Stocks see-saw over interest rate fears
New signs that interest rates may be heading higher sent stocks flitting between gains and losses on Wednesday, but the major indexes ended up closing pretty much where they started.
Stocks held onto gains through the first part of the day, but in the afternoon the Federal Reserve released minutes of its last meeting suggesting it was more open to raising rates than many had thought. Caught unaware, investors started dumping utilities and other high dividend payers that had been in favour for much of the year.
Bond prices fell sharply, sending long-term interest rates higher.
By the close, the Standard and Poor's 500 index managed to eke out a gain, up 0.42 points, just 0.02% higher, to 2,047.63. The Dow Jones industrial average slipped 3.36 points, less 0.1%, to 17,526.62. The Nasdaq composite climbed 23.39 points, or 0.5%, to 4,739.12.
Utilities fell 1.9% on the Fed news, but banks rose because they can make more money on loans if rates go higher. JPMorgan Chase jumped 4% and Goldman Sachs climbed 3%.
The minutes of the Fed's last meeting showed a widely held view among policymakers that it "likely would be appropriate" to raise rates at its June meeting as long as the economy and labour markets continue to strengthen and inflation shows signs of accelerating.
Some investors are worried that a rise in rates will hurt a sluggish US economy that grew just 0.5% in the first quarter.
Among stocks making big moves, Target plunged 5.61 dollars, or 7.6%, to 68 dollars after reporting that sales had slowed. The company also gave a forecast that disappointed investors.
Shares of many other retailers followed the company lower in what is shaping up to be a miserable year for the sector. Wal-Mart dropped 1.95 dollars, or 3%, to 63.15 dollars and Costco Wholesale lost 2.31 dollars, or 1.6%, to 141.29 dollars.
Lowe's bucked the trend, rising 2.53 dollars, or 3%, to 78.60 dollars on surging first-quarter profits and higher comparable-store sales. The home improvement chain also raised its outlook for the year as it benefits from a strengthening US housing market.
In overseas markets, Germany's DAX and France's CAX 40 each rose 0.5%. Britain's FTSE 100 was unchanged. Japan's Nikkei 225 index was flat. Hong Kong's Hang Seng lost 1.5%.