US open: Stocks mixed after FOMC rate decision, US GDP
US stocks were mixed on Thursday after the Federal Reserve held interest rates steady and as official data showed economic growth slowed surprisingly in the first quarter.
At 1503 BST the Dow Jones Industrial Average fell 0.33%, the S&P 500 dropped 0.05% and the Nasdaq rose 0.26%.
The Fed on Wednesday decided to keep interest rates unchanged at 0.25% to 0.50% on Wednesday, as expected, but left the door open to a rate increase at the next meeting in June. Policymaker Esther George also voted to raise rates for a second month in a row as the Fed softened its tone on the economic outlook.
“Unless there’s a robust pick up in the data for May, Fed policymakers are likely to be looking at some gloomy economic trends at the June meeting, making a rate hike hard to justify,” said Chief market economist at Markit, Chris Williamson.
“The Fed may also not want to unsettle markets with a rate hike just days before the UK’s 23 June referendum on remaining in the EU.”
In Thursday news, US economic growth slowed to an annual rate of 0.5% in the first quarter from the 1.4% rate enjoyed in the fourth quarter of 2016, the Commerce Department revealed. Analysts had forecast a 0.6% increase.
“We remain very skeptical of the growth number, which has been depressed temporarily by the stock market plunge in Jan, persistent seasonal adjustment problems which reduce Q1 growth but boost Q2, and the very early Easter, which has hit an array of March data, all of which will rebound in April,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“The Fed pointed out yesterday that the labour market has continued to improve despite the apparent slowing in growth, perhaps suggesting that they, too, are suspicious of the GDP data.”
Another report from the Labor Department showed the number of Americans filing for unemployment benefits rose less than expected last week. US initial jobless claims rose by 9,000 to 257,000 from an upwardly-revised 248,000, coming in ahead of expectations for an increase to 260,000.
Elsewhere, the Bank of Japan shocked the market by voting to refrain from any extra stimulus measures to bolster the stagnant economy.
The BoJ decided to keep its negative interest rate of -0.10% in place and voted to continue its asset purchase programme.
Alongside the BoJ’s policy announcement, official data showed annualised deflation of 0.1% in March, compared to inflation of 0.3% the previous month. In better news, the jobless rate unexpectedly fell to 3.2% in March from 3.3% in February.
Meanwhile, oil prices gained with West Texas Intermediate crude up 0.5% to $45.57 per barrel and Brent crude up 0.94% to $47.63 per barrel.
In company news, Facebook surged after its first-quarter results out late on Wednesday beat expectations. The social network posted earnings of $1.51bn, p from $512m in the same quarter a year before.
Solar panel maker First Solar was under the cosh as its quarterly results missed analysts’ expectations.
Dow Chemical fell as the company said its revenue dropped sharply amid pricing and currency headwinds in the latest quarter.
Time Warner Cable advanced as its first quarter revenue and profit beat expectations.
Amazon reports its first quarter after the closing bell.
In currencies, the dollar fell 0.13% against the pound, dropped 0.10% against the euro and plunged 2.68% versus the yen.