By Paul J. Davies 

U.S. stocks opened mixed Thursday as banks and other companies that benefit from a better growth outlook reacted well to Wednesday's Federal Reserve policy decision.

The Dow Jones Industrial Average fell 49 points, or 0.1%, to 26380 shortly after the opening bell. The S&P 500 declined less than 0.1% and the Nasdaq Composite rose less than 0.1%.

Shares of banks like JPMorgan Chase, Wells Fargo and Bank of America rose in morning trading.

U.S. stocks closed lower Wednesday after Federal Reserve Chairman Jerome Powell used his press conference to play down the weaker inflation data and emphasize a healthier global growth picture, suggesting interest rate cuts weren't on the cards soon. That should help banks whose profitability is hurt by lower rates.

Asian and European stock indexes were mixed in response. The Hang Seng in Hong Kong gained 0.8% and South Korea's Kospi Index rose 0.4%, but the Stoxx Europe 600 was down 0.3% and the FTSE 100 in London was flat.

European banks saw gains, with France's BNP Paribas up 3.5%, Deutsche Bank 2.7% higher and the U.K.'s Barclays up 1.5%.

Volkswagen leapt more than 4% after its earnings beat expectations despite a EUR1 billion ($1.1 billion) charge to cover ongoing legal risks from the 2015 emissions cheating scandal.

Strategists at Bank of America said European equities should catch up more with the performance of U.S. ones, particularly those more immediately exposed to fluctuations in economic growth, known as cyclical stocks. These include banks and car makers and are expected to benefit from improving economic data.

"Cyclicals have started to outperform defensives, but the European cyclical recovery trade still lags far behind the U.S.," the strategists said Thursday.

Such stocks took a more positive message on the health of the global economy from Mr. Powell's press conference than U.S. markets had.

The Fed left rates unchanged and its initial policy statement appeared to emphasize weaker-than-expected inflation, which prompted U.S. stocks to rally and government bond yields to fall on the idea that future rate cuts were more likely.

However, Mr. Powell's later press conference highlighted short-term explanations for soft inflation and he stopped short of endorsing a rate cut when pushed on how he would respond to further weak data.

"He also spoke positively about the growth outlook in China and Europe, and said that financial conditions are accommodative," said Jim Reid, a macro strategist at Deutsche Bank. "All in all, he sounded more optimistic about the economy than expected."

The S&P 500 ended Wednesday down 0.8% and the Dow Jones Industrial Average was 0.6% lower.

The outlook for healthier economies, along with rate cuts appearing less likely, presented a balanced outlook for markets. Signs that better growth was winning out and encouraging risk taking were evident in government bond yields Thursday morning where yields were lifted as prices fell.

The 10-year U.S. Treasury yield was 2.519 Thursday morning, up from 2.510% Wednesday.

The U.S. dollar, which marginally strengthened late Wednesday, rose further Thursday morning, with the WSJ Dollar Index up 0.05%.

Write to Paul J. Davies at paul.davies@wsj.com

 

(END) Dow Jones Newswires

May 02, 2019 09:53 ET (13:53 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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