Wall Street ends lower after Fed statement, oil drop

Another big down day to the tune of 196 points on the Dow.  And why?  Because the Fed issued one of its most positive reports to date giving a glowing evaluation of the nation's economic recovery and reiterating once again that long overdue interest rate hikes are still in our future, though probably not until near year-end.  It seems investors haven't quite yet made up their minds as to whether they really want a recovery.  The low interest rates have made it possible for many companies to raise capital cheaply which has lead to more product, more sales, more profit and the desirable rise in stock and mutual fund prices.  But this good news also means that the economy should be weaned off the government umbilical cord and that means that interest rates must eventually be market-driven again. The market doesn't seem to know whether it wants that or not.  The Fed's rosy report also had the predictable outcome of strengthening the dollar which in turn hit oil and other commodities harder with the energy index once again dipping 4% and crude falling to $44.31 per barrel.  Bonds also benefited from the report and when bonds do better, stocks do worse.  All in all, a bad reaction to good news.  Volume was heavier than usual at 7.6 billion.

Wall Street ends lower after Fed statement, oil drop

BY SINEAD CAREW

DJ:      17,191.37  -195.84         NAS:      4,637.99  -43.50 S&P:      2,002.16  -27.39

NEW YORK Wed Jan 28, 2015 4:41pm EST

(Reuters) - U.S. stocks closed down on Wednesday, driven by a sharp decline in the S&P 500 energy sector, after the Federal Reserve said the domestic economy was growing at a solid pace, signaling it remains on track to raise interest rates later this year.

Concluding their first policy-setting meeting of the year, Fed officials said they would be "patient" on raising rates as they looked past the urgent moves made by other central banks this month to boost their struggling economies.

The dollar .DXY strengthened further after the Fed statement, putting renewed pressure on oil, which dipped to its lowest level since early 2009. This pushed energy stocks .SPNY down further.

While many market participants said they were unsurprised by the Fed comments, Stephen Massocca, Chief Investment Officer of Wedbush Equity Management LLC in San Francisco said the Fed's language looked slightly stronger in support of a rate hike.

“It was more hawkish than people thought. But you are counting grains of sand coming through the hourglass so I don’t think you will see it resonate much longer than what we’ve seen in the last hour or so,” Massocca said.

“I don’t think anyone is going to overreact here, but it was a surprising to me. I thought they would turn the dial 2 degrees and they turned it 6 degrees,” he said.

Bond prices rose after the statement, which may also have put some pressure on stocks.

The Dow Jones industrial average .DJI fell 195.84 points, or 1.13 percent, to 17,191.37, theS&P 500 .SPX lost 27.39 points, or 1.35 percent, to 2,002.16 and the Nasdaq Composite.IXIC dropped 43.50 points, or 0.93 percent, to 4,637.99.

The S&P energy sector .SPNY finished down 3.9 percent as U.S. crude futures tumbled more than 4 percent to $44.31 per barrel. Barclays and Goldman Sachs posted bearish notes on oil earlier in the day.

"Today’s statement makes it apparent that they are less convinced that the core can stay insulated from the drop in oil prices," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. "Now, September is when I think the Fed will lift rates off zero."

The market had been boosted earlier by earnings from companies including Apple andBoeing.

A 5.7 percent advance in Apple shares (AAPL.O) limited losses on the Nasdaq. Apple smashed Wall Street expectations with record sales of big-screen iPhones in the holiday shopping season, which helped the company post the largest quarterly profit in corporate history.

Boeing (BA.N) added 5.4 percent after handily beating top- and bottom-line expectations.

NYSE decliners outnumbered advancers 2,284 to 825, for a 2.77-to-1 ratio; on the Nasdaq, 2,077 issues fell and 665 advanced for a 3.12-to-1 ratio.

The S&P 500 posted 58 new 52-week highs and 14 lows; the Nasdaq Composite recorded 72 new highs and 71 lows.

Volume was heavier, with about 7.6 billion shares traded on U.S. exchanges, above the 7.16 billion average for the month so far, according to BATS Global Markets.