NEW YORK (TheStreet) -- U.S. stocks closed lower but bounced off session lows Wednesday after Federal Reserve Chairwoman Janet Yellen explained the central bank's revised forward guidance, including a plan to drop the unemployment threshold.
- The Dow Jones Industrial Average lost 0.7% to 16,222.17, the S&P 500 was off 0.61% to 1,860.77 and the Nasdaq dropped 0.59% to 4,307.6.
- "The purpose for this change is simply to bring more information than we did in the past ... even if it's qualitative information," Yellen said during the press conference following the FOMC's rate decision. "The Fed never felt that the unemployment rate was a sufficient statistic for the market. It's appropriate to look at many more things. We've tried to give a general formulation of what we'll be looking at ... in achieving our goals."
- The FOMC statement retained a very accommodative tone even as the Central Bank trimmed its monthly bond-buying program by a further $10 billion and revised its forward guidance. Key points in the statement included:
- The Committee continues to anticipate that it will likely be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.
- With the unemployment rate nearing 6.5%, the Committee has updated its forward guidance.
- The Committee will assess progress toward its objectives of maximum employment and 2% inflation by taking into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.
- The Committee currently anticipates that even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
- The Dow and S&P 500 tanked during the press conference when Yellen said that the period between the end of so-called tapering and the beginning of hiking interest rates could be just six months.
- "I think the important factor is that we are talking sometime in 2015 [when interest rates will rise], we're talking over a year out into the future," Paul Mangus, head of equity strategy and research at Wells Fargo Private Bank, said in a phone interview. "A little bump in the road between now and 2015 can extend that further than what some investors might have read into [Yellen's] remarks."
- In other economic news, the U.S. current account deficit fell to its lowest level in 14 years at $81.1 billion in the fourth quarter, the Commerce Department said.
- In stock news, top gainers in the S&P included First Solar (FSLR), which surged 20.6% amid news the company and its affiliated Shams Ma'an Power Generation consortium have landed a 20-year power purchase agreement for a planned solar power plant in Jordan.
- Other gainers included Lennar (LEN), up 1.9% and NVIDIA (NVDA), up 1.7%.
- FedEx (FDX) was off 0.13% after results were tarnished by the severe winter weather. The company's full-year outlook disappointed and its fiscal third-quarter earnings of $1.23 a share missed the average analyst estimate of $1.45 on lower-than-expected revenue.
- General Mills (GIS) reported fiscal third-quarter earnings, missing estimates by 2 cents at 62 cents a share on weaker-than-expected sales in the face of increased competition from store brands and more marketing expenses. Shares closed little changed at $50.75.
- Toyota (TM) dipped 1.1% after it reached a deal with the Justice Department to settle a four-year criminal investigation into whether the company misled about a sudden-acceleration defect that has caused deaths. The $1.2 billion settlement is among the largest paid by an automaker.
- The fifth-largest U.S. homebuilder KB Home (KBH) rose 5.9% after beating profit estimates as a land shortage helped boost selling prices.
- And Nu Skin Enterprises (NUS) shed 5.8%. The skin-care product seller is reportedly being investigated on suspicions of being an illegal pyramid scheme.
- International markets were mixed with the FTSE 100 off 0.49% even after the U.K.'s economic growth was upgraded to 2.7% from 2.4%, according to Chancellor George Osborne. The DAX in Germany was up 0.37%, the Hong Kong Hang Seng settled down 0.07% and the Nikkei 225 in Japan closed up 0.36%.
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