Wall Street turns negative on Fed news; TSX holds to small gain as Brexit looms

TORONTO – New York indexes turned negative at the close, while the Toronto stock market clung to a small gain Wednesday after the U.S. Federal Reserve announced it was holding its trend-setting interest rate steady for the time being.

On Wall Street, the Dow Jones industrials pulled back 34.65 points to 17,640.17, while the broader S&P 500 faded 3.82 points to 2,071.50 and the Nasdaq composite declined 8.62 points to 4,834.93.

All three indexes — now down five straight sessions — had been positive heading into the Fed announcement.

The U.S. central bank noted in a statement that it is not moving on rates even though the overall economy has improved, saying it still has concerns about job growth. As expected, Fed policy-makers voted to keep interest rates unchanged at their current level of 0.25 per cent to 0.50 per cent. The Fed did not signal when it might raise rates again.

“They have gotten more dovish,” said Laura Lau, a senior portfolio manager at Brompton Group. “The probability of a rate hike is going down every day.”

For weeks, the Fed had been expected to consider raising rates at its June meeting but that view was put into question after the release of surprisingly disappointing jobs figures for May. Fed chairwoman Janet Yellen has repeatedly said the bank will only raise rates if the economic data supports such a move.

Some economists now think a July rate increase is still possible if the job market rebounds and financial markets remain calm after Britain’s vote next week on whether to leave the European Union. Others think the economic outlook will still be too cloudy and are looking to September as the most likely time for a Fed move.

The Fed raised its key policy rate modestly in December from a record low near zero, where it had been since the depths of the Great Recession in 2008.

Lau said she now anticipates the Fed not moving on rates until December, following the U.S. presidential election.

Meanwhile, in Toronto, the S&P/TSX composite index gave back some of its earlier gains but still ended up in the black, adding 39.22 points to 13,923.45 as it ended five consecutive losing sessions.

In commodities, the July contract for benchmark North American crude oil fell 48 cents to US$48.01 a barrel, while July natural gas was down a penny at US$2.60 per mmBtu. August gold added 20 cents to US$1,288.30 a troy ounce and July copper soared five cents to US$2.09 a pound.

The oil-sensitive Canadian dollar continued its recent retreat, falling 0.44 of a U.S. cent to 77.36 cents.

— With a file from The Associated Press

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