Stocks and Bonds: Markets Mixed After Fed’s Rate Decision

Stocks ended mixed but mostly higher Wednesday after the Federal Reserve said the economy was on the mend.

Bond prices fell, however, after the Fed said it would not step up its spending to purchase Treasuries and other debt to lower interest rates.

The central bank’s decision Wednesday to leave its main lending rate at a low of zero to 0.25 percent was not a surprise, but some investors have been hoping the central bank would do more to revive the economy. Others wanted it to more clearly lay out how it would keep inflation in check.

“The Fed is still stuck on that tightrope of trying to make sure they provide enough reassurance to keep the recovery going but at the same time try to allay the concern that they won’t allow inflation to get going either,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

In the economic assessment statement accompanying its rate decision, the Fed said the economy’s rate of decline appeared to be slowing. It noted that consumer spending had shown further signs of stabilizing although job losses, shrinking wealth and tight credit remained problems. Policy makers noted that energy and other commodities prices had risen, although they said “substantial resource slack” would probably rein in cost pressures and that inflation would “remain subdued for some time.”

The Fed also did not say it would increase its purchases of Treasuries or other kinds of government debt, disappointing some investors who had hoped for more. The Fed has said it will buy $1.25 trillion in mortgage-backed securities and $300 billion in Treasuries to stimulate the economy by keeping borrowing rates low.

The Dow Jones industrial average fell 23.05 points, or 0.3 percent, to 8,299.86. The Standard & Poor’s 500-stock index rose 5.84, or 0.7 percent, to 900.94, and the Nasdaq composite index rose 27.42, or 1.6 percent, to 1,792.34.

The Treasury’s benchmark 10-year note fell 17/32, to 95 12/32, and the yield, which moves in the opposite direction from the price, rose to 3.69 percent, from 3.62 percent Tuesday.

Stocks were sharply higher early in the day after a surprise jump in orders for big-ticket manufactured items.

In corporate news, Oracle’s results, released late Tuesday for its most recent quarter, exceeded analysts’ average forecast. The company’s shares gained $1.39, or 7 percent, to $21.26, helping the tech-heavy Nasdaq.

The dollar was mixed against other major currencies. Gold prices rose.

Following are the results of Wednesday’s Treasury auction of five-year notes:

Stocks and Bonds: Markets Mixed After Fed’s Rate Decision

11:00 - 2009-Jun-24