Stocks Lose Steam After Fed Statement
NEW YORK ( TheStreet) -- U.S. stocks lost steam after the Federal Open Market Committee's statement on Federal Reserve policy offset an early boost from strong economic data.
The FOMCsaid it expects economic growth to pick up in the second half of the year, but said inflation has come in below its targeted expectations. Investors may have been discouraged by a change in the committee's language from its previous statement in June: "The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term."
A raft of upbeat economic data was unleashed throughout the morning. Investors embraced stronger-than-expected reports on U.S. economic growth and the labor market against signs of rising wage inflation as Chicago area business conditions looked to have experienced modest improvements.
The private payroll employment report from Automatic Data Processing on Thursday showed a stronger-than-expected gain of 200,000 for July versus an upwardly-revised 198,000 in June. Expectations were for a gain of 180,000 for July, according to a Thomson Reuters poll of economists.
The advanced estimate for second-quarter gross domestic product rose by a greater-than-expected 1.7% after a downwardly-revised 1.1% increase in the first quarter, according to the Bureau of Economic Analysis. Economists were expecting a rise by 1% for the second quarter. Revisions to data going back to 1929 showed a slightly higher overall growth rate for the economy.
The Chicago Purchasing Manager Index showed a smaller than expected, but still modest improvement in business conditions in the Chicago area with a rise to 52.3 in July following a fall to 51.6 in June. An increase to 54 was expected.