por admin » Mié Sep 18, 2019 1:55 pm
Dow drops 200 points as Fed fails to give a clear signal of further rate cuts
PUBLISHED 12 HOURS AGO UPDATED 4 MINS AGO
Fred Imbert
@foimbert
CNBC.COM
Fed needs to be very aggressive, just not yet: Fmr. Fed Governor
Stocks traded lower on Wednesday as traders digested the Federal Reserve's latest decision on U.S. monetary policy.
The Dow Jones Industrial Average fell 200 points, or 0.8%. The S&P 500 slid 0.8% while the Nasdaq Composite dropped 1.1%.
The U.S. central bank cut the overnight rate by 25 basis points to a range of 1.75% to 2%. This is the second time this year the Fed has lowered rates. The central bank cut rates back in July.
"What the Fed's telling you is this is risk management. They want to bring down rates a little bit but they ultimately see the economy as being in good shape," said Gregory Faranello, head of U.S. rates at AmeriVet Securities.
However, the Fed was divided in its decision to lower rates, with three officials dissenting. Central bank officials are also split on further action this year.
Five Fed members wanted to keep rates unchanged while others supported lowering them to the current range and keeping them there. Seven others wanted at least one more rate cut.
"I think the market got into its head it wanted more rate cuts," said Drew Matus, chief market strategist at MetLife Investment Management. "Market participants and economists are seeing two different things."
"If [the Fed] really wanted to convince people these are insurance cuts, then they're done. They're done this year," Matus said.
Chairman Jerome Powell addressed the media after the central bank's announcement. He said the Fed could initiate a "sequence" of rate cuts if the economy slows down, but noted he does not see that right now.
Traders work before the closing bell at the New York Stock Exchange (NYSE) on September 12, 2019 at Wall Street in New York City.
Johannes Eisele | AFP | Getty Images
Traders work before the closing bell at the New York Stock Exchange (NYSE) on September 12, 2019 at Wall Street in New York City.
Treasury yields pared some of their losses from earlier in the day. The benchmark 10-year rate traded at 1.77%while the 2-year yield was at 1.74%.
The Fed meeting took place a couple of days after President Donald Trump called the central bank "boneheads" and asked for zero or even negative rates. Trump tweeted on Wednesday that Powell and the Fed have "no guts, no sense, no vision."
The meeting also happened as China and the U.S. try to reach a deal to end their ongoing trade war.
Trump said on Wednesday that a deal could come soon. China and the U.S. are expected to meet next month. The trade war has dampened the outlook for global economic growth and corporate profit expansion.
FedEx slashed its fiscal 2020 earnings guidance. The company also posted weaker-than-expected quarterly results, citing "a weakening global macro environment driven by increasing trade tensions." FedEx shares dropped 13.8%.
"It's going to take some sort of catalyst for the markets to move higher," said Greg Luken, CEO of Luken Investment Analytics. "That will be earnings." He noted that lower interest rates could give stocks a short-term boost, but strong earnings will be needed to keep the market moving higher.
The major indexes