WASHINGTON (dpa-AFX) - After turning in a lackluster performance for much of
the session, stocks saw substantial volatility following the Federal Reserve's
monetary policy announcement Wednesday afternoon. The major averages initially
surged in reaction to the Fed announcement but pulled back going into the close.

The major averages eventually finished the day mixed. While the Dow rose 87.37
points or 0.2 percent to 37,903.29, the Nasdaq fell 52.34 points or 0.3 percent
to 15,605.48 and the S&P 500 dipped 17.30 points or 0.3 percent to 5,018.39.

The late-day volatility came after the Federal Reserve announced its widely
expected decision to leave interest rates unchanged.

Citing a lack of further progress toward its 2 percent inflation objective in
recent months, the Fed said it decided to maintain the target range for the
federal funds rate at 5.25 to 5.50 percent

Members of the Fed also reiterated they need 'greater confidence' inflation is
moving sustainably toward 2 percent before they consider cutting interest rates.

Meanwhile, the Fed said it would continue reducing its holdings of Treasury
securities and agency debt and agency mortgage-backed securities but revealed
plans to slow the pace of decline.

The central bank said would slow the pace of decline of its securities holdings
by reducing the monthly redemption cap on Treasury securities from $60 billion
to $25 billion.

The monthly redemption cap on agency debt and agency mortgage-backed securities
will be maintained at $35 billion, and the Fed will reinvest any principal
payments in excess of this cap into Treasury securities.

'In continuation with the wait-and-see policy that has been in place, Chairman
Powell is buying some time by diverting attention of this meeting towards the
Fed's balance sheet and focusing on reducing the runoff pace of their Treasury
holdings,' said Charlie Ripley, Senior Investment Strategist for Allianz
Investment Management.

He added, 'Ultimately, today's policy decision was a well-rounded approach to
give the Fed more time to gain confidence in the path of inflation, but we
suspect they remain ready to cut knowing that the interest rate curve has
remained inverted for the longest period on record.'

The Fed's next monetary policy meeting is scheduled for June 11-12, with the
central bank likely to leave rates unchanged once again.

On the economic data front, payroll processor ADP released a report showing
private sector employment increased by more than expected in the month of April.

ADP said private sector employment shot up by 192,000 jobs in April after
jumping by an upwardly revised 208,000 jobs in March.

Economists had expected private sector employment to climb by 175,000 jobs
compared to the addition of 184,000 jobs originally reported for the previous
month.

Meanwhile, the Institute for Supply Management released a separate report
showing a modest contraction by U.S. manufacturing activity in the month of
April.

The ISM said its manufacturing PMI slipped to 49.2 in April from 50.3 in March,
with a reading below 50 indicating contraction. Economists had expected the
index to edge down to 50.0.

The slight pullback by the index came after it indicated a modest expansion in
March following sixteen consecutive months of contraction.

Sector News

Semiconductor stocks showed a substantial move to the downside on the day,
resulting in a 3.5 percent nosedive by the Philadelphia Semiconductor Index.

Advanced Micro Devices (AMD) led the sector lower, plunging by 9.0 percent
despite reporting slightly better than expected first quarter results. Traders
may have been disappointed AMD provided second quarter sales guidance in line
with analyst estimates.

Significant weakness was also visible among computer hardware stocks, as
reflected by the 2.0 percent slump by the NYSE Arca Computer Hardware Index.

Shares of Super Micro Computer (SMCI) plummeted by 14.0 percent after the high
efficiency server maker reported weaker than expected fiscal third quarter
revenues.

Energy stocks also saw considerable weakness amid a steep drop by the price of
crude oil, while biotechnology, utilities and telecom stocks showed strong moves
to the upside.

Other Markets

In overseas trading, Japanese and Australian stocks moved lower on Wednesday,
with most markets in the Asia-Pacific region closed for Labor Day. Japan's
Nikkei 225 Index dipped by 0.3 percent, while Australia's S&P/ASX 200 Index
slumped by 1.2 percent.

While most of the major European markets were also closed on the day, U.K.
stocks moved modestly lower. The U.K.'s FTSE 100 Index ended the day down by 0.3
percent.

In the bond market, treasuries moved sharply higher in reaction to the Fed
announcement. As a result, the yield on the benchmark ten-year note, which moves
opposite of its price, tumbled 9.1 basis points to 4.595 percent.

Looking Ahead

Trading on Thursday may continue to be impacted by reaction to the Fed
announcement, while reports on weekly jobless claims, the U.S. trade deficit and
labor productivity and costs may also attract attention.



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