[BRIEFING.COM] The S&P 500 declined as much as 0.7% on Wednesday, as an earnings warning from FedEx (FDX 175.07, -6.34, -3.5%) helped fuel economic growth concerns. The benchmark index then advanced as much as 0.4% after the Federal Reserve provided a series of updates coming out of its FOMC meeting that created an impression it has shifted even further to a dovish mindset. The knee-jerk buying interest cooled off, though, leaving the S&P 500 down 0.3% for the day.
The Dow Jones Industrial Average lost 0.6%, and the Russell 200 lost 0.8%. The Nasdaq Composite increased 0.1%, helped in part by gains from the mega-cap stocks.
The S&P 500 financial sector (-2.1%) was the day's outright laggard, dragged lower by a sharp drop in U.S. Treasury yields following the FOMC announcements. Conversely, the communication services (+1.2%) and energy (+0.9%) sectors outperformed. The energy space benefited from oil prices ($60.20/bbl, +$0.86, +1.4%) setting a new yearly high following some bullish inventory data.
The Fed left the target range for the fed funds rate unchanged at 2.25-2.50%; signaled that it does not expect any rate hikes now in 2019 versus two rate hikes at the time of the December 2018 meeting; and said it will begin tapering its balance sheet in May with an end date of Sept. 30.
Leaving the fed funds rate intact was widely expected. Projecting zero rate hikes in 2019 -- and only one in 2020 -- along with providing an end date for its balance sheet runoff was less expected. These actions made it clear that the market doesn't have to fear the Fed like it did in the fourth quarter.
U.S. Treasury yields and the U.S. Dollar Index (95.95, -0.43, -0.5%) dropped on the dovish mindset. The 2-yr yield fell six basis points to 2.40%, and the 10-yr yield fell eight basis points to 2.54%. The curve-flattening trade weighed heavily on the financial sector, as a compression in spreads caused concerns that net interest margins will be weak for lenders.
There is apt be burgeoning concerns, too, that the Fed's pivot to a more dovish mindset reflects a dim view of the global economic outlook that won't translate well for earnings growth.
On a related note, FedEx called attention to slowing international macroeconomic conditions and weaker global trade growth trends for its disappointing earnings results/guidance. That news pressured the Dow Jones Transportation Average (-1.3%), which trailed the market throughout today's session.
Another factor that had the market under wraps ahead of the FOMC decision was a remark from President Trump, who said he is considering leaving tariffs on Chinese goods in place for a long period.
In economic data, the weekly MBA Mortgage Applications Index increased 1.6% following a 2.3% increase in the prior week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report, the Philadelphia Fed Index for March, and the Conference Board's Leading Economic Indicators Index for February on Thursday.
- Nasdaq Composite +16.5% YTD
- Russell 2000 +14.4% YTD
- S&P 500 +12.7% YTD
- Dow Jones Industrial Average +10.4% YTD