By Jessica Menton and Christopher Whittall
U.S. stocks flipped between small gains and losses Thursday as the Federal Reserve held interest rates steady and investors continued to digest the results of the midterm elections that on Wednesday triggered the largest postelection gain for the S&P 500 since 1982.
The broad stock-market index slipped 0.2%, a day after the index rose 2.1%, the third largest percentage gain following an Election Day on record. The technology-heavy Nasdaq Composite shed 0.4%, while the Dow Jones Industrial Average rose 27 points, or 0.1%, to 26206.
After a turbulent period for stocks, the S&P 500 had climbed in six of the past seven sessions through Wednesday. The index fell nearly 7% in October, its steepest monthly decline in more than seven years, despite most U.S. companies reporting robust earnings growth.
Concerns over rising interest rates, slumping oil prices, the longevity of the U.S. expansion and the heady valuations of large technology companies caused many investors to pull back.
The Federal Reserve held short-term interest rates steady Thursday, offering a mostly upbeat assessment of the economy's performance, suggesting another rate increase is likely at its next meeting in December. Economists have debated whether rising inflation will force the central bank to raise rates faster than investors are anticipating.
"Inflation hasn't gotten too out of control, but there is a question of whether it makes sense for the Fed to take a pause, given the skittishness we've seen in the market in the past month," said Lindsey Bell, investment strategist at CFRA Research.
The yield on the 10-year Treasury note rose to 3.230% Thursday from 3.215% Wednesday, according to Tradeweb. Yields rise as bond prices fall. The WSJ Dollar Index, which measures the buck against a basket of 16 other currencies, added 0.4%.
U.S. crude-oil prices continued tumbling Thursday, falling 1.5% to $60.77 a barrel to enter a bear market, or a 20% drop from recent highs. The slide ends oil's longest bull market since 2008. Energy stocks in the S&P 500 declined 0.5% and have dropped 10.5% over the past month.
"If oil breaks below $60 a barrel, that would be psychologically significant for the market where investors may lose confidence in crude prices," said Stacey Morris, director of research at Alerian.
Getting through the midterm elections removed one element of uncertainty hanging over the market. The result met most investors' expectations for the Democrats to gain control of the House of Representatives and for the Republicans to retain the Senate.
Analysts say the likely gridlock in Washington will reduce uncertainty for companies over potential changes to economic policy and regulations. It should also decrease the likelihood of the Trump administration passing other measures that could fuel growth -- but inflate the budget deficit -- such as further tax cuts.
Investors are "just happy to get it behind us. Markets tend to like it when things go as expected," said Matt Brill, a senior portfolio manager for Invesco Fixed Income.
It also eliminates "the tail risk of greater budget deficits going forward," he added.
Money managers are likely to shift their attention back to some of the themes that have dominated markets for much of 2018, including company earnings, trade tensions between the U.S. and China and the pace at which the Fed will raise rates.
Disappointing corporate news drove some of Thursday's modest declines.
Shares in Wynn Resorts fell 12% after the hotel and casino operator reported profits that fell short of analyst expectations and cast doubt on its Macau business in the fourth quarter.
Qualcomm slumped 7.6% after the company posted a loss in its latest quarter. Shares of Monster Beverage fell 3% after it disclosed an arbitration proceeding with Coca-Cola.
About 87% of companies in the S&P 500 have released quarterly results so far, with earnings growth in the index above 25%, according to FactSet.
Elsewhere, the Stoxx Europe 600 rose 0.2%. Most markets in the Asia-Pacific region rose, catching up with the sharp jump on Wall Street in the previous session.
In Asia, Japan's Nikkei Stock Average rose 1.8% after registering a small decline Wednesday. Hong Kong's Hang Seng Index climbed 0.3%, while Korea's Kospi index rose 0.7%. China's Shanghai Composite Index bucked the trend, falling 0.2%, in its fourth consecutive session of declines.
Write to Jessica Menton at Jessica.Menton@wsj.com and Christopher Whittall at email@example.com
(END) Dow Jones Newswires
November 08, 2018 14:42 ET (19:42 GMT)
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