The Dow erased all of its gains Wednesday after the Fed offered no surprises in its latest statement, backing its pledge to keep rate slow for an "extended period."
The Dow Jones Industrial Average ended flat, while the S&P 500 and Nasdaq posted modest gains.
The Federal Reserve held interest rates steady, as expected. And, while it noted improvements in the economy — specifically in employment and housing — it renewed its "extended period" pledge.
"The Fed's statement is welcome news for equity investors," said Todd Schoenberger, managing director of LandColt Trading. "[M]aintaining the current policy is ideal for investors in need of yield. Look for more of the $1.5 trillion sitting on the sidelines begin to migrate back into equities in early 2010."
Heading into today's statement, investors were concerned about inflation and what the Fed might say about rates after a report Tuesday showed producer prices surged 1.8 percent last month.
Those fears began to subside this morning after a report showed that inflation wasn't translating to the consumer level — consumer prices rose just 0.4 percentin November, and that was largely due to a jump in energy costs. Core prices, which exclude the volatile food and energy components, were flat.
Economists — and even the Fed — said inflation isn't going to be a threat anytime soon.
"Most of these increases will reverse in December/January in the wake of the drop in oil prices," Ian Sheperdson of High Frequency Economics points out in a note to clients. "In short, the downward pressure on core inflation continues," he said.
In their statement, Fed policy makers said, "[T]he committee expects that inflation will remain subdued for some time."
The dollar rose against both the euro and yen after the Fed statement. Oil rose, settling at $72.66 a barrel, after a report showed crude inventories dropped by 3.7 million barrels last week. Gold rose to nearly $1,135 an ounce.
In the morning's other economic news: Housing starts rose 8.9 percentlast month, though it was less than expected, and mortgage applications rose for a third straight weeklast week.
The U.S. current account deficit widened as expected in the third quarter to $108 billion.
Citigroup fell 3.1 percent as its secondary offering is expected to price tonight. The buzz is that it will be between $3.30 and $3.35 a share. The other big news related to Citi is that the US has agreed to forgo billions in taxeson its bailout of the banking giant.
Wells Fargo rose after the bank raised about $12.25 billionin its stock offering on Tuesday to help repay a $25 billion bailout received from the U.S. government last year.
General Electric shares slipped despite Goldman Sachs and JPMorgan raising their price targets on the stock to $20.
Honeywell fell after the conglomerate delivered an outlook that fell short of Wall Street's expectations.
And Intel is facing antitrust charges from the FTC, which accuses the chip giant of using its size to snuff out the competition.
Intel shares fell over 2 percent, while shares of rival AMD jumped more than 3 percent.
Adobe Systems delivered a mixed report after the bell: It beat earnings expectations but withheld a 2010 forecast, saying it all depends on the economy.
Reatilers were higher this morning after comScore reported online spending for the holiday season so far is up 4 percent to $21 billion compared with the same period last year.
But the National Retail Federation said brick-and-mortar shoppers are still waiting for those in-store deals: Consumers on average have completed 46.7 percent of their holiday shopping, a five-year low for this point in the season.
As the year winds down, a new Reuters poll shows stocks are expected to rise again next year as the economy and profit outlooks improve.
WEDNESDAY: Weekly mortgage apps; consumer prices; housing starts; current account; weekly crude inventories; Fed announcement; Earnings from Hovnanian
THURSDAY: Bank of Japan monetary policy meeting; Bernanke confirmation vote; weekly jobless claims; leading indicators; Philly Fed survey; Earnings from FedEx, Rite Aid, Oracle, Palm and RIMM
FRIDAY: Bank of Japan meeting continues; U.S. budget deadline; quadruple witching
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