The dollar all but erased losses while most U.S. stocks slipped from records after Federal Reserve Chair Janet Yellen suggested weak readings on inflation won’t persist as the central bank continued its path of tightening. Treasuries rallied on slower price acceleration.
The greenback was little changed versus the euro after weakening as much as 0.8 percent during the session. Technology stocks led declines on equity benchmarks, as Yellen reiterated the central bank’s intention of continuing to raise rates as data improve, even as inflation readings fall short of expectations. Data earlier Wednesday showing a deceleration in price gains sparked a Treasury rally that shaved as many as 11 basis points from the 10-year yield.
“Everyone is concerned about the path of interest rate increases as well as the methodology for reducing the balance sheet, and this is creating a little bit of volatility intraday,” Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, said by phone. “The volatility should creep higher in the course of the summer months as Fed moves further in adjusting the balance sheet.”
The Fed’s actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year. Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year.
Central banks in Japan, Switzerland and Britain are also scheduled to weigh in with policy decisions this week. Investors have reined in expectations for a Bank of England interest-rate increase after the election shock.
Markets largely ignored a shooting that wounded the third-highest ranked U.S. House Republican and at least four others at a congressional baseball practice in Alexandria, Virginia. The gunman later died from injuries in a shootout with police.
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Here are the major movers:
- The S&P 500 fell 0.1 percent to 2,437.91 at 4 p.m. in New York, after fluctuating for most of the session.
- The tech-heavy Nasdaq indexes fell 0.4 percent, while small caps lost 0.6 percent. The Dow Jones Industrial Average edged higher to a fresh record, led by gains in Home Depot Inc. and Travelers Cos.
- The Stoxx Europe 600 Index erased gains to close lower by 0.3 percent.
- MSCI’s emerging-market index added 0.3 percent, paring gains after the Fed decision.
- The Bloomberg Dollar Spot Index fell 0.2 percent, trimming a drop that reached 0.7 percent.
- The yen was 0.5 percent stronger at 109.565 per dollar.
- The pound fell 0.1 percent to $1.2747 after it strengthened 0.8 percent Tuesday.
- The Canadian dollar rose 0.1 percent, gaining for a fifth day. The euro added 0.1 percent to 1.1219.
- The yield on 10-year Treasury notes fell eight basis points to 2.14 percent. It slipped to 2.10 earlier in the session.
- The yield on U.K. gilts dropped 11 basis points to 0.93 percent after rising seven points on Tuesday.
- West Texas crude futures fell 3.7 percent to settle at $44.73 a barrel, the lowest since November. The U.S. government reported gasoline and other petroleum product stockpiles swelled last month. WTI has fallen 19 percent this year from its peak of $55.24 on Jan. 3.
- Spot gold fell to the lowest level in more than two weeks after the Fed’s decision. The metal fell as much as 0.7 percent to $1,257.28 an ounce. It earlier rose more than 1 percent.