US Stocks Trim Early Gains Ahead of Fed's Rate Decision; Industrial Production Falls
Equities opened solidly higher on Wednesday only to pare gains as markets waited to see whether the Federal Reserve would raise rates for the first time in seven years.
In the countdown to the Fed's announcement, expected at 2 PM ET, a raft of economic data was published that presented a positive outlook for the residential house-building sector and an underwhelming picture for industrial production.
Housing starts - seen as a key indicator for the number of new housing units under construction - and permits both rose more than expected in November. Privately-owned housing starts rose by 10.5% in November to 1.17 million from 1.06 million in October. Single-family housing starts jumped by 7.6% to 768,000 from 714,000 over the same time-frame.
Economists polled by Econoday had expected private housing starts at 1.14 million and housing permits of the 1.15 million.
Separate data showed that industrial production, often viewed as a barometer of output for all goods produced in the US, fell by 0.6% from a month earlier. Due to weakening demand for manufactured goods and a decline in utility use thanks to warm weather in the U.S, it marks the sharpest decline since March 2012, and is three times lower than the 0.2% decline analysts earmarked.
The worse-than-expected production numbers indicate the economic recovery is moving slower than expected and could give credence to expectations that the Fed will move slowly with regard to future rate hikes.
The central bank's benchmark interest rate has been frozen at 0.25% for seven years but a string of positive data published over the past six months, combined with positive rhetoric for a potential rate rise, has fueled expectations that the Fed's Federal Open Markets Committee, will ramp up the interest rate when it wraps its two-day meeting later in the day.
The US' three benchmark indices - the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 - were registering growth of less than 0.2% two hours after main markets opened.
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