Stock traders John Santiago, left, and Paul Cosentino work at the New York Stock Exchange, Wednesday, Sept. 18, 2019. The Federal Reserve is expected to announce its benchmark interest rate later in the day. (AP Photo/Mark Lennihan)

US stocks head lower following Fed's decision to cut rates

September 18, 2019 - 2:56 pm

Stocks declined broadly on Wall Street Wednesday afternoon after the Federal Reserve cut its benchmark interest rate for a second time this year.

Investors expected the rate cut, but may have been disappointed by apparent disagreement among Fed officials about their future rate policy.

In a statement, the central bank said it is prepared to continue doing what it deems necessary to sustain the U.S. economic expansion. The Fed is trying to combat threats including uncertainties caused by President Donald Trump's trade war with China, slower global growth and a slump in American manufacturing. The Fed noted that "business fixed investment and exports have weakened."

The rate cut reduces the Fed's key rate by an additional quarter-point to a range of 1.75% to 2%. The rate influences many consumer and business loans.

Investors were listening for more clues about the prospects for further rate cuts as Fed Chairman Jerome Powell held a press conference that started at 2:30 p.m.

Technology, industrial and consumer-focused stocks were among the biggest losers as investors headed cautiously for less risky holdings.

Adobe fell 3.2%, one of the tech sector's biggest decliners, after giving investors a weak profit forecast. FedEx led the slide in industrial stocks after issuing a disappointing earnings report. Amazon dropped 1.1% amid a broad slide in retailers, restaurant chains and other consumer-focused companies.

Financial stocks, including American Express and Goldman Sachs, fell as bond yields declined. For banks, lower bond yields mean less lucrative interest rates on loans.

Bond prices rose and the yield on the 10-year Treasury fell to 1.76% from 1.81% late Tuesday. Investors typically shift money into bonds when they grow more concerned about the economy's health.

Utilities held up the best with slight gains. The sector is typically considered a safer place to park money amid concerns about economic growth.

Investors largely expect the Fed to cut short-term interest rates by another quarter of a percentage point, following a similar cut in late July. That marked the first time in more than a decade that the central bank cut rates as it tries to shield the United States from the pain of a slowing global economy and the effects of the trade war with China.

U.S. and Chinese representatives plan to hold trade talks next month in Washington.

Aside from the rate cut, investors will also be listening for the Fed's assessment of the nation's economic health any other cues from Powell about the central bank's future intentions. Back in July, the Dow Jones Industrial Average dropped more than 300 points when Powell refused to commit to a long cycle of rate cuts.

KEEPING SCORE: The S&P 500 index fell 0.7% as of 2:23 p.m. Eastern time. The Dow Jones Industrial Average dropped 158 points, or 0.6%, to 26,952. The Nasdaq slid 1%. The Russell 2000 index of smaller company stocks lost 0.8%.

Major stock indexes in Europe closed mostly higher. Asian stocks were mixed.

MIDWEEK STUMBLE: The broader market wobbled throughout the week and is so far on track for a slight loss after three consecutive weeks of gains. Those gains came as both sides in the U.S.-China trade war took steps to ease tensions ahead of planned negotiations in October.

But, the volatility has been taking its toll. The S&P 500 is eking modest gains of 1.9% for the quarter with just a few weeks left. That marks a pullback from gains of 3.8% in the second quarter and a serious crimping of growth compared with a 13.1% rise during the first quarter.

OIL SLICK: Oil prices continued pulling back from a 14% spike on Monday as Saudi Arabia brings back production at an oil facility attacked over the weekend. It said half of the production cut by the attack is already restored and plans on full production by the end of the month. Benchmark U.S. crude fell $1.21 to $58.14 per barrel. Brent crude, the international standard, fell $1.04 to $63.51.

MISSED DELIVERY: FedEx fell 13.9% after reporting a disappointing drop in fiscal first quarter profit and cutting its full-year forecast as the trade war takes its toll on economic growth. The company is also dealing with the loss of its lucrative contract with Amazon. FedEx cut ties with the retail giant over the last several months.

CEO Fred Smith said escalating tariffs and trade tension between the U.S. and China have lowered industrial production and hurt the international shipment of goods.

TOUGH TO CHEW: Chewy tumbled 8% to $27.82 after the online pet store's fiscal second quarter loss was far wider than Wall Street had expected. The company debuted on the New York Stock Exchange in June at $22 per share and closed at $34.99 on its first day.

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