U.S. Stocks Finish Choppy Trading Day Modestly Lower

Extending the lackluster performance seen in the previous session, stocks showed a lack of direction over the course of the trading day on Wednesday. The major averages once again spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the day modestly lower. The Dow slid 164.55 points or 0.5 percent to 33,820.38, the Nasdaq dipped 39.19 points or 0.3 percent to 14,051.03 and the S&P 500 edged down 3.54 points or 0.1 percent to 4,183.18 after reaching a record intraday high.

Stocks initially lacked direction as traders looked ahead to the Federal Reserve’s monetary policy announcement, although the choppy trading continued after the Fed announced its widely expected decision to maintain its ultra-easy policy.

The Fed left interest rates and asset purchases unchanged even as the central bank upgraded its assessment of the U.S. economy.

Citing progress on vaccinations and strong policy support, the Fed noted indicators of economic activity and employment have “strengthened,” which reflects a modest upgrade from last month, when the central bank said the indicators have “turned up recently.”

The Fed also said the sectors most adversely affected by the coronavirus pandemic remain weak but have shown improvement.

After previously saying inflation continues to run below 2 percent, the Fed now acknowledges that inflation has risen but largely attributed the increase to “transitory factors.”

The statement from the central bank also said risks to the economic outlook remain due to the ongoing public health crisis, although that reflects an improvement from last month, when the Fed cited “considerable risks to the economic outlook.”

Despite the improvements mentioned in the statement, the Fed once again kept the target range for the federal funds rate at 0 to 1/4 percent.

The Fed also reiterated that it expects rates to remain at near-zero levels until labor market conditions have reached levels consistent with its assessments of maximum employment and inflation is on track to moderately exceed 2 percent for some time.

The central bank also said it plans to continue its bond purchases at a rate of at least $120 billion per month until “substantial further progress” has been made toward its goals of maximum employment and price stability.

Traders were also reacting to the latest earnings news from several big-name companies, including some megacap technology stocks.

Shares of Alphabet (GOOGL) moved sharply higher after the Google parent reported better than expected first quarter results and announced a $50 billion stock buyback.

Credit card giant Visa (V) also moved to the upside after reporting fiscal second quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Microsoft (MSFT) saw notable weakness even though the software giant reported better than expected fiscal third quarter results.

Fellow Dow components Amgen (AMGN) and Boeing (BA) have also come under pressure after reporting disappointing results, weighing on the blue chip index.

Sector News

Reflecting another lackluster performance by the broader markets, most of the major sectors once again ended the day showing only modest moves.

Software stocks saw significant weakness, however, with the negative reaction to Microsoft’s results weighing on the sector.

The Dow Jones U.S. Software Index slid by 1.5 percent, pulling back further off the record closing high set on Monday.

Notable weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent drop by the Philadelphia Semiconductor Index.

On the other hand, energy stocks moved sharply higher amid an increase by the price of crude oil. Crude for June delivery jumped $0.92 to $63.86 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 5.8 percent, the NYSE Arca Oil Index spiked by 3.6 percent and the NYSE Arca Natural Gas Index surged up by 2.7 percent.

Other markets

In overseas trading, most stock markets across the Asia-Pacific region moved modestly higher during trading on Wednesday. Japan’s Nikkei 225 Index crept up by 0.2 percent, while China’s Shanghai Composite Index rose by 0.4 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index climbed by 0.5 percent, the German DAX Index and the U.K.’s FTSE 100 Index both edged up by 0.3 percent.

In the bond market, treasuries bounced back near the unchanged line following the Fed announcement. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.620 percent after reaching a high of 1.659 percent.

Looking Ahead

Earnings news is likely to attract attention on Thursday, with Apple (AAPL), eBay (EBAY), Facebook (FB), Ford (F), and Qualcomm (QCOM) among the companies releasing their quarterly results after the close of today’s trading.

Bristol Myers Squibb (BMY), Caterpillar (CAT), Comcast (CMCSA), Hershey (HSY), Kraft Heinz (KFT), MasterCard (MA), McDonald’s (MCD), and Merck (MRK) are also among the companies due to report their results before the start of trading on Thursday.

Traders are also likely to keep an eye on the preliminary reading on first quarter GDP as well as reports on weekly jobless claims and pending home sales.