Dow closes down 222 points after Fed holds rates steady

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January 27, 2016

NEW YORK: Stocks closed more than 1 percent lower Wednesday, despite higher oil prices, as disappointing quarterly reports weighed and the Fed statement renewed concerns about global economic growth.

The major averages initially held near earlier levels — narrowly mixed — after the statement release, before falling past morning lows.

January 27, 2016

NEW YORK: Stocks closed more than 1 percent lower Wednesday, despite higher oil prices, as disappointing quarterly reports weighed and the Fed statement renewed concerns about global economic growth.

The major averages initially held near earlier levels — narrowly mixed — after the statement release, before falling past morning lows.

The Dow lost 222 points, and the Nasdaq composite was off more than 2 percent. The S&P 500 lost more than 1 percent as information technology weighed.

"I think it's the acknowledgement that the global economic and financial economic developments are going to be monitored closely because they could potentially put (the Fed's) outlook at risk," said Craig Bishop, vice president, lead strategist, U.S. Fixed Income Strategies at RBC Wealth Management, U.S.

"I don't think it does anything to change the expectations that other central banks are going to keep on the path of accommodative policy," he said.

The Bank of Japan is due to release its meeting announcement on Friday. The European Central Bank kept rates unchanged last week, with comments from ECB President Mario Draghi raising hopes of stimulus at the March meeting.

As widely expected, the Federal Reserve left rates unchanged in its post-meeting statement Wednesday. The central bank said it is "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook."

"People are nervous so they probably fasten on the fact that the Fed needs to keep an eye on market and international developments," said Lisa Kopp, head of traditional investments at U.S. Bank Wealth Management.

"People are just jittery and it will take time for things to settle out. … I think the market being down is just indicating it's a tough market right now and people are nervous," she said.

The Nasdaq composite underperformed as Apple weighed and the iShares Nasdaq Biotechnology ETF (IBB) fell more than 3.5 percent after briefly spiking 1 percent in opening trade.

Biogen held 5.7 percent higher after jumping jumped more than 9.5 percent in midday trade after the firm posted earnings that beat on both the top and bottom line, driven by higher demand for a key drug.

Apple and Boeing declined sharply as the greatest weights on the Dow. The two stocks accounted for about 120 points off the index in afternoon trade.

Boeing held 9 percent lower. The stock initially fell more than 9.5 percent after the firm gave full-year guidance below expectations, although the jetmaker reported earnings that beat on both the top and bottom line.

Shares of Apple were off more than 6 percent after the iPhone maker reported fewer-than-expected unit sales of its flagship product, for the lowest growth in shipments since the iPhone was launched in 2007. Apple also forecast its first revenue drop in 13 years, citing some softness in the critical Chinese market, Reuters reported.

"It's weighing on stocks more broadly given its size and dominance," said Jack Ablin, chief investment officer at BMO Private Bank.

The Dow transports fell more than 1 percent after briefing rising more than 1 percent earlier. Alaska Air was the greatest decliner, while Norfolk Southern, FedEx and United Continental were the only gainers.

U.S. crude oil futures settled up 85 cents, or 2.70 percent, at $32.30 a barrel.

Treasury yields edged off earlier highs, with the 2-year yield lower at 0.84 percent and the 10-year yield at 2.01 percent.

The U.S. dollar extended losses slightly to trade about 0.4 percent lower against major world currencies, with the euro near $1.09 and the yen at 118.82 yen against the greenback as of 2:33 p.m. ET.

"I think the market talked itself into a dovish statement but it didn't slam the door shut on March so there's a bit of something for everyone there," said Art Hogan, chief market strategist at Wunderlich Securities.

"You have to understand, when we have a two-day Fed meeting, you get so ramped up you have to unwind," he said.

Stocks closed more than 1 percent higher Tuesday and attempted gains ahead of the Fed statement release.

In economic news, new home sales jumped to a seasonally adjusted annual rate of 544,000 from an upwardly revised November figure of 491,000.

The Treasury auctioned $35 billion of 5-year notes at a high yield of 1.496 percent.

Fed Chair Janet Yellen is scheduled to hold her semi-annual testimony before Congress in about two weeks.

In other earnings news, United Technologies, maker of Pratt & Whitney aircraft engines and Otis elevators, reaffirmed guidance but reported a 4.5 percent decline in fourth-quarter revenue as a strong dollar weighed.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 24.

About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 758 million and a composite volume of 3.7 billion in afternoon trade.

Gold futures for February delivery settled down $4.40 to $1,115.80 an ounce.


Courtesy: Reuters/CNBC