Stocks closed lower on Wall Street Wednesday after a rally following the Federal Reserve’s latest interest rate policy update faded in the final hour of trading.
The S&P 500 fell 0.5 percent after having been up 0.6 percent following the 2 p.m. Fed announcement. The central bank signaled it will keep interest rates near zero into 2023 and issued a slightly less dire outlook for economic growth and unemployment this year.
The Fed’s decision to leave rates unchanged had been widely expected by Wall Street and continues the central bank’s policy of unprecedented support for financial markets since the pandemic knocked the economy into a recession.
“The Fed confirmed what we all thought, rates at 0 percent are here to stay, probably for years,” said Ryan Detrick, chief market strategist for LPL Financial. “A better economy and a dovish Fed, that is a nice combo.”
The S&P 500 lost 15.71 points to 3,385.49. The Dow Jones Industrial average rose 36.78 points, or 0.1 percent, to 28,032.38. It had earlier been up by 369 points. The Nasdaq composite lost 139.85 points, or 1.3 percent, to 11,050.47.
Smaller stocks rose more than the rest of the market, and the Russell 2000 index of small-caps gained 14.17 points, or 0.9 percent, to 1,552.33.
The market’s pullback snapped a three-day winning streak for the S&P 500, which is down 3.3 percent so far this month after five-straight monthly gains.
One of the primary reasons Wall Street has roared back to record heights this year despite the still-raging pandemic is the immense aid from the Federal Reserve. The central bank has cut short-term rates to nearly zero and is buying all kinds of bonds to support markets. Last month, Fed chair Jay Powell outlined a new strategy of providing support even if inflation rises above