess whether Corporate America can continue to
grow profits amid concerns that economic growth could weaken overseas.
"This is a market that has to get used to focusing on what companies tell us
in terms of their bottom line and their top line," Krosby said. "And you're
already seeing it in the market during this earnings season."
Investors cheered strong financial results from Apple, which reported
record-smashing quarterly earnings late Tuesday. The stock added $6.17, or 5.7
percent, to $115.31.
Boeing also got a lift after it reported that its profit vaulted 19 percent
in the fourth-quarter on strong demand for commercial jets airliners. The stock
rose $7.16, or 5.4 percent, to $139.64.
Along with Boeing, several other companies turned in better-than-expected
financial results on Wednesday, including video-game maker Electronic Arts,
storage container seller Tupperware Brands, computer chip maker Freescale
Semiconductor and steel company U.S. Steel.
Brent crude, a benchmark for international oils used by many U.S.
refineries, fell $1.13 cents to close at $48.47 in London. In energy futures
trading on the NYMEX, wholesale gasoline fell 0.5 cents to close at $1.345 a
gallon. Heating oil fell 3.1 cents to close at $1.632 a gallon. Natural gas
fell 11.5 cents to close at $2.866 per 1,000 cubic feet.
Gold fell $5.80 an ounce to $1,285.90. Silver was essentially flat at $18.08
an ounce, and copper rose nearly 2 cents a pound to $2.48.