Stocks were little changed on Thursday as Apple surged, but gains were capped after the Federal Reserve’s latest policy announcement sparked worries about the U.S. economy.
The Dow Jones Industrial Average traded just 10 points higher as a 2 percent gain in Apple offset a decline in J.P. Morgan Chase. The S&P 500 traded less than 0.1 percent higher while the Nasdaq outperformed, rising 0.2 percent.
Apple rose after Needham upgrade the stock to strong buy from buy, citing “value upside ” in the firm’s ecosystem.
Biogen tanked more than 26 percent after discontinuing trials for a drug aimed at treating Alzheimer’s Disease. The move sent the Health Care Select Sector SPDR ETF (XLV) down 0.8 percent.
On Wednesday, the Fed said it does not expect to raise rates at all in 2019. The central bank had forecast at least two rate hikes for this year back in December. The Fed added it expects to end its balance-sheet reduction process by the end of September. However, it also lowered its economic growth forecast for 2019.
“Fed Chair Powell is causing anguish amongst global investors even though the initial reaction was an instant grab for equities,” said Jeff Kilburg, CEO of KKM Financial.
Treasury yields fell sharply on Wednesday, with the benchmark 10-year rate hitting its lowest level in a year. The yield traded at 2.52 percent on Thursday while the short-term 2-year rate held at 2.4 percent. Yields move inversely to prices.
U.S. sovereign bonds are considered a less risky investment to equities and are traditionally used by investors to hedge against a potential slowdown in in the economy.
These moves come after a slew of negative commentary from companies like FedEx, BMW and UBS. Earlier this week, FedEx CFO Alan Graf said: “Slowing international macroeconomic conditions and weaker global trade growth trends continue.” Meanwhile, BMW said it is looking to cut $13.6 billion in costs this year while UBS noted the first quarter could be one of its worst ever.
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Economic data have also been largely disappointing. The Citi Economic Surprise Index recently hit its lowest level since August 2017 and is still deep in negative territory. A negative print on the index shows data are underperforming economist expectations.
Still, the U.S. economy is on solid ground compared to the rest of the world, said Charlie Ripley, senior investment strategist at Allianz Investment Management. He also said: “While the Fed continues with the wait-and-see policy stance, we think it would require a material deterioration in growth or some exogenous shock to the markets for the Fed to be completely done raising rates in the current cycle.”
Equities are on track to post a muted weekly performance, with the major indexes little changed. On top of digesting the Fed’s announcement, investors are also grappling with mixed news on the trade front. President Donald Trump said Wednesday that Washington’s tariffs on Beijing could stay on for a “substantial period of time.”
Source: cnbc.com | Original Link