Federal Open Market Committee policymakers on Feb. 1 voted to hold the Federal Reserve's key rate at its current target range, between 50 basis points and 75 basis points, during their first meeting of 2017.
The committee said that "job gains remained solid and the unemployment rate stayed near its recent low." Meanwhile, economic activity continued to grow at a modest pace and inflation, still below the committee's 2% long-run objective, increased in recent quarters. The committee will continue to monitor inflation and global economic and financial developments closely.
"I think that that small amount of extra emphasis put on inflation in the report may be designed by the Fed to give them some more optionality in terms of a potential for a March or a May rate hike," said Robert Dye, chief economist at Comerica Bank. Dye noted that Fed funds futures markets are focusing on June for the potential rate hike, but if inflation "gets a little bit hotter than the Fed would like, they are certainly not bound by that schedule."
"We believe the statement is consistent with another tightening as soon as March, although we certainly would not expect tightening if the probability of a move, being priced into markets, does not rise to at least 50% before the meeting from around 25% to 30% currently," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.
In other economic news, private sector employment increased by 246,000 jobs in January, according to the latest ADP National Employment Report. ADP revised the December 2016 total of jobs added down to 151,000 from 153,000.
Mortgage applications decreased 3.2% from a week ago on a seasonally adjusted basis for the week ended Jan. 27, the Mortgage Bankers Association reported, citing its latest weekly mortgage application survey.
Against this backdrop, U.S. bank stocks closed higher along with broader markets Wednesday, Feb. 1, while U.S. thrift stocks traded lower.
The SNL U.S. Bank index ticked up 0.14% to 530.39, and the SNL U.S. Thrift index retreated 0.75% to 931.74. The Dow Jones Industrial Average was up 0.14% to 19,890.94, the S&P 500 increased 0.03% to 2,279.55 and the Nasdaq composite index added 0.50% to 5,642.65.
In banking news, Wilmington, Del.-based Bancorp Bank reported a 2016 net loss of approximately $84.2 million in its most recent call report, compared to the year-to-date net loss of $67.7 million as of Sept. 30, 2016, ahead of The Bancorp Inc.'s fourth-quarter 2016 earnings release. The Bancorp fell 16.53% to $5.00 by the end of business.
Also by the end of business, JPMorgan Chase & Co. was up 0.38% to $84.95, Bank of America Corp. gained 1.10% to $22.89, and Citigroup Inc. rose 0.39% to $56.05.
Wells Fargo & Co. retreated 0.07% to $55.91. Rules imposed by the Office of the Comptroller of the Currency to exert more control at Wells Fargo are keeping the bank from paying severance to laid-off employees who were not part of the unauthorized-accounts scandal, The New York Times reported Jan. 31.
Among notable movers, Ellicott City, Md.-based Howard Bancorp Inc. gained 3.21% to $17.70, while Helena, Mont.-based Eagle Bancorp Montana Inc. lost 5.02% to $19.85 and New Orleans-based First NBC Bank Holding Co. fell 3.75% to $3.85.
Among thrifts, New York Community Bancorp Inc. declined 1.38% to $14.98, while BofI Holding Inc. gained 0.85% to $29.75.
Market prices and index values are current as of the time of publication and are subject to change.