New York (AFP) – Wall Street stocks finished down sharply on Wednesday as US investors shrugged off strong Apple earnings, while the dollar rallied after the Federal Reserve signaled it expects more interest rate hikes in 2018.
The pullback in US stocks came after equity markets in Europe rose and both the pound and euro retreated.
Apple, the biggest company by market capitalization, rocketed 4.4 percent higher after reporting better-than-expected profits and announcing a new $100 billion share repurchase plan. But the broad-based S&P 500 fell 0.7 percent.
The outcome was similar to last week, when Amazon shares jumped on strong earnings, but the broader market ignored the results.
“It’s concerning that we are not just seeing positive reactions to positive news,” said Maris Ogg of Tower Bridge Advisors. “I don’t mean the market should be blooming but we have had pretty a good earnings season.”
Art Hogan, chief market strategist at Wunderlich Securities, said the declines reflected “resistance” amid worries over a trade war, tightening monetary policy and ongoing political turmoil in Washington.
President Donald Trump’s attorney Ty Cobb on Wednesday became the latest attorney to quit Trump’s legal team as a probe into the presidential campaign’s contacts with Russia continues.
“You’ve got a whole bunch of macro news juxtaposed with strong earnings that are largely being ignored,” Hogan said.
“It’s a market that gets sold on rallies rather than bought on dips.”
– Dollar rallies –
The Fed, meanwhile, kept interest rates unchanged as expected. It acknowledged an uptick in inflation while continuing to pledge further gradual increases in the benchmark lending rate.
News that the Fed was not speeding up its pace of rate hikes initially weighed on the dollar but the greenback picked up momentum later in the afternoon as traders fixated on the likelihood of a rate hike in June.
“The bottom line is the Fed is the only G7 central bank tightening monetary policy,” said Boris Schlossberg, managing director of BK Asset Management. “The Fed is on tap to do at least three rate hikes this year and everyone else is stationary at best.”
“Barring any exogenous event, the dollar rally continues,” he said.
Earlier, Eurozone stock markets, closed mostly higher as they caught up after Tuesday’s May Day closures, with Frankfurt largely outperforming its peers.
Oil prices pushed higher, in part on speculation Trump could scrap a nuclear deal with Iran, reinstating US sanctions and adding roadblocks to Iran’s efforts to boost petroleum output.
– Key figures around 2100 GMT –
New York – Dow: DOWN 0.7 percent at 23,924.98 (close)
New York – S&P 500: DOWN 0.7 percent at 2,635.67 (close)
New York – Nasdaq: DOWN 0.4 percent at 7,100.90 (close)
London – FTSE 100: UP 0.3 percent at 7,543.20 (close)
Frankfurt – DAX 30: UP 1.5 percent at 12,802.25 (close)
Paris – CAC 40: UP 0.2 percent at 5,529.22 (close)
EURO STOXX 50: UP 0.6 percent at 3,556.56 (close)
Tokyo – Nikkei 225: DOWN 0.2 percent at 22,472.78 (close)
Hong Kong – Hang Seng: DOWN 0.3 at 30,723.88 (close)
Shanghai – Composite: FLAT at 3,081.18 (close)
Euro/dollar: DOWN at $1.1944 from $1.1993 at 2100 GMT
Pound/dollar: DOWN at $1.3568 from $1.3614
Dollar/yen: UP at 109.91 yen from 109.86
Oil – Brent North Sea: UP 23 cents at $73.36 per barrel
Oil – West Texas Intermediate: UP 68 cents at $67.93 per barrel