Stocks slip despite Fed’s steady stance

A choppy day of trading on Wall Street ended with stocks modestly lower Wednesday after the Federal Reserve said it is leaving its key interest rate unchanged while noting recent improvement in the economy.

The Standard & Poor’s 500 index ended down 0.1% after wavering between small gains and losses. Gains in communication services, energy and financial companies outweighed declines in technology and healthcare stocks. Bond yields also fell broadly, pulling back after an early rally.

In its latest policy update, the nation’s central bank left its benchmark short-term rate near zero, where it has been since the pandemic erupted more than a year ago, to help keep loan rates down and encourage borrowing and spending. The Fed also said it would keep buying $120 billion in bonds each month to try to keep longer-term borrowing rates low.

“With no meaningful change to monetary policy or communication, this meeting was simply a message to market participants to sit back and observe as the economic recovery continues to unfold,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Stocks initially got a bump after the release of the Fed’s statement but shed those gains by the end of the day.

The S&P 500 slipped 3.54 points to 4,183.18. It had reached an all-time high Monday. The Dow Jones industrial average fell 164.55 points, or 0.5%, to 33,820.38. The tech-heavy Nasdaq fell 39.19 points, or 0.3%, to 14,051.03.

Smaller-company stocks fared better. The Russell 2000 index rose 2.89 points, or 0.1%, to 2,304.16.

Wall Street has been mostly grinding higher in recent weeks, pushing stock indexes to record highs, as the rollout of COVID-19 vaccinations, the massive support from the U.S. government and the Fed, and a string of encouraging economic data fuel expectations for a stronger economy and solid corporate profit growth this year.

The expectations for a strong rebound — and rising prices for oil, lumber and other commodities — have also spurred concerns over inflation and the prospects for higher interest rates. Those worries have helped fuel a rapid rise in bond yields from where they were at the start of the year.

In its remarks, the Fed noted that the economy and job market have “strengthened.” And, although it acknowledged that inflation has risen, it said it sees the increase as transitory. Fed officials have said they want to see inflation exceed their 2% annual target before they’d consider raising rates.

The yield on the 10-year Treasury, which influences interest rates on mortgages and other consumer loans, eased after the Fed’s statement, slipping to 1.61% from Tuesday’s 1.62%.

Investors also focused Wednesday on corporate earnings. Alphabet and Visa were among companies whose shares rose after their quarterly reports.