A cautious Federal Reserve said the economy was weaker but stood pat on monetary policy
U.S. stocks ended modestly lower on Wednesday, 01 August 2012. Stocks, which were trading in green earlier during the day dipped into negative territory following the latest statement from the Federal Open Market Committee. The statement called for the Federal Funds Rate to remain unchanged at 0-0.25%. The committee also suggested that rates may remain at the current level at least through late 2014.
For the day, that ended on Wednesday, 01 August 2012, Dow ended lower by 32.55 points (0.25%) at 12,976.2. Nasdaq ended lower by 19.31 points (0.7%) at 2,920.21. S&P 500 ended lower by 4 points (0.3%) at 1,375.32.
Energy was the best performing and utilities were the worst of its 10 major industry sectors.
The U.S. session opened slightly higher earlier during the day. Following the initial instability, equities leveled off below session highs in anticipation of the FOMC Statement, which was set for 2:15 PM ET. The European Central Bank and Bank of England are scheduled to opine tomorrow morning.
Economic data was mixed this morning with ADP Employment Change surprising to the upside while the ISM Index and construction spending disappointed. The ADP National Employment Report indicated employment in the nonfarm private business sector rose 163K in July. This was above the 125K expected by the consensus. In addition, the previous month's reading was revised down to 172K from 176K.
The July ISM Index came in worse than expected at 49.8 vs. the 50.1 consensus estimate, and up slightly from June's 49.7 reading. June Construction Spending rose 0.4% month over month vs. the 0.9% expected.
A cautious Federal Reserve on Wednesday said the economy was weaker but stood pat on monetary policy. The lack of action from Fed was a surprise. Market had expected the Fed to push out its pledge to hold its benchmark federal funds rate exceptionally low. Instead the Fed repeated that it would likely hold that rate steady until late-2014.
The Fed left unchanged its benchmark federal funds rate target at zero to 0.25%, the level it has been at since December 2008. U.S. stocks dropped in the immediate aftermath of the Fed decision.
The central bank downgraded its view on the economy, saying that economic activity had decelerated. Previously the Fed had said that the economy had been expanding moderately. Since the recession ended in the summer of 2009, the economy has sputtered along with the unemployment rate stuck above 8%.
Oil prices ended higher on Wednesday, 01 August at Nymex. Prices ended higher as bigger than expected drop in crude stockpiles offset the negative effect arising out of Federal Reserve's disappointing decisions on Wednesday. On Wednesday, crude oil futures for light sweet crude for September delivery closed higher by $0.85 (1%) at $88.91/barrel.
In the latest weekly inventory report, the EIA reported today that the Energy Information Administration reported a drop of 6.5 million barrels in crude supplies for the week ended 27 July 2012. Market had expected a decline of 1.6 million barrels on the week. The EIA also reported gasoline inventories dropped 2.2 million barrels, and stockpiles of distillates were down 1 million barrels. Market had expected gasoline supplies to be up 400,000 barrels and distillates inventories to rise 1.6 million barrels.
In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.1%.
Precious metal prices ended substantially lower on Wednesday, 01 August 2012. Gold for August delivery fell $6.8, or 0.4%, to end at $1,603.7 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. On Wednesday, silver prices for September delivery fell 38 cents (1.4%) to end at $27.54.
Decliners outpaced advancers roughly nine to five on the New York Stock Exchange, where composite volume topped 4.3 billion. Nasdaq's composite volume edged past 1.7 billion.
Indian ADRs ended mostly higher on Wednesday. ICICI Bank and HDFC Bank gained 0.2% and 1.5% respectively. Infosys gained 0.8%. Tata Motors gained 0.7%. Wipro Technologies gained 0.4%. Dr Reddys gained 0.6%. VSNL shed 0.8%.
For tomorrow, initial claims, continuing claims and factory orders data are the economic reports expected. Earning reports will continue to pour in.
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