Wall Street was mostly lower on Wednesday following decline in bank stocks after the Fed decided not to hike rate in 2019. Following Fed’s decision, yields on various government bonds took a nosedive. Moreover, conflicting news from trade war front also dented investors’ confidence. The Dow and S&P 500 ended in the red while Nasdaq Composite managed to finish in the green.
The Dow Jones Industrial Average (DJI) closed at 25,745.67, declining 0.6% or 141.71 points. The S&P 500 Index (INX) lost 0.3% to close at 2,824.23. However, the Nasdaq Composite Index (IXIC) closed at 7,728.97, gaining 5.02 points. A total of 7.76 billion shares were traded on Wednesday, higher than the last 20-session average of 7.53 billion shares. Decliners outnumbered advancers on the NYSE by 1.16-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.64-to-1 ratio. The CBOE VIX increased 2.6% to close at 13.91.
How Did the Benchmarks Perform?
The Dow ended in negative territory with 23 stocks of the 30-stocks blue-chip index finished in the red while seven ended in the green. The tech-heavy Nasdaq Composite finished in the green due to strong performance by large-cap tech stocks. The S&P 500 also closed in the red with the Financials Select Sector SPDR (XLF) declining 2.1%. Notably, six out of eleven sectors of the benchmark index closed in the red while five finished in the green.
Fed Maintains Accommodative Monetary Stance
On Mar 20, after the completion of its two-day policy meeting of the Federal Open Market Committee, the central bank has decided not to hike interest rate in 2019 unless the situation changed abruptly. The Fed members unanimously decided to maintain patience before adopting any decision to raise interest rate. This means the benchmark fund rate will remain at 2.25-2.5%. Notably, the Fed hiked interest rate four times in 2018 and it hinted for two more rate hike in 2019 last December.
Moreover, the central bank has also decided to end its balance sheet reduction program in September. Under its quantitative easing program the Fed allows $30 billion in Treasury proceeds and $20 billion from mortgage-backed securities to roll off and reinvest the rest of bonds.
Following Fed’s decision, yields on several government bonds plunged. Yield on benchmark 10-Year US Treasury Note declined to 2.528%, its lowest since January 2018. Yield on 5-Year US Treasury Note declined to 2.328%, its lowest since February 2018. Yield on 2-Year US Treasury Note declined to 2.4%.
Sharp decline in yields have shaken the banking sector. Consequently, shares of major banks like
The Goldman Sachs Group Inc. GS, Bank of America Corp. BAC, Morgan Stanley MS, JPMorgan Chase & Co. JPM and Citigroup Inc. C plummeted 3.4%, 3.4%, 2.1%, 2.1% and 2%, respectively. Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conflicting Signal From Trade War Front
On Mar 20, President Donald Trump said that tariffs which the U.S. government has already imposed on Chinese goods will continue for indefinite time period until China comply to a trade deal which will satisfy all concerns of the Trump administration. According to Trump, "We're not talking about removing [tariffs], we're talking about leaving them for a substantial period of time, because we have to make sure that if we do the deal with China that China lives by the deal,"
However, Trump also mentioned that negotiations with China for a trade deal "is coming along nicely."Next week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to Beijing for another round of discussions with Chinese authorities.
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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
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