US stocks closed down on Wednesday, driven by a sharp decline in the S&P 500 energy sector, after the Federal Reserve said the domestic economy was growing at a solid pace, signalling it remains on track to raise interest rates later this year. Concluding their first policy-setting meeting of the year, Fed officials said they would be "patient" on raising rates as they looked past the urgent moves made by other central banks this month to boost their struggling economies.
The dollar strengthened further after the Fed statement, putting renewed pressure on oil, which dipped to its lowest level since early 2009. This pushed energy stocks down further. While many market participants said they were unsurprised by the Fed comments, Stephen Massocca, Chief Investment Officer of Wedbush Equity Management LLC in San Francisco said the Fed's language looked slightly stronger in support of a rate hike.
"It was more hawkish than people thought. But you are counting grains of sand coming through the hourglass so I don't think you will see it resonate much longer than what we've seen in the last hour or so," Massocca said. "I don't think anyone is going to overreact here, but it was a surprising to me. I thought they would turn the dial 2 degrees and they turned it 6 degrees," he said. Bond prices rose after the statement, which may also have put some pressure on stocks.
The Dow Jones industrial average fell 195.84 points, or 1.13 percent, to 17,191.37, the S&P 500 lost 27.39 points, or 1.35 percent, to 2,002.16 and the Nasdaq Composite dropped 43.50 points, or 0.93 percent, to 4,637.99. The S&P energy sector finished down 3.9 percent as US crude futures tumbled more than 4 percent to $44.31 per barrel. Barclays and Goldman Sachs posted bearish notes on oil earlier in the day.
"Today's statement makes it apparent that they are less convinced that the core can stay insulated from the drop in oil prices," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. "Now, September is when I think the Fed will lift rates off zero." The market had been boosted earlier by earnings from companies including Apple and Boeing.
A 5.7 percent advance in Apple shares limited losses on the Nasdaq. Apple smashed Wall Street expectations with record sales of big-screen iPhones in the holiday shopping season, which helped the company post the largest quarterly profit in corporate history. Boeing added 5.4 percent after handily beating top- and bottom-line expectations.
NYSE decliners outnumbered advancers 2,284 to 825, for a 2.77-to-1 ratio; on the Nasdaq, 2,077 issues fell and 665 advanced for a 3.12-to-1 ratio. The S&P 500 posted 58 new 52-week highs and 14 lows; the Nasdaq Composite recorded 72 new highs and 71 lows. Volume was heavier, with about 7.6 billion shares traded on US exchanges, above the 7.16 billion average for the month so far, according to BATS Global Markets.
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