NEW YORK, Jan 31 — US stocks fell yesterday after the Federal Reserve said in its latest statement that economic growth had stalled but indicated the pullback was likely temporary.
Stocks were flat for most of the session prior to the Fed statement at the end of a two-day policy meeting. The Fed repeated its pledge to keep purchasing securities until employment improves substantially.
The statement followed data that showed the economy, as measured by gross domestic product, unexpectedly contracted in the fourth quarter. Economists stressed that the 0.1 per cent contraction, caused partly by a plunge in government spending and lower business inventories, is not an indicator of recession.
“The unemployment rate is likely to fall below 6.5 per cent next year, so the Fed may be raising interest rates as soon as mid-2014. The fiscal drag from the tax increases will be offset this quarter by rebuilding post-Sandy, so real GDP growth should still come in at 2 per cent,” said Kurt Karl, chief economist at Swiss Re.
The S&P 500 held above 1,500, seen by technical analysts as an inflection point that will determine the overall direction in the near term. The index is on track to post its best month since October 2011 and its best January since 1997.
“This is a very modest pullback after a steep run,” said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
“It is too soon for the Fed to start talking about the end of (their bond buying programme). The economy needs stimulus to sustain this recovery.”
Chesapeake Energy rose 6 per cent to US$20.11 a day after it said Aubrey McClendon would step down as chief executive. The company has had a tumultuous year in which a series of Reuters investigations triggered civil and criminal probes of the second-largest US natural gas producer.
After the bell, shares of Facebook Inc fell 5.9 per cent to US$29.40 following the company’s earnings announcement. Facebook said its revenue in the fourth quarter grew 40 per cent year-on-year to US$1.585 billion.
Both Boeing Co and Amazon.com shares gained after earnings beat expectations, continuing a trend this quarter of high-profile names advancing after results.
Amazon rose 4.8 per cent to US$272.76 and Boeing rose 1.3 per cent to US$74.59.
The Dow Jones industrial average was down 44.00 points, or 0.32 per cent, at 13,910.42. The Standard & Poor’s 500 Index was down 5.88 points, or 0.39 per cent, at 1,501.96. The Nasdaq Composite Index was down 11.35 points, or 0.36 per cent, at 3,142.31.
Thomson Reuters data showed that of the 192 companies in the S&P 500 that have reported earnings this season, 68.8 per cent have been above analyst expectations, which is a higher proportion than over the past four quarters and above the average since 1994.
Research In Motion shares fell 12 per cent to US$13.78 after the company, which is changing its name to BlackBerry, unveiled a long-delayed line of smartphones in hopes of a comeback into a market it once dominated.
Giving the market extra support, private sector employment topped forecasts with the ADP National Employment report showing 192,000 jobs were added in January, higher than the 165,000 expectation. — Reuters