June 11 – Dow Jones. US stocks closed mixed on Wednesday, pausing after a recent rally, despite a promise by the US Federal Reserve in the coming years to continue aggressive monetary stimulus measures.
The Dow Jones Industrial Average fell 282.31 points, or 1.0%, to 26989.99 points. S&P 500 decreased by 17.04 points, or 0.5%, to 3190.14 points.
Meanwhile, the Nasdaq Composite added 66.59 points, or 0.7%, to 10,020.35 points, a new record high.
According to the results of the next meeting, the Fed said it intends to increase efforts to support the economy against the backdrop of the coronavirus pandemic. The Central Bank said it does not expect interest rates to increase until the end of 2022, and will maintain the previous volume of purchases of US government bonds and mortgage bonds.
Fed stimulus measures have been a key driver of stock market growth since mid-March lows. The rally was also driven by hopes for a recovery in the US economy after easing quarantine restrictions.
However, resuming business activity does not guarantee economic recovery, said Joseph Amato, president of the Neuberger Berman Group.
“One should be careful in assessing the rate of recovery in activity,” he said. “If the economic recovery dragged on, then the (so strong) growth of the stock market was probably not justified.”
The yield on 10-year US government bonds fell to 0.744% against 0.829% on Tuesday.
Meanwhile, the Organization for Economic Co-operation and Development on Wednesday announced that a second wave of quarantine measures aimed at suppressing new outbreaks of coronavirus would inflict a severe blow on the global economy, which is already in a state of severe decline. The OECD estimates that the global economy will shrink by 6% this year if a second wave of infections and restrictive measures can be avoided.
So far, investors seem to be focused on participating in the stock market rally and are not paying much attention to the economic situation, said Rupert Thompson, chief investment officer at Kingswood Holdings.
In his opinion, the continuation of the rally is possible due to the joining of investors who missed the growth observed in recent months.
This trend may continue for a couple of months, after which the completion of state aid programs is likely, another wave of bankruptcies and layoffs, as well as a second wave of the coronavirus pandemic, Thompson said. “Only then will investors begin to doubt the prospects for a V-shaped economic recovery,” he added.
Shares of United Airlines Holdings fell 11.0% after JPMorgan Chase analysts downgraded to neutral. Delta Air Lines shares were down 7.4% and Southwest Airlines were down 2.3%. Cruise operators Carnival shares fell 11.0%, Royal Caribbean Cruises fell 9.0%.
Shares of transport and leisure companies have fallen earlier this year, and have recovered in recent weeks amid optimism about the resumption of US economic activity.
Oil quotes rose after the Fed official statement, although previously published data from the Energy Information Administration (EIA) of the US Department of Energy showed that oil reserves in the country reached a record high. July futures for WTI oil on the NYMEX rose 1.7%, to $ 39.60 per barrel.
The pan-European Stoxx Europe 600 fell 0.4%. Japanese Nikkei 225 grew 0.2% with support from the healthcare and electronics sectors. South Korea’s leading index added 0.3%, while Hong Kong’s Hang Seng closed the day virtually unchanged.
The Chinese Shanghai Composite lost 0.4%. As official macro data showed, the decline in prices of Chinese manufacturers in May increased to 3.7% compared to the same period last year. Meanwhile, the growth of the consumer price index (CPI) in May slowed down to 2.4% compared with the same period of the previous year. Both indicators fell short of the consensus expectations of economists surveyed by The Wall Street Journal.