Stocks Move To Downside As Traders Digest Fed Announcement - U.S. Commentary

(RTTNews) - Stocks have moved to the downside in recent trading, as traders digest the Federal Reserve's announcement of its latest decision on interest rates. As expected, the Fed left its target for the federal funds rate unchanged in a range of 0.0 to 0.25 percent.

In its accompanying statement, the Fed noted that information received since the April meeting suggests that the pace of economic contraction is slowing. The Fed said conditions in financial markets have generally improved and housing spending has shown further signs of stabilizing.

With regard to inflation, the central bank noted that prices of energy and other commodities have risen of late, although it said substantial resource slack is likely to dampen cost pressures.

The Fed didn't announce any changes to its plan to repurchase long-term treasuries, reiterating that it will buy up to $300 billion worth of Treasury securities by autumn.

Early buying interest was sparked by a report from the Commerce Department showing that durable goods for May rose unexpectedly, dwarfing economist estimates.

However, a separate report from the Commerce Department showed that new home sales slipped in May, while economists had anticipated a moderate increase. Traders largely shrugged off the housing data, which was marked by notable revisions to the three previous months.

In recent trading, the Dow has pulled back below the unchanged line and is currently posting a modest loss. While the Dow is currently down 0.83 at 8,322.08, the Nasdaq remains up 30.27 at 1,795.19 and the S&P 500 is up 7.64 at 902.74.

Sector News

Some health insurance and defense stocks have slid into negative territory, as reflected by the 1.1 percent pullback in the Morgan Stanley Healthcare Payor Index and the 0.9 percent retreat by the Philadelphia Defense Sector Index.

Meanwhile, significant strength remains visible among healthcare provider stocks, as reflected by the 3.5 percent gain being shown by the Morgan Stanley Healthcare Provider Index. With the gain, the index is moving well off the one-month closing low it set in the previous session.

Gold stocks are also posting strong gains, with the NYSE Arca Gold Bugs Index rising by 3.2 percent. The index is moving further off of its worst closing level in nearly two months, helped by an increase in the price of the precious metal, which closed up $10.10 at $934.40 an ounce.

Transportation and electronic storage stocks also continue to move higher, with the Dow Jones Transportation Average and the NYSE Arca Disk Drive Index advancing by 2.2 percent and 2.8 percent, respectively.

In Focus: Economic Data, Corporate & Earnings News

As mentioned above, a report from the Commerce Department showed that durable goods for May rose by 1.8 percent, matching a revised increase in April. The increase surprised economists, who had expected a decline of 0.9 percent.

Another notable increase in orders for transportation equipment contributed to the bigger than expected increase in durable goods orders. Orders for transportation equipment increased by 3.6 percent in May, following a 6.2 percent increase in April.

Excluding the continued increase in orders for transportation equipment, durable goods orders still rose 1.1 percent in May compared to a 0.4 percent increase in April. Economists had expected ex-transportation orders to fall 0.5 percent.

In a separate report, the Commerce Department said that new home sales slipped by 0.6 percent to an annual rate of 342,000 in May from a revised April rate of 344,000. Economists had expected sales to jump 2.3 percent to 360,000 from the 352,000 originally reported for the previous month.

On the corporate front, Oracle (ORCL | Quote | Chart | News | PowerRating) said Tuesday after the markets closed that its fourth quarter profit fell about 7 percent from last year, as a stronger U.S. dollar ate into its sales. Nonetheless, the results beat analyst estimates, and shares of Oracle are up 7 percent on the news.

Contract electronics manufacturer Jabil Circuit (JBL | Quote | Chart | News | PowerRating) announced a third quarter net loss due to restructuring and impairment charges and lower revenues. The company's fourth quarter revenue forecast was also lower than analyst estimates. Nonetheless, the stock is currently up 3.8 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Wednesday's session on the upside. Japan's benchmark Nikkei 225 Index closed up 0.4 percent, while Hong Kong's Hang Seng Index jumped 2 percent.

The major European markets also closed notably higher, with the French CAC 40 Index and the German DAX Index finishing up by 2.2 percent and 2.7 percent, respectively, while the U.K.'s FTSE 100 Index jumped 1.2 percent.

In the bond markets, treasuries have spiked back to the downside after drifting higher earlier in the afternoon. Subsequently, the yield on the benchmark ten-year note is trading at 3.681 percent, an increase of 4.1 basis points on the day.

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