Stocks sink after hopes of interest rate cut are dashed

Stocks on Wall Street gave up some early gains and ended broadly lower Wednesday after the head of the Federal Reserve appeared to play down the possibility of an interest rate cut this year, disappointing some investors.

The Fed’s decision to leave its benchmark interest rate alone was widely expected and came amid signs of renewed economic health but unusually low inflation. The announcement reaffirmed a message that has comforted investors since the start of the year: No rate increases are likely anytime soon.

The low-rate policy is helping to keep borrowing costs down and supporting an economy that has been growing steadily since late last year.

“There really wasn’t anything in the Fed statement that should have spooked investors,” said Karyn Cavanaugh, senior markets strategist at Voya Investment Management, adding that a rate cut wouldn’t be an appropriate move against the backdrop of the U.S. economy that grew 3.2% in the first three months of this year and a national unemployment rate below 4%.

“I don’t think investors who were anticipating a rate cut were being very realistic,” Cavanaugh said.

The Standard & Poor’s 500 index slid 22.10 points, or 0.8%, to 2,923.73. The Dow Jones industrial average fell 162.77 points, or 0.6%, to 26,430.14. The Nasdaq composite fell 45.75 points, or 0.6%, to 8,049.64. The Russell 2000 index of smaller company stocks declined 14.83 points, or 0.9%, to 1,576.38.

Bond prices ended up little changed, with the yield on the 10-year Treasury note holding at 2.50%.

Household goods makers, banks and energy companies took some of the heaviest losses Wednesday. Only real estate stocks eked out a slight gain.

Apple shares climbed 4.9% after the consumer electronics giant’s firstquarter results beat Wall Street forecasts. Its sales are still shrinking as iPhone demand weakens, however. Still, Apple raised its dividend and signaled that the revenue slide could level off in the current quarter.

Royal Caribbean Cruises jumped 6.7% after the cruise line operator said booking rates and volumes helped push up revenue, along with more demand for onboard activities.

CVS Health climbed 5.4% after the company reported a 42% surge in its quarterly profit, blowing past Wall Street’s forecasts. The nation’s second-largest drugstore chain also raised its profit forecast for the year.

Earnings reporting season is more than a third of the way through, and the results have been tempering investors’ fears about a severe profit slump. Among companies in the S&P 500, earnings are down about 0.3% so far. That’s far better than the 4% drop expected a few weeks ago.

Benchmark U.S. crude fell 0.5% to $63.60 a barrel. Brent crude rose 0.2% to $72.18 a barrel.

Wholesale gasoline slipped 0.1% to $2.06 a gallon. Heating oil rose 0.8% to $2.09 a gallon. Natural gas rose 1.7% to $2.62 per 1,000 cubic feet.

Gold slipped 0.1% to $1,284.20 an ounce. Silver fell 1.7% to $14.73 an ounce. Copper slid 3.5% to $2.80 a pound.