Oil Prices Soar, Wall Street Up-Down After Fed Holds the Line on Rates

Illustration. (Photo: Anadolu Agency)

Wall Street closed mixed on Wednesday. Oil prices jumped sharply, while the Fed kept its benchmark interest rate.

As reported by Anadolu Agency, Thursday, April 30, the Dow Jones Industrial Average fell for the fifth consecutive day. The flagship stock index weakened 0.57 percent or 280.12 points to 48,861.81.

The S&P 500 was down 0.04 percent or 2.85 points to 7,135.95. The Nasdaq Composite was the opposite, up 0.04 percent or 9.4 points and closed at 24,673.24.

The main pressure came from oil. The price of West Texas Intermediate crude oil, the US benchmark, rose about 8.5 percent to above 108 US dollars per barrel. Brent, the international benchmark, strengthened about 8 percent to above 120 US dollars per barrel.

The increase was triggered by concerns about supplies from the Middle East. Reports say US President Donald Trump has asked his aides to prepare a long blockade against Iran.

Oil prices have risen further after Trump reportedly rejected Tehran's proposal to reopen the Strait of Hormuz. The US naval blockade is said to continue until there is an agreement that addresses Washington's concerns about Iran's nuclear program.

Investors are also watching the Fed's decision. The Federal Open Market Committee or FOMC voted 8-4 to keep the federal funds rate in a range of 3.5 percent to 3.75 percent.

The number of dissenting opinions was the highest since 1992. This shows a considerable difference in views in the US central bank.

Fed boss Jerome Powell said high oil prices would push inflation in the short term. This statement reinforces market concerns that interest rate cuts are not necessarily being carried out in the near future.

Powell also said that the surge in energy prices had not reached its peak. He warned that a prolonged oil shock could weigh on the global economy and affect the direction of monetary policy.

Powell said he "had no choice" but to remain on the Fed board after his term as chairman ended in May. He cited the legal action taken by the Trump administration as the reason.

After the Fed's decision, the yield on 10-year US government bonds rose more than 5 basis points to 4.41 percent.

European stocks also weakened. The pan-European Stoxx 600 index fell 0.60 percent to 602.96.

France's CAC 40 was down 0.39 percent at 8,072.13. Italy's FTSE MIB 30 was down 0.51 percent at 47,796.03. Britain's FTSE 100 was down 1.16 percent at 10,213.11.

Germany's DAX 40 was down 0.27 percent at 23,954.56. Spain's IBEX 35 was down 0.74 percent at 17,642.80.

Markets are now facing two major pressures: rising oil prices and the Fed still holding high interest rates.