Stocks fell and bond yields rose on Wall Street Wednesday after the Federal Reserve lowered its key interest rate for the first time in a decade but left investors feeling uncertain about the likelihood of further cuts.
The quarter-point cut announced by the central bank was widely expected, so investors focused on Chairman Jerome Powell’s remarks during a news conference for hints about the Fed’s future plans.
Powell said that there could be more cuts, but that the central bank was not intending to embark on a long cycle of lowering interest rates. He characterized the rate cut as a “mid-cycle adjustment.”
The remarks sent stocks into a skid that briefly knocked the Dow Jones Industrial Average down more than 470 points. Prices of short-term U.S. government bonds fell, sending yields higher.
Stocks erased some of their losses later during Powell’s news conference, when he seemed to shift his message to leave open the possibility that the Fed would cut rates again.
The S&P 500 index dropped 32.80 points, or 1.1%, to 2,980.38. The benchmark index had its worst day in two months. It hit an all-time high just last Friday.
The Dow Jones Industrial Average lost 333.75 points, or 1.2%, to 26,864.27. The Dow was briefly down 478 points.
The Nasdaq composite fell 98.19 points, or 1.2%, to 8,175.42. The Russell 2000 index of smaller companies slid 10.99 points, or 0.7%, to 1,574.61.
The 10-year Treasury yield fell to 2.01% from 2.06% late Tuesday, a big move. The two-year yield, which is more influenced by the Fed’s movements, rose sharply to 1.86% from 1.83%.
In addition to keeping an eye on the Fed, investors continued to pore through a heavy flow of corporate earnings.
Companies are about midway through the earnings reporting season. Results have been better than the dismal expectations that analysts had coming into it.
Apple rose 2% after beating Wall Street’s profit and revenue forecasts for the quarter while slamming the brakes on the decline of iPhone sales in China. Sales of the company’s best-known product are still sputtering, but the company has seen increasing revenue contributions from digital services, such as music.
Dine Brands Global, the owner of IHOP and Applebee’s, fell 5.1% after slashing its financial forecast for the year. The company cut forecasts for sales at existing Applebee’s and IHOP locations, along with overall profit, following a disappointing second quarter earnings report.
Molson Coors Brewing also slid 5.1% after the company reported a global decline in volume and sales during the second quarter that weighed down profit. The maker of Molson and Coors fell short of analysts’ profit and revenue forecasts.
Benchmark crude oil rose 53 cents to settle at $58.58 a barrel. Brent crude oil, the international standard, rose 45 cents to close at $65.17 a barrel. Wholesale gasoline was unchanged at $1.90 per gallon. Heating oil climbed 2 cents to $1.96 per gallon. Natural gas rose 9 cents to $2.23 per 1,000 cubic feet.
Gold fell $3.60 to $1,426 10 per ounce, silver fell 15 cents to $16.35 per ounce and copper fell 1 cent to $2.66 per pound.
The dollar rose to 108.77 Japanese yen from 108.60 yen on Tuesday. The euro weakened to $1.1085 from $1.1156.