US stocks wobble after fed announcement, but close higher

US stock indexes overcame an afternoon wobble to close mostly higher after the Federal Reserve said it would start reducing its huge bond portfolio next month and was still on track to raise interest rates later this year.

US stocks wobble after fed announcement, but close higher

US stock indexes overcame an afternoon wobble to close mostly higher after the Federal Reserve said it would start reducing its huge bond portfolio next month and was still on track to raise interest rates later this year.

The central bank's announcement drove bond yields higher, lifting shares in banks and other financial companies.

Banks benefit from higher bond yields because it means they can charge higher interest rates on loans.

High-dividend stocks like utilities and household goods makers fell. Income-seeking investors find those stocks less appealing when bond yields move higher.

The Standard & Poor's 500 index inched up 1.59 points, or 0.1%, to 2,508.24. The Dow Jones industrial average rose 41.79 points, or 0.2%, to 22,412.59.

The modest gains nudged both indexes to record highs, extending a run of milestones that stretches back to last week.

The Nasdaq composite lost 5.28 points, or 0.1%, to 6,456.04. The Russell 2000 index of smaller-company stocks added 5.02 points, or 0.4%, to 1,445.42.

Trading on Wall Street had been mostly subdued this week ahead of the Fed's announcement.

Fed policymakers decided to leave the central bank's short-term benchmark interest rate between 1% and 1.25%, but also said they still expect to increase the rate one more time this year and three times in 2018, if persistently low inflation rebounds.

The Fed has modestly raised the rate four times since December 2015 after keeping it at a record low for seven years after the 2008 financial crisis.

In addition, the Fed said it will begin to gradually unwind its 4.5 trillion-dollar balance sheet next month.

The portfolio primarily consists of government and mortgage-backed bonds. The move will gradually increase long-term borrowing rates.

Following the announcement, bond prices slumped, sending the yield on the 10-year Treasury note to 2.27% from 2.25% late on Tuesday.

Investors also bid up shares in banks and other financial companies, which led the gainers. Zions Bancorporation climbed 70 cents, or 1.6%, to 45.11 dollars. Raymond James Financial rose 1.15 dollars, or 1.4%, to 82.32.

The Fed statement also sent the dollar higher against other currencies.

The dollar rose to 112.38 yen from 111.50 yen on Tuesday. The euro weakened to 1.1885 dollars from 1.1997.

Technology companies were among the biggest decliners. Qorvo slid four dollars, or 5.4%, to 70.32.

Adobe Systems also slumped.

The business software company posted solid quarterly results, but investors were concerned about the performance of its cloud business. The stock lost 6.64 dollars, or 4.2%, to 149.96.

Traders also sold off several packaged food companies after General Mills' latest quarterly results fell short of Wall Street's expectations.

The cereal maker slid 3.21 dollars, or 5.8%, to 52.17. Kellogg fell 1.15, or 1.7%, to 64.72, while Campbell Soup lost 81 cents, or 1.7%, to 46.51.

Bed Bath and Beyond plunged 15.9% after the home goods retailer reported that its latest quarterly sales at stores open at least a year, a key metric for retailers, fell short of analysts' forecasts. The stock lost 4.29 to 22.74 dollars.

Investors also weighed new data on the US housing market that showed sales of previously occupied homes fell 1.7% in August.

Over the past 12 months, US home sales have risen only 0.2%. The report from the National Association of Realtors pulled down homebuilder shares. CalAtlantic Group fell the most, shedding 97 cents, or 2.7%, to 34.60 dollars.

Energy companies rose along with the price of crude oil. Chesapeake Energy added 15 cents, or 3.7%, to 4.19 dollars.

Benchmark US crude added 93 cents, or 1.9%, to settle at 50.41 dollars a barrel on the New York Mercantile Exchange.

Brent crude, used to price international oils, gained 1.15 dollars, or 2.1%, to 56.29 a barrel in London.

Wholesale petrol was little changed at 1.66 dollars a gallon. Heating oil added three cents to 1.81 a gallon. Natural gas declined three cents to 3.09 dollars per 1,000 cubic feet.

Among metals, gold gained 5.80 dollars to 1,316.40 an ounce. Silver rose six cents to 17.33 dollars an ounce. Copper held steady at 2.97 dollars a pound.

Markets overseas were mixed.

In Europe, Germany's DAX rose 0.1%, while the CAC 40 in France added 0.1%. The FTSE 100 index of leading British shares was flat.

In Asia, Japan's Nikkei 225 added 0.1% and South Korea's Kospi slipped 0.2%. Hong Kong's Hang Seng index added 0.4%. Australia's S&P/ASX 200 fell 0.1%.

AP

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