The Dow Jones industrial average dipped 0.1 percent to end at 18,473.75 and the S&P 500 edged up 0.03 percent to 2,169.18 after spending much of the day at a loss. The Nasdaq Composite added 0.24 percent to 5,110.05. (Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. July 25, 2016. - REUTERS)
NEW YORK: Wall Street ended lower on Wednesday after a late-afternoon reversal following signals from the Federal Reserve that it could change its bond investment policy this year, quenching a rally sparked by a strong private-sector jobs report.
Also investor concerns about the Trump administration's ability to deliver promised tax cuts were intensified by comments from lawmakers on deep divisions in Washington.
Most Federal Reserve policymakers think the U.S. central bank should take steps to begin trimming its $4.5 trillion balance sheet this year as long as the economic data holds up, Fed meeting minutes showed.
The minutes also showed "some participants viewed equity prices as quite high relative to standard valuation measures."
“Either it scared participants because of talk that sounds like maybe (the stock market) is bubbling, or there is some thought that the normalization of the balance sheet is going to harm growth ... or we are going to get more (rate) hikes” than already expected, said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
In a heavy volume trading day, The Dow Jones Industrial Average ended down 41.09 points, or 0.2 percent, at 20,648.15, the S&P 500 lost 7.21 points, or 0.31 percent, to 2,352.95 and the Nasdaq Composite dropped 34.13 points, or 0.58 percent, to 5,864.48.
The Dow posted its largest intra-day downside reversal in 14 months in Wednesday's session after shedding a gain of more than 198 points to end near the session low, which was a drop of nearly 50 points.
After the recent failure of the Republicans' healthcare legislation reform bill some investors had hoped this would bring President Donald Trump's tax-cutting promise closer to reality.
But U.S. House of Representatives Speaker Paul Ryan said on Wednesday that tax reform will take longer to accomplish than healthcare.
"It seems like it was a combination of hawkish Fed minutes, disappointment about the pace of tax reform and a pullback in crude prices" that reversed the rally, according to Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"From my perspective, this is probably an unjustified emotional dip driven by several mixed signals."
Nine of the S&P's 11 major sectors finished lower, with financials leading the sell-off. Utilities <.SPLRCU> and Real Estate <.SPLRCREC>, the so-called defensive sectors, were the only two that ended higher.
Earlier in the day the S&P had risen as much as 0.8 percent and the Nasdaq hit a record high after private-sector jobs data blew past expectations.
Data showed that U.S. companies added 263,000 workers in March, the most since December 2014 and well above economists' expectations of 187,000.
The Nasdaq biotechnology index <.NBI> turned negative in the late afternoon to end down 1.4 percent.
This was likely because investors turned away from riskier investments this afternoon, said Chris Zaccarelli, Chief Investment Officer at Cornerstone Financial Partners in Huntersville, North Carolina.
Declining issues outnumbered advancing ones on the NYSE by a 1.93-to-1 ratio; on Nasdaq, a 2.61-to-1 ratio favored decliners.
The S&P 500 posted 38 new 52-week highs and six new lows; the Nasdaq Composite recorded 71 new highs and 69 new lows.
More than 7.58 billion shares changed hands on U.S. exchanges compared with the 6.8 billion average for the last 20 sessions
Meanwhile British shares edged higher on Wednesday, extending gains from the previous session as heavyweight mining and oil stocks rallied, while support services firm DCC also gained after agreeing to buy a business in Hong Kong and Macau.
The blue chip FTSE 100 index ended up 0.1 percent, outperforming the broader European market thanks to its large proportion of resources-related stocks.
Miners were among the standout performers, with BHP Billiton and Antofagasta both gaining more than 1.5 percent as copper prices traded higher.
BHP Billiton, the world's biggest exporter of coal for making steel also saw support after declaring force majeure for coal deliveries from its mines in Australia's Bowen Basin after a cyclone damaged railway lines.
Disruption from Cyclone Debbie has spurred worries of tighter supply, sending coking coal futures higher.
Oil stocks also lent support, but they pared some gains after crude prices eased from one-month highs, as support from an outage at the largest UK North Sea oilfield was offset by a surprise increase in U.S. crude inventories.
BP and Royal Dutch Shell rose 0.7 and 0.3 percent respectively. Even though they came off earlier highs, energy stocks remained the biggest contributor to gains in the FTSE.
DCC was also among the biggest gainers, ending up 1.7 percent and trading close to record highs after agreeing to buy Royal Dutch Shell's liquefied petroleum gas (LPG) business in Hong Kong and Macau for an enterprise value of $145 million.
"It ... provides a good platform for further growth in the Asian LPG market as it pursues its strategy to be a global leader in its industry," analysts at UBS said in a note.
South Africa-exposed insurer Old Mutual was the biggest FTSE loser, down 4.4 percent, tracking a further fall in the rand after the ruling African National Congress Party (ANC) rejected calls for President Jacob Zuma to quit.
Specialty chemicals company Croda dropped 3.6 percent after Credit Suisse downgraded its rating to "underperform" from "neutral".
"We believe Croda shares are trading at a premium to fair value given operational headwinds in 2017 and structural long-term pressure in Personal Care as the business lifecycle matures," analysts at Credit Suisse said in a note.
Outside of the blue chips, shares in Allied Minds lost a third of their value in their biggest one-day loss on record after the tech and life sciences-focused incubator cut funding for seven of its portfolio companies..- Reuters
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