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Stocks - Wall Street Rebounds to End Flat After Rate Cut

Investing.com - Stocks recovered most of their losses by the end of trading Wednesday, erasing an afternoon selloff after the Federal Reserve cut its key interest rate for the second time in two meetings.

The S&P 500 ended the day basically flat, holding above 3,000 for a second day in a row and for the fifth day in the last six trading sessions. The index had been off as many as 28 points after the Fed rate announcement.

The Dow Jones Industrial Average, once down 211 points, closed with a small gain, up 0.13%. The Nasdaq Composite finished down 0.11%, a big improvement from a decline of nearly 100 points after the Fed decision. The Nasdaq 100 index, dominated by big tech stocks, was flat.

The Fed cut its key federal funds rate to a band of 1.75% to 2% from 2% to 2.25%. It was the Fed's second rate cut this year. Two members of the Federal Open Market Committee voted against any cut; another wanted to go further. Futures market trading suggests another rate cut is coming this year, but at least five members of the committee aren't sure another cut is needed.

President Donald Trump tweeted that the Fed had failed and not gone far enough in cutting interest rates as a combination of trade disputes and slowing international growth are weighing on the U.S. economy, especially U.S. businesses, which have been cautious in capital spending.

But Fed Chairman Jerome Powell defended the Fed's decision, saying the Fed will change rates if necessary, but not before. While there was some softening in the economy, he said in his news conference, "We don't see a recession; we're not forecasting a recession."

He received some major good news on Wednesday. U.S. building permits and housing starts hit a 12-year high. Reuters said the report was evidence that lower mortgage rates were boosting housing markets.

Homebuilding shares were higher on the news. The iShares U.S. Home Construction ETF (NYSE:ITB) was up 0.64%. The ETF's biggest holdings include DR Horton (NYSE:DHI), Lennar (NYSE:LEN), NVR (NYSE:NVR) and PulteGroup (NYSE:PHM).

Energy, materials, real estate and technology stocks struggled. Financial and utilities shares were higher.

FedEx (NYSE:FDX) fell more than 13%, the biggest loser among the Dow Jones Transportation stocks. The Transportation average fell 1.2%.

Late Tuesday, FedEx cut earnings guidance for the current fiscal year, citing the ongoing trade disputes with China and loss of revenue from Amazon.com's (NASDAQ:AMZN) decision to dump FedEx as its primary package shipper.

Nordstrom (NYSE:JWN), Applied Materials (NASDAQ:AMAT) and JPMorgan Chase (NYSE:JPM) were among the top overall market performers.

JPMorgan), Microsoft (NASDAQ:MSFT), Goldman Sachs (NYSE:GS) and Apple (NASDAQ:AAPL) led the Dow.

After the close, Microsoft boosted its quarterly dividend by 11% to 51 cents from 46 cents and announced a new $40 billion share-buyback plan.

Crude oil prices were lower, with West Texas Intermediate crude down $1.23, or more than 2%, to $58.11 a barrel. Brent crude, the global benchmark, was off 95 cents to $63.60 an ounce. Gold moved below $1,500 in after-hours trading after settling at $1,506 an ounce, down $7.40.

Chipmaker KLA-Tencor (NASDAQ:KLAC), banking companies Comerica (NYSE:CMA) and SVB Financial Group (NASDAQ:SIVB) and home builder Lennar were among the S&P 500 leaders on the day.

FedEx, Alexion Pharmaceuticals (NASDAQ:ALXN), oil and gas producer Noble Energy (NYSE:NBL) and dental equipment company Dentsply Sirona (NASDAQ:XRAY) were among the weakest S&P performers.

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