While you were sleeping: UPDATED Stocks stall as Fed holds rates steady

The US dollar bounced and Wall Street reversed earlier losses after Federal Reserve policy makers signalled that interest rates might rise this year. 

The Fed kept its key rate unchanged but was more optimistic about the economy.

“Near-term risks to the economic outlook have diminished,” the Federal Open Market Committee said in a statement after its two-day meeting.

“The labour market strengthened and ... economic activity has been expanding at a moderate rate” since the June meeting. 

The greenback at first strengthened and then reversed against the euro and the yen. 

“It sounds like the Federal Open Market Committee is setting the stage for another rate hike in the coming months, and that is good for the dollar given the recent issues in Europe and the UK,” Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, told Bloomberg.

Wall Street recovered from earlier declines after the Fed’s statement. At the close, the Dow Jones Industrial Average down 1.58 points at 18,472.17, while the Nasdaq Composite Index climbed 0.6% to 5139.81. The Standard & Poor’s 500 Index was down 0.1% at 2166.58.. 

The Dow rose as gains in shares of Apple and those of Caterpillar, up 6.6% and 1.3% respectively, outweighed slides in shares of Coca-Cola and McDonald’s, down 3.4% and 1.7% respectively.

Apple shares rally
Apple shares rallied after the company reported a drop in revenue that was smaller than expected, bolstered by better-than-expected sales for a cheaper iPhone SE model.

“Good things happen when people expect nothing,” Amit Daryanani, an analyst at RBC Capital Markets who estimates that the SE accounted for 23% of total iPhone sales, told Bloomberg.

“The numbers aren’t getting any worse and we’re getting into a new iPhone cycle soon." A new flagship model should improve the company’s financial performance, he added.

Coca-Cola shares dropped after the soft drink company posted quarterly revenue that fell short of analysts’ expectations because of declining sales overseas including in China and Argentina and downgraded its full-year so-called organic revenue estimate. 

"Strong performance in some of our largest and most developed markets, including the US, Mexico and Japan, was offset by difficult external conditions in many of our emerging and developing markets, including China and Argentina," chief executive officer Muhtar Kent said in a statement. 

"These factors combined to put pressure on our volume and top-line performance in the quarter, especially where we own bottling businesses."

Europe’s Stoxx 600 Index ended the day with a gain of 0.4% from the previous close, bolstered by better-than-expected corporate results including from LVMH Moet Hennessy Louis Vuitton. The UK’s FTSE 100 index added 0.4%, Germany’s DAX index gained 0.7% and France’s CAC 40 index climbed 1.2%.

(BusinessDesk)

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