By Sinéad Carew and Samuel Indyk
NEW YORK/ LONDON (Reuters) -Equities lost ground on Wednesday while the U.S. dollar extended gains after the Federal Reserve kept rates unchanged and said there was no decision made about a widely expected cut in September.
The Fed’s latest statement on rates gave little indication of when borrowing costs might be lowered and the decision to hold them steady drew dissents from two of the U.S. central bank’s governors, both appointees of President Donald Trump who agree with him that monetary policy is too tight.
While the equity market reaction to the Fed’s statement was muted, stocks lost ground sharply during a press conference when the Fed Chair Jerome Powell said it is too soon to decide whether or not the central bank will cut rates in September as it will examine economic information in the run-up to its next gathering.
“I don’t think there’s anything in the statement that was not as expected. You had rates remaining unchanged and they cited disparate things in the data in terms of and pushes and pulls on inflation and a bit of moderation in economic activity,” said Tony Welch, chief investment officer at SignatureFD in Atlanta. “At least they are now noting that there has been some moderation so that’s a little bit of a change. And you had a couple of dissents, which was broadly expected as well.”
On Wall Street at 3:17 p.m. ET (1917 GMT), the Dow Jones Industrial Average <.DJI> fell 299.43 points, or 0.67%, to 44,333.56, the S&P 500 <.SPX> fell 22.48 points, or 0.35%, to 6,348.38 and the Nasdaq Composite <.IXIC> fell 21.70 points, or 0.08%, to 21,076.59.
MSCI’s gauge of stocks across the globe <.MIWD00000PUS> fell 4.03 points, or 0.43%, to 931.77. Earlier the pan-European STOXX 600 <.STOXX> index had closed down 0.02%.
In the government bond market, U.S. Treasury yields added to gains as Powell spoke. The yield on benchmark U.S. 10-year notes rose 4.4 basis points to 4.372%, from 4.328% late on Tuesday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 5.9 basis points to 3.935%, from 3.875%.
In currencies, the dollar advanced further as Powell spoke. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.92% to 99.80.
The euro was down 1.03% at $1.1427 and the Canadian dollar weakened 0.44% versus the greenback to C$1.38 per dollar.
Against the Japanese yen, the dollar strengthened 0.55% to 149.26, while it strengthened 0.92% to 0.813 against the Swiss franc.
Oil prices climbed more than 1% as investors awaited developments on Trump’s tighter deadline for Russia to end the war in Ukraine and his tariff threats to countries that trade its oil.
U.S. crude futures settled up 1.14%, or 79 cents at $70 a barrel and Brent closed at $73.24 per barrel, up 1.01% or 73 cents on the day.
Elsewhere in commodities, gold prices fell after the solid U.S. economic data and the Fed statement.
Spot gold fell 1.54% to $3,275.22 an ounce. U.S. gold futures fell 1.4% to $3,277.30 an ounce.
Copper declined 0.69% to $9,730.00 a tonne.
Meanwhile on the trade front, Trump was busy on Wednesday, signing an order for 50% tariffs on certain copper products as of August 1. He also signed an order for tariffs totaling 50% for U.S. imports from Brazil.
Earlier, he had announced a 25% tariff on U.S. imports from India starting also on August 1. This was after talks between the U.S. and China concluded on Tuesday without any major breakthroughs.
Data earlier in the day showed U.S. economic growth rebounded more than expected in the second quarter, but that grossly overstated the economy’s health as declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in 2-1/2 years.
And on the labor side, U.S. private payrolls increased more than expected in July, according to the ADP National Employment Report. Private payrolls rose by 104,000 jobs last month after a revised 23,000 decline in June. Economists polled by Reuters had forecast private employment increasing 75,000 following a previously reported drop of 33,000 in June.
(Reporting by Sinéad Carew, Samuel Indyk and Gregor Stuart Hunter; Editing by Muralikumar Anantharaman, Sam Holmes, Chizu Nomiyama and Marguerita Choy)
