New York: US stocks rallied but lost steam on Wednesday after the Federal Reserve said it would keep rates near zero for “an extended period” even as it expressed confidence in the economic recovery.
Stocks pushed higher in the hour following the FOMC statement, after the Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25%. The S&P 500 rose as high as 1,061.00 and the Nasdaq touched 2,081.00.
But the market was unable to hold those gains as it succumbed to selling pressure in the last half-hour of trading.
“This doesn’t change much. It’s hard to figure out how this could be helpful for the upside, though it easily could have been negative,” said Jordan Posner, portfolio manager at Matrix Asset Advisors in New York.
“The good news is more an absence of anything bad.”
The Fed’s closely watched policy statement was somewhat more upbeat than its statement in September. However, it was also more explicit about why it expects to keep rates low, citing “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”
After the closing bell, Cisco Systems Inc gained 3.1% to $24.02 after the network equipment vendor said quarterly revenue rose more than expected from its previous quarter. The company also said its board authorized up to $10 billion in additional stock buybacks.
The healthcare sector jumped on hopes the Obama administration’s healthcare reforms may be slowed after Republicans scored some key election victories.
The Morgan Stanley Healthcare Payor index jumped 4.7%, while the S&P Healthcare index added 1.3%.
The Dow Jones industrial average gained 30.23 points, or 0.31%, to end at 9,802.14, after rising as much as 156.13 points, or 1.6%, in the hour after the FOMC statement to touch a session high at 9,928.04. The Standard & Poor’s 500 Index edged up 1.09 points, or 0.10%, to finish at 1,046.50. But the Nasdaq Composite Index slipped 1.80 points, or 0.09%, to close at 2,055.52.
Healthcare stocks also got a boost from Wellcare Health Plans Inc, which climbed 6.7% to $28.09 after the managed care company posted a quarterly profit above analysts’ estimates even as membership fell about 8% from a year earlier.
Intel Corp rose 1.3% to $18.59 even after it was sued by New York attorney general Andrew Cuomo, who accused the world’s largest chipmaker of threatening computer makers and paying billions of dollars in kickbacks to maintain its market dominance.
Wall Street opened higher after ADP’s private-sector report showed signs of improvement in the labour market. The three major US stock indexes extended gains following a strong reading on the US services sector from the Institute for Supply Management.
Volume was below average on the New York Stock Exchange, with 1.35 billion shares changing hands, shy of last year’s estimated daily average of 1.49 billion. On the Nasdaq, about 2.25 billion shares traded, roughly equal to last year’s daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of 8 to 7, while on the Nasdaq, about eight stocks fell for every five that rose.