Wall Street stocks suffered a sell-off in response to Tuesday announcement from the US Federal Reserve that it was holding a “pause” in its campaign of interest rate increases.
Uncertainty about the Fed’s decision had persisted until the moment it was announced.
After jolting up and down at different points following the announcement, major indices closed at or near their lows for the days. The S&P 500 was down 4.29 points for the day, or 0.34 per cent, at 1271.48. This was down about 1 per cent compared to its high for the day.
The Nasdaq Composite was down 11.65 points, or 0.56 per cent, at 2060.85, while the Dow Jones Industrial Average was down 0.41 per cent, or 45.8 points, at 11,173.59. All had been up for the day before the announcement, although few traders had taken strong positions before the news from the Fed.
Before the announcement, Bristol-Myers Squibb saw its shares fall 6.6 per cent to $21.28, after the company, which is facing a criminal investigation of a proposed settlement of patent litigation over the heart drug Plavix, said on Tuesday it had received a grand jury subpoena to produce documents related to the matter.
Google was up $4.88, or 1.29 per cent, at $382.83 after News Corp chose the company to handle searches on its MySpace social networking site. News Corp was
1.53 per cent higher at $19.27.
VeraSun Energy, the second-largest US ethanol producer, gained 6 per cent to $24.4 after it reported second-quarter net income of $19.6m, compared with a loss of $3.91m for the same period last year, as revenue more than quadrupled.
The morning rise came in spite of data showing productivity in the US rising at a slower pace in the second quarter and an acceleration in a key gauge of inflation.
Non-farm productivity increased at a 1.1 per cent annual rate in the second quarter. Unit labour costs rose 4.2 per cent in the non-farm business sector during the second quarter.
Jim Paulsen, chief investment strategist at Wells Capital Management, said: “I do not see this as unexpected and I think whatever they did, it was always going to lead to debate.”
He added: “If anything they were a bit less hawkish in tone than I thought they might be. But it creates volatility because you have to ask whether it is a buy signal for stocks or does it open you to inflationary pressure.”
Bausch & Lomb fell after it said its pre-tax earnings for this year might miss previous forecasts by as much as 79 per cent. Its shares fell 0.82 per cent to $45.96.
Before the opening bell, Rent-Way, the second biggest US rent-to-own retailer, had agreed to be bought by larger rival Rent-A-Center for $567m. Rent-A-Center shares were up 3.8 per cent, or $1.02, at $28.01.