US close: Wall Street ends on mixed note as Fed sticks to its guns

Wall Street ended the session on a mixed note as the US central bank to a large degree stuck to its plans to continue tightening policy, including an announcement that it would begin to shrink its balance year in 2017, which served to flatten the yield curve further.

The Dow Jones Industrial Average edged higher by 0.22% or 46.09 points to 21,374.56 - a new record high - while the S&P 500 drifted lower by 0.10% to end at 2,437.92 but off its worst levels of the day. In parallel, the tech-heavy Nasdaq-100 slipped 0.43% to 5,727.07.

The worst performing segments of the market were: Marine Transportation (-5.54%), Coal (-3.36%) and Exploration and Production (-2.91%).

As expected the Federal Reserve hiked the target range for the Fed funds rate by another 25 basis points to between 1.00 and 1.25% with policymakers on the Potomac sigalling they expected another rate increase before the year was out.

"Risks to our outlook for monetary policy include persistent weakness in inflation, which could delay the next rate hike into 2018. The Fed, in contrast, sees inflation as being restrained by transitory factors and is comfortable with its current normalization plans. We believe it is very committed to balance sheet runoff this year and, in our view, there is a high bar to altering the Fed’s plans for its balance sheet at this point. In other words, it’s full steam ahead," said Barclays's Michael Gapen and Blerina Uruci following the announcement of the decision.

However, a weaker than expected reading on US consumer prices for the month of May published earlier in the day had led some economists, including those at Barclays, to be more cautious on the outlook for further rate increases in 2017

The headline rate of CPI dipped by 0.1% in May when compared to the month before, while the annual pace of advance declined from 2.2% in April to 1.9% for May, according to the Bureau of Labor Statistics.

At an annual rate of 1.7% so-called 'core' prices also undershot forecasts for a gain of 1.9%.

Thursday's figures led Uruci to tell clients: "Today's soft inflation report reduces our conviction that the Fed will be able to raise rates for a third time in December. While we maintain a December rate increase in our baseline, it is conditional on evidence that inflation is resuming its firming trend."

In parallel, the Department of Commerce announced that US retail sales volumes fell by 0.3% on the month (consensus: 0.0%).

However, upwards revisions to data for prior months helped to offset the weakness.

To take note of, and in a possible negative development for the economy, the US interest rate yield curve flattened further on Wednesday.

By the closing bell, the yield on the benchmark 10-year US Treasury note was down by nine basis points to 2.13% while that on the two-year note was down by three basis points at 1.33%.

In corporate news, shares in electric car maker Tesla rose following news that its Model X SUV has been given a five-star safety rating and after Ron Baron, the founder of Baron Capital, told CNBC the stock could jump by more than 50% by next year.

Altice, the broadband provider, set a price range of between $27 to $31 for the initial public offering of its shares.

Dow Jones - Risers

Home Depot Inc. (HD) $156.76 1.80%
Travelers Company Inc. (TRV) $127.97 1.48%
Goldman Sachs Group Inc. (GS) $226.51 1.03%
General Electric Co. (GE) $28.69 0.84%
Unitedhealth Group Inc. (UNH) $182.34 0.72%
Boeing Co. (BA) $192.38 0.68%
Nike Inc. (NKE) $54.66 0.64%
Coca-Cola Co. (KO) $45.30 0.60%
McDonald's Corp. (MCD) $150.68 0.57%
Johnson & Johnson (JNJ) $132.77 0.57%