Dow closes slightly lower after Fed's interest rate decision

Central bank cut rates by quarter percentage point

By Anneken Tappe, CNN Business
Drew Angerer/Getty Images

(CNN) - Stocks finished mixed Thursday, as investors come to grips with the Federal Reserve forecasting no further interest rate cuts this year.

The Dow closed 54 points, or 0.2%, lower, while the S&P 500 ended flat. The Nasdaq Composite finished 0.1% higher.

Lower interest rates are good for stocks, because they make it cheaper for companies to borrow money.

At Wednesday's policy meeting, the central bank cut interest rates by a quarter percentage point, marking their second cut in a row. However, the Fed's dot plot — the average expectation of future interest rates — doesn't foresee another rate cut this year or in 2020.

Market expectations for a rate cut in October are below 50%, but for the December meeting they are at more than 60%, according to the CME's FedWatch Tool.

"Over the past 24 hour or so, we have seen lots of central bank action and the message has been clear: global interest rates will remain at or near record lows for the foreseeable future," said Fawad Razaqzada, technical analyst at Forex.com.

Both the Bank of Japan and the Bank of England left interest rates unchanged this week.

That put renewed pressure on government bonds yields. The 10-year US Treasury yield traded lower for most of the day, and was last little changed at 1.7944%.

The New York Fed for a third time in a row injecting liquidity in the markets. The overnight rate at which banks lend to each other spiked earlier this week as an oversupply of bonds and corporate tax payments squeezed liquidity.

The oil market pendulum continues to swing: Thursday's US oil prices were up again for much of the day, although they settled little changed at $58.13 a barrel.

Oil prices collapsed on Monday following an attack on Saudi Arabian oil production facilities. On Tuesday and Wednesday, prices recovered after Saudi Arabia said it would have its production up and running again in a matter of weeks.

The Philadelphia Fed business outlook survey for September looked more positive than expected, but still indicated a slowing in manufacturing activity from the prior month.

Jobless claims for the week ended September 14 came in more or less in line with expectations at 208,000.

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