Stocks Erase Gains on Fed’s No-Change Decision
September 21, 2015 — Last week, stocks had advanced in anticipation of Thursday’s Federal Reserve decision on interest rates, initially spiked higher on the “no change” decision, but 30 minutes later, and through Friday, equity gains evaporated. Before closing out the week with a fractional loss, the S&P 500 had gained 2.7% in the run-up to the decision and had surpassed 2,000 for the first time since August 21st. Fed Chair Janet Yellen said policymakers refrained from raising interest rates because of concerns about slowing and stability in China and other emerging markets. The 9-to-1 FOMC member vote essentially forces investors to live with rate uncertainty until at least October or December when Fed members again debate the merits.
In economic data ahead of the central bank policy meeting, Wall Street took comfort in a second straight monthly gain in retail sales, up 0.2% in August, while July sales were upwardly revised to 0.7% from 0.6%. The Federal Reserve reported that industrial production declined 0.4% last month, also following an upwardly revised July increase (0.9% vs. 0.6% previously reported). On Wednesday, the Labor Department said the consumer price index (CPI) fell 0.1% in August, the first contraction since January. The so-called core-CPI (excludes food and fuel prices), rose 0.1% for a second month. On a year-over-year basis, the headline CPI is up 0.2%, while the core-CPI is up 1.8% since August 2014.
For the week, the S&P 500 fell 0.13%, the Dow Industrials slipped 0.30%, and the NASDAQ Composite gained 0.12%. Five of the ten major sector groups posted gains last week, led by Utilities (+2.53%), Consumer Staples (+0.82%) and Healthcare (+0.76%). Materials (-1.59%) and Telecom (-1.46%) fell among decliners. Treasures prices advanced on safer-haven buying, pulling the yield on 10-year Treasury notes down 5.5 basis points to end at 2.134%.