US open: Stocks fail to extend Fed rate hike rally

US equity markets were unable to extend their rally on Thursday after they were propelled higher in the previous session when the Federal Reserve raised interest rates as expected for the second time in four months and struck a more dovish tone than anticipated on future rate policy.

At 1543 GMT, the Dow Jones Industrial Average was down 0.2% to 20,907.27, the S&P 500 fell 0.28% to 2,378.49 and the Nasdaq slipped 0.19% to 5,889.07.

Markets were also weighed down by energy stocks, which were under pressure again from low oil prices. Chevron was down 1.16% and was the worst performer on the Dow, while ExxonMobil fell 0.27%

West Texas Intermediate was down 0.39% to $48.67 a barrel and Brent crude was 0.15% weaker at $51.73.

On Wednesday, stocks ended higher after the Fed lifted the funds rate to between 0.75% and 1%, as expected. However, it indicated that further rate rises would be “gradual” and officials stuck to their outlook for two more rate hikes this year and three in 2018. Many market participants had been expecting the Fed to sound a more hawkish tone.

Analysts at Monex Europe what was particularly significant was that Neel Kashkari, president of the Federal Reserve of Minneapolis, dissented from the decision to increase rates, showing not all FOMC members agree that it is the right time to normalise monetary policy, contradicting the recent bullish market consensus.

“The market had started to price in a total of four hikes this year, assuming the Fed was ready to begin an aggressive path of monetary tightening, but that is clearly no longer the case.”

Although stocks got a lift, the Fed’s dovishness hit the dollar, which slid on the back of the rate hike. This continued on Thursday with the greenback trading down 0.77% against the pound to 0.8098. It fell 0.2% versus the yen to 113.15 and was flat against the euro at 0.9321.

Elsewhere, the Bank of England stood pat on interest rates at 0.25% as expected, following the Bank of Japan which also held rates steady on Wednesday.

Over in Europe, the main indices gained as relief set in after Dutch Prime Minister Mark Rutte won an election victory, fighting off far-right rival Geert Wilders.

On the data front, US housing starts rose 3% in February to 1.28m, slightly above the 1.26m consensus forecasts, but permits fell 6.2% to 1.21m, below the 1.26m expected. Housing starts were up 6.2% in February year-on-year.

Initial jobless claims were down marginally to 241,000 for the week ending 11 March from 243,000 the previous week and close to the 240,00 consensus forecast.

The Philadelphia Fed manufacturing survey fell to 32.8 in March from 43.3 the month earlier and was ahead of the 28.0 expected.

The key 'new orders' gauge, which helps to forecast future activity, improved slightly to 38.6 from 38.0, the highest reading since December 1987.

In corporate news, software company Oracle rallied 7.19% after its third-quarter earnings late on Wednesday came in ahead of expectations.

Sports camera maker GoPro climbed 16.12% after it announced job cuts late on Wednesday and said it expects to be profitable on an adjusted basis this year.

Retailer Williams-Sonoma was up 2.81% after its fourth-quarter profit beat analysts’ expectations.

Dollar General added 2.32% after the discount retailer beat revenue forecasts and said it will increase managers' pay.

On the downside, Guess tumbled 10.79% after the fashion retailer’s earnings missed expectations on Wednesday.

Canada Goose fell 4.79% after a tepid initial public offering on the New York Stock Exchange.

Earnings are due from Adobe Systems after the close.