U.S. Stocks Close Mixed Following Lackluster Session

After ending the previous session sharply higher, stocks showed a lack of direction over the course of the trading session on Wednesday. Despite the choppy trading, the tech-heavy Nasdaq reached a new record closing high.

The major averages eventually ended the session mixed for the third time in four sessions. While the Dow dipped 44.77 points or 0.2 percent to 30,154.54, the Nasdaq climbed 63.13 points or 0.5 percent to 12,658.19 and the S&P 500 rose 6.55 points or 0.2 percent to 3,701.17.

The mixed close on Wall Street came after the Fed announced its widely expected decision to leave interest rates unchanged while also revealing plans to continue its asset purchase program until the economy shows substantial progressed towards the central bank’s goals of maximum employment and price stability.

The Fed said it decided to keep the target range for the federal funds rate at 0 to 1/4 percent, which is where the target range has remained since an emergency rate cut in March.

The accompanying statement reiterated that the Fed plans to keep rates at near-zero levels until labor market conditions have reached levels consistent with maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

In one of the few changes to the November statement, the Fed also said it plans to continue purchasing bonds at a rate of at least $120 billion per month until “substantial further progress” has been made toward its policy goals.

“The Fed tweaked the guidance for its asset purchases in the statement issued after the conclusion of today’s FOMC meeting, with the new language implying those purchases could continue for longer than previously believed,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “Nevertheless, with yields already at unusually low levels across the curve, additional asset purchases would provide only very limited benefit to the real economy.”

In addition to announcing its latest monetary policy decision, the central bank also provided updated economic projections.

The latest projections show the Fed now expects the economy to shrink by less than expected in 2020 and grow by slightly more than expected in 2021 and 2022.

Earlier in the day, traders seemed reluctant to make significant moves as they weighed optimism about a new fiscal stimulus bill against disappointing retail sales data.

After a meeting of congressional leaders on Tuesday, both Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer expressed optimism that an agreement can be reached “soon.”

Traders have remained optimistic that lawmakers will eventually reach an agreement even though a deal on a new relief package has remained beyond their grasp for months.

However, the Commerce Department released a report before the start of trading showing retail sales slumped by much more than expected in the month of November.

The Commerce Department said retail sales tumbled by 1.1 percent in November following a revised 0.1 percent dip in October.

Economists had expected retail sales to slip by 0.3 percent compared to the 0.3 percent increase originally reported for the previous month.

Excluding a decrease in sales by motor vehicle and parts dealers, retail sales still fell by 0.9 percent in November. Ex-auto sales were expected to inch up by 0.1 percent.

The National Association of Home Builders also released a report showing homebuilder confidence pulled back by more than expected in December after reaching a record high in November.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Software stocks showed a strong move to the upside, however, with the Dow Jones U.S. Software Index surging up by 2 percent to its best closing level in three months.

Considerable strength was also visible among gold stocks, as reflected by the 1.8 percent gain posted by the NYSE Arca Gold Bugs Index. The strength in the sector came as the price of gold moved notably higher in electronic trading.

On the other hand, natural gas stocks came under pressure over the course of the session, dragging the NYSE Arca Natural Gas Index down by 1.6 percent.

Significant weakness also emerged among utilities stocks, resulting in a 1.4 percent drop by the Dow Jones Utility Average.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.3 percent, while Hong Kong’s Hang Seng Index jumped by 1 percent.

The major European markets have also moved to the upside on the day. While the German DAX Index surged up by 1.5 percent, the U.K.’s FTSE 100 Index advanced by 0.9 percent and the French CAC 40 Index rose by 0.3 percent.

In the bond market, treasuries showed wild swings over the course of the session before closing nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 0.920 percent.

Looking Ahead

Reports on weekly jobless claims, housing starts, and Philadelphia-area manufacturing activity may attract attention on Thursday, although traders are also likely to keep a close eye on any developments in Washington.

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