Benchmarks ended mostly lower on Wednesday after the Federal
Reserve indicated it might increase key lending rates sooner than
expected. The central bank also said the economic stimulus
program may end this fall and the rates will then be raised six
months later. These statements from Federal Reserve Chairwoman
Janet Yellen dragged benchmarks to their first drop in three
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) dropped 0.7% to close
Wednesday's trading session at 16,222.17. The Standard & Poor
(S&P 500) fell 0.6% to finish at 1,860.77. The tech-laden
Nasdaq Composite Index too declined 0.6% to 4,307.60. The
fear-gauge CBOE Volatility Index (VIX) surged 4.1% to settle at
15.12. Total volume on the New York Stock Exchange was 3.2
billion shares. Advancing stocks were outnumbered by declining
stocks on the NYSE. For 24% stocks that advanced, 74% declined.
The Federal Reserve Chairwoman Janet Yellen commented that
interest rate hikes might happen in about six months after the
end of the economic stimulus plan. The quantitative easing
program is expected to end this fall.
Yellen said central bank will rely on a 'wide range of
information' on jobs as well as inflation and not just the
unemployment rate while deciding on raising interest rates.
Market participants are now expecting the Fed to hike interest
rates in the second half of 2015. In an attempt to boost
the economy the Federal Funds rate has been near zero since 2008.
The Federal Open Market Committee decided in its policy meeting
to 'modestly' reduce the pace of its bond purchase program. The
Fed also said despite the harsh winter weather in the months of
January and February, the economy had recuperated enough to
withstand a reduction in bond purchases. The central bank agreed
to trim purchase of its U.S. Treasuries and mortgage-backed
securities by another $10 billion starting April. This will bring
the bond-buyback program to $55 billion.
The day was devoid of any major economic data that could boost
investors' confidence. The U.S. Department of Commerce reported
that fourth quarter current account deficit decreased to $81.1
billion while the consensus estimate expected the deficit to
decline to $87 billion.
All the 10 sectors of the S&P 500 ended in the red. The
Utilities Select Sector SPDR (XLU) led the decline as the sector
dropped 1.6%. Top holdings from the Utilities sector such as Duke
Energy Corporation (NYSE:
), Dominion Resources, Inc. (NYSE:
), NextEra Energy, Inc. (NYSE:
), Southern Company (NYSE:
) and Exelon Corporation (NYSE:
) decreased 2.2%, 0.9%, 1.2%, 1.5% and 0.3%, respectively.
The Industrials sector followed Utilities. The Industrial Select
Sector SPDR dropped 1%. Key stocks from the sector such as
General Electric Company (NYSE:
), United Technologies Corp. (NYSE:
), The Boeing Company (NYSE:
), Union Pacific Corporation (NYSE:
) and 3M Company (NYSE:
) fell 1.4%, 0.6%, 1.5%, 1.4% and 1.1%, respectively.
U.S. stocks entered the negative territory on Wednesday after
rising for two days in a row. In the last couple of days subdued
tension between Russia and the West over Crimea, and encouraging
domestic economic numbers had boosted markets. Increase in
industrial production, modest improvement in general business
conditions in New York State and a gain in homebuilders'
confidence were welcomed by the investors. The S&P 500 was
able to move above its key technical level of 1850 and the
tech-heavy Nasdaq Composite Index gained from the surge in