Stocks rollercoastered Wednesday, ending another wild ride with a plunge deeper into the red after the Federal Reserve's latest policy statement. The Dow Jones industrial average lost nearly 200 points, on the heels of Tuesday's 291-point drop. 10-year Treasury yields sank to 1.72%, the lowest since May 2, 2013. U.S. crude oil slid 4%, falling $1.84 to $44.39 per barrel in electronic trading on the New York Mercantile Exchange.
The contract added $1.08 on Tuesday to close at $46.23. An afternoon selloff materialized, then accelerated, as investors realized the Fed has not taken a rate hike this year off the table, despite the fact that board members reiterated that they would remain "patient" in their deliberations.
The Fed used more positive language to describe the outlook for the economy and job market, so in effect "upgraded" its outlook, says Don Luskin, chief investment officer at TrendMacro. He said that board members also added "international conditions" to their list of worries, yet "lift-off (for the first rate hike) is still on for June," Luskin told clients in a post-Fed statement research note.
Adds Russ Koesterich, chief investment strategist at BlackRock: "The takeaway: a Fed hike is not off the table (this year). And the market would like to delay that as long as it can." The Dow shed 196 points, a 1.1% loss. It's the Dow's lowest close since Dec. 16. The blue-chip barometer is now down 3.5% for 2015 and 4.8% since its record close on Dec. 26. Ending 1.4% lower was the Standard & Poor's 500 index. The Nasdaq composite index lost 0.9%.
STOCKS: USA TODAY's live markets blog The Nasdaq composite originally got a boost after a blockbuster earnings report from Apple and Yahoo's decision to spin off its stake in Alibaba. Major indexes gained initially, then lost steam and nosed into the red a little before noon ET. Then they climbed into the black again but again stalled and turned negative after the Federal Reserve updated its economic outlook.
The markets' down day comes after a sharp drop Tuesday sparked by a spate of earnings misses from companies in a variety of key sectors including Caterpillar (CAT), Procter & Gamble (PG) and DuPont (DD). The Dow closed down 291 points. But several big-name tech companies released earnings after the bell that sparked a tech rally: • Apple (AAPL) shares jumped 5.7% after the tech giant reported a blockbuster quarter with a record $18 billion profit and sales of a whopping 74.5 million iPhones.
Asian markets were mixed as Japan's Nikkei 225 index rose 0.2% but China's Shanghai composite index tanked 1.4%. Hong Kong's Hang Seng index gained 0.2%.
European stocks were also mixed. Britain's FTSE 100 index was down 0.1% and France's CAC 40 dropped 0.1%. But Germany's DAX index gained 0.8%.
The euro edged down to $1.1336 from the previous session's $1.1362. Uncertainty related to how things will play out in Greece, where a new anti-austerity party is pressing for concessions on the debt-strapped countries bailout deal with its European creditors, and renewed worries about the Ukraine crisis, is also weighing on U.S. investors, adds Koesterich.
One thing is for sure, investors should brace for continued "volatility" in the stock market this year, says Koesterich.
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