(Reuters) – Wall Street sank on Wednesday when Federal Reserve policy makers gave mixed signals about their next move after cutting interest rates by a quarter of a percentage point in a widely expected move.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., September 18, 2019. REUTERS/Brendan McDermid
With continued economic growth and strong hiring “the most likely outcomes,” the Fed nevertheless cited “uncertainties” about the outlook and pledged to “act as appropriate” to sustain the expansion.
New projections showed policymakers at the median expected rates to stay within the new range through 2020, bad news for investors hoping for additional cuts to help blunt economic fallout from the U.S.-China trade.
“The main concern (for stock investors) is there might not be another cut, and that’s why you had a little bit of a selloff,” said Alan Lancz, President of Alan B. Lancz and Associates in Toledo, Ohio. “But it’s almost like selling on good news. They left the door open for more cuts. It’s a really divided Fed right now.”
Expectations of lower rates have supported Wall Street’s rally this year, with the benchmark S&P 500 .SPX less than 2% below its record high close in July.
The Nasdaq Composite .IXIC dropped 1.02% to 8,102.75.
Ahead of the Fed’s announcement, the S&P 500 had been down about 0.3%.
Ten of the 11 major S&P sectors were in the red, with the S&P utilities index .SPLRCU up 0.1% and alone among gainers.
The central bank also widened the gap between the interest it pays banks on excess reserves and the top of its policy rate range, a step taken to smooth out problems in money markets that prompted a market intervention by the New York Fed this week.
FedEx (FDX.N) shares tumbled 13.9% and were on course for their sharpest one-day percentage drop since the financial crisis after the company blamed U.S.-China trade tensions and a split with Amazon.com Inc AMZN.N for its dismal full-year profit forecast.
Declining issues outnumbered advancing ones on the NYSE by a 1.84-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favored decliners.
The S&P 500 posted 17 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 39 new highs and 29 new lows.
Additional reporting by Medha Singh and Ambar Warrick in Bengaluru; Editing by Nick Zieminski and David Gregorio