All eyes were on the Federal Reserve on Wednesday, as the central bank offered up its latest rate decision and economic assessment. Despite virtually zero chance for an immediate rate hike, investors still parsed the Fed’s latest statement for hints on future policies and insights into the pace of economic growth. “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad,” said the Fed after its policy meeting. Investors now expect short-term interest rates to remain near zero well into 2011, and perhaps even into 2010. Elsewhere, president Obama dismissed General McChrystal, replacing the embattled commander with David Petraeus.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, lost 1.2 points, or 0.1%, in another day of heavy trading.
Sinking sharply on the day was the PowerShares DB Commodity Index Fund (DBC), which dropped 1.6% on the day. Commodity prices headed lower after government data showed that U.S. May new home sales fell almost 33% from April. Growth sensitive commodities such as copper lost ground on the disappointing news, while agricultural commodities also headed lower on the day. DBC offers exposure to a diversified basket of commodities, including industrial and precious metals and food commodities.
Heading higher on the day was the Vanguard European ETF (VGK), which added just over 1% as investor sentiment towards the euro zone continued to shift. European equity markets actually closed lower on Wednesday, as the cost to insure Greek bonds against default hit the highest level since the sovereign debt package was announced in early May. But investors began snapping up European equities in afternoon trading, sending VGK higher to close the day.
Disclosure: No positions at time of writing.