Wall St fizzles after Fed statement

The ASX is set for modest gains after US stocks finished flat and a more upbeat Fed kept rates on hold.

US stocks got a boost from stronger than expected Apple earnings. AP Photo/Richard Drew.

US stocks were little changed overnight after the Federal Reserve said it would hold short-term interest rates steady.

European stocks had earlier rallied in response to Japanese plans for fresh stimulus, closing ahead of the Fed decision.

The Australian share market is set for a steady open after the lacklustre Wall Street leads, with ASX futures up 2 points at 6.29am (AEST).

Overall market reaction to the Fed decision was fairly muted, as investors had widely expected the Fed to leave the benchmark federal-funds rate unchanged. In its statement, the central bank also offered a more upbeat assessment of the US economy, saying “near-term risks to the economic outlook have diminished.”

That language could mean a rate increase as early as September is still a possibility.

“We’re going to have a parade of data between now and September, and the market will make its own decisions on whether there will be a rate hike based on that,” said Quincy Krosby, market strategist at Prudential Financial. Signs of US economic health are what matter most, she added.

The Dow Jones Industrial Average fell 1.6 points, or less than 0.1 per cent, to 18472, while the Nasdaq Composite rose 0.6 per cent, lifted by Apple.

The tech giant rose 6.6 per cent in recent trading, adding about 49 points to the Dow industrials, after it gave guidance for the current quarter that exceeded analyst expectations late Tuesday.

The S & P 500 slipped 0.1 per cent, with gains in tech tempered by declines in consumer companies and energy shares. Exploration and production companies declined as US-traded crude fell 2.3 per cent to $US41.92 a barrel, its lowest level since April, following a surprise increase in crude-oil stockpiles.

Crude-oil stocks rose by nearly 1.7 million barrels last week, the US Energy Information Administration said Wednesday. Analysts surveyed by The Wall Street Journal had expected supplies to fall by 1.6 million barrels. Gasoline stocks were up 452,000 barrels. Analysts had expected no change.

US government bonds strengthened slightly after the Fed statement. The yield on the 10-year Treasury note fell to 1.516 per cent, compared with 1.530 per cent just before the Fed’s statement and 1.561 per cent on Tuesday.

The dollar initially bounced after the Fed statement, but then reversed course. The ICE Dollar Index, which measures the dollar against major peers, was recently down 0.3 per cent.

Gold for July delivery rose 0.4 per cent to $US1,326.60 an ounce.

A heavy week of earnings continued to drive moves in the stock market. Twitter shares tumbled 15 per cent after the social-media company’s results late Tuesday showed it still suffers from shrinking revenue growth and user growth.

Boeing swung to a loss in the latest quarter but it wasn’t as bad as analysts feared, and shares rose 0.8 per cent.

“While earnings remain pretty unimpressive, it looks as if the worst is behind us,” said John Brady, managing director at futures brokerage R.J. O’Brien.

With just over 200 companies in the S & P 500 reporting, earnings in the index are on track to drop 4 per cent in the second quarter from the prior year, marking the fifth consecutive quarter of contracting earnings, according to FactSet. That is a smaller decline than the 5.3 per cent drop analysts had expected as of June 30 and marks a stronger result than the first quarter, FactSet data show.

The Stoxx Europe 600 index gained 0.4 per cent. Japan’s Nikkei Stock Average rose 1.7 per cent after The Wall Street Journal reported that the Japanese government may issue 50-year bonds for the first time to take advantage from ultralow yields on Japanese sovereign debt.

Dow Jones