US stocks gave up bigger gains by the close on Wednesday, as investors welcomed the Fed's decision to hold rates steady, as expected, but remained wary about the economy. The Dow Jones ended 4.4 points higher at 11811.83, the Nasdaq added 32.98 points to close at 2401.26 and the S&P500 added 7.68 points to close at 1321.97.
Stocks rallied in the morning on falling oil prices and were extended further in the afternoon after the central bank decision. But weakness in select sectors caused the Dow to give up most of its gains and the other major gauges to cut gains.
The Fed held a key short term interest rate steady, as expected, and indicated that the economy was starting to recover. At the same time, the bankers also took a slightly more hawkish stance on inflation and this may have given investors a reason to shed bigger gains. The central bank pumped billions into the banking system as a means of loosening up the stalled credit markets. In its statement, the bankers implied that some of this stimulus has helped and will continue to help. The statement said "although downside risks to growth remain they appear to have diminished somewhat and the upside risk to inflation and inflation expectations have increased". This part of the statement shows that although the bankers did upgrade the assessment of the economy, they also shifted the risks more toward inflation versus growth, said one senior economist at Wells Fargo.
After the close, Oracle reported higher fiscal fourth quarter sales and earnings that topped forecasts, thanks to strong software revenue. That sent shares higher in extended hours trading.
Also after the close, Research in Motion reported quarterly sales and earnings that rose from a year ago, but were short of expectations. Shares plunged in extended hours trading.
Boeing slid almost 7 percent after the company was downgraded to sell from neutral by Goldman Sachs. United Technologies also declined.
American Express said Mastercard will pay it as much as $1.8bn to settle an antitrust suit. The financial services company also cautioned that consumer credit is deteriorating faster than it expected this month, which would result in bigger credit losses. AmEx shares initially struggled for direction, but ended up sliding into the close along with the rest of the financial sector. Bank stocks such as Citigroup had been up more than 4 percent earlier in the session, but ended up closing flat or lower.
Monsanto reported higher quarterly sales and earnings that topped estimates. The agriculture company also lifted its full year earnings forecast. However, investors took a sell the news approach, with the stock having more than doubled over the last year. The slump in oil prices was good news for companies that depend directly on fuel, such as airlines, railroads and truckers. The Dow Jones Transportation average climbed 1 percent.
In economic news, The government reported Wednesday that May durable goods were basically flat, after falling 1 percent in April. The reading on big ticket items, the type meant to last three years or more, was in line with analysts expectations.
Another report showed that new home sales declined 2.5 percent in May, to a seasonally adjusted annual rate of 512,000 units versus 525,000 in April. That was just above the expectations of economists, who were forecasting a rate of 510,000 units. However, year over year sales dropped 40 percent, reflecting the ongoing fallout in the housing market.
US light crude for August delivery fell $2.45 to settle at $134.55 a barrel on NYMEX after a government report showed a surprise jump in crude inventories last week.
Gas prices fell for a third time in a row this week. The national average price for a gallon of regular unleaded gas fell to $4.067 from $4.069 the previous day.
In currency trading, the dollar declined versus the euro and rose against the yen.
In the bond market, Treasury prices slumped, raising the yield on the 10 year note to 4.16 percent to 4.1 percent.
COMEX gold for August delivery fell $9.30 to $882.30 an ounce.
The Nikkei average closed lower on Thursday, extending its longest losing streak this year to a sixth session as lower oil prices dented trading houses such as Mitsubishi Corp. Trade was lacklustre ahead of a flood of economic data as growing uncertainty about the global economy thinned the market, although defensive shares such as Pharmaceuticals stood firm as investors sought safety.
Among other gainers was Sony Corp, which said after the close that it would double sales in BRIC countries to 2 trillion yen by the year ending in March 2011. The Nikkei closed 7.6 points lower, in a day of volatile trading that saw it move in and out of positive territory before closing at 1344.79.
Shares of electricity wholesaler Electric Power Development Co fell 6.9 percent to Y3,810 after it shareholders rejected several proposals by British activist investor the Childrens Investment Fund including one for a higher dividend.
Otherwise activity was largely limited to trading on factors specific to each company, including buying back of shares that had been heavily sold in recent days, such as Sony. Sony gained 2.9 percent to Y5,060.
Mitsubishi lost 2.6 percent to Y3,420 while fellow trader Itochu Corp shed 2.5 percent to Y1,141 and Marubeni Corp slid 2.2 percent to Y887.
Nomura Holdings slid 1 percent after sources familiar with the matter said Japan's financial watchdog plans to order the company to improve internal controls after it become embroiled in an insider trading scandal.
UK stocks ended 0.6 percent lower on Wednesday as losses at food and drug retailers and energy groups outweighed gains in banks ahead of a rate decision by the US Federal Reserve. The FTSE100 closed 32.5 points lower at 5634.7.
Tesco lost 3.4 percent and Sainsbury fell 3.2 percent after TNS Worldpanel data showed that the two groups had seen their grocery market shares erode slightly in the 12 weeks to June 15.
With oil trading close to $137 a barrel both utilities and energy stocks were mixed. Centrica, Scottish and Southern Energy and National Grid lost 2.2-3 percent, while BP lost 0.6 percent, BG Group fell 1.9 percent. Royal Dutch however gained 0.8 percent. BG was also hurt by its hostile $13.1bn bid for Australia's Origin Energy, as it sought to boost its position in Asia-Pacific's fast growing gas market.
Banks notched up late gains, tracking US financial stocks higher. Barclays jumped 4 percent and RBS rose 2.1 percent. HSBC fell 0.2 percent on market talk that the British bank could make a bid for the worlds largest wealth manager, UBS. Both declined to comment. But investors remained cautious ahead of a US Federal Reserve statement on Wednesday that could shed light on the timing on possible interest rate increases. Sentiment was also down because of US data showing consumer confidence fell in June to its lowest in 16 years, fuelling worries over consumer spending. Bradford and Bingley soared 17 percent after restructuring specialist Resolution said it planned to consolidate some of Britain's smaller banks and had been invited by investors in B&B to consider using it to spearhead the plan. B&B rejected the investment approach, saying it would have meant Resolution taking effective control of the lender.
Political tension surrounding Israel and Iran also weighed on the market, which extended early losses on rumours of a strike on Iran's nuclear sites. The denial of the rumour by a senior Iranian nuclear official had little market impact. Last Friday the New York Times quoted US officials as saying Israel had carried out exercises which could be a rehearsal for a strike on Iran.
Miners slipped, tracking weaker metal prices. Xstrata, Anglo American and Vedanta Resources fell between 0.7 and 3 percent. But Antofagasta gained 1.7 percent after Credit Suisse upgraded the stock to outperform from neutral and raised its price target to 760 pence from 600 pence.
Debenhams jumped 6 percent after the department store said like for like sales rose by more than expected in the 10 weeks and its net debt would be in line with analysts current expectations.