(Updates with close of U.S. markets, Federal Reserve action)
By Herbert Lash
NEW YORK, April 30 (Reuters) - U.S. stocks fell on
Wednesday after the Federal Reserve cut interest rates but left
its next move unclear, causing the dollar to slip and raising
the chances of still higher commodity prices ahead.
With an uncertain outlook on interest rates and after U.S.
economic data showed the weakest consumer spending since 2001
and reduced business investment, investors locked in profits in
stocks, which in April posted the first positive month since
October.
The U.S. 30-year Treasury bond <US30YT=RR> traded a full
point higher in price as a debt rally gained momentum after the
Fed cut its benchmark lending rate to banks one-quarter of a
percentage point to 2 percent.
Oil fell $2 a barrel, extending a retreat from a record
high this week to more than 5 percent following a U.S.
government report that showed crude oil stockpiles rose much
more than expected in the world's top energy consumer.
The rate cut by the Fed -- which has now trimmed rates by
3.25 percentage points since September -- had been expected.
But Fed policy-makers did not signal a pause in their
rate-cutting campaign.
Many economists and analysts worry that the rate cuts will
only spur higher inflation down the road and keep commodity
prices on the boil, especially if rates are cut more in the
future.
"They had such an opportunity to send (commodity) prices
tumbling," said Peter Beutel, president of energy consultancy
Cameron Hanover in New Canaan, Connecticut.
"Every time they cut rates and leave the door open for
another cut, they basically are just giving away the store when
it comes to commodity prices," Beutel said.
The dollar rose against the euro and extended gains against
the yen immediately after the Fed announced its latest move.
But then the U.S. currency pared gains against the euro and
slipped against the yen on the view that the U.S. central bank
had left the door open for further rate cuts.
Stocks rallied before the rate decision and extended gains
after the announcement, only to fall later in the session.
The Dow Jones industrial average <> fell 11.81 points,
or 0.09 percent, to 12,820.13. The Standard & Poor's 500 Index
<.SPX> fell 5.35 points, or 0.38 percent, to 1,385.59. The
Nasdaq Composite Index <> fell 13.30 points, or 0.55
percent, to 2,412.80.
Earlier, U.S. and European stocks had rallied.
Data on U.S. gross domestic product, business activity and
employment had kept dollar sentiment positive by suggesting
that the Fed might not have to cut interest rates after
Wednesday.
Investors also drew comfort from a lower-than-expected loss
at General Motors Corp <GM.N> and stronger-than-anticipated
profit at consumer products maker Procter & Gamble Co <PG.N>.
GM posted a first-quarter loss due to a costly supplier
strike, waning demand for its most profitable vehicles and $2.2
billion in charges related to struggling former subsidiaries.
But its results beat Wall Street forecasts and its shares
jumped 9.4 percent.
Procter & Gamble Co posted a higher quarterly profit as
cost controls helped offset soaring prices for oil and other
commodities. Its shares rose 1.8 percent.
In Europe, shares rose, boosted by the U.S. economic data
and a raft of bullish company results, to post their best
monthly performance in 4-1/2 years.
The FTSEurofirst 300 index <> of top European shares
closed up 0.7 percent at 1,337.68 points, the fifth gain out of
the past six sessions. The index rose 6 percent in April, its
best monthly performance since October 2003.
Asian bourses closed mixed to lower. Tokyo's Nikkei 225
<> shed 0.3 percent and Hong Kong's Hang Seng <> fell
0.6 percent. China's main Shanghai index <> bucked the
trend and jumped 4.8 percent.
Oil losses were limited late in the day after the Fed's
rate cut indicated that it expects inflation to moderate -- a
sign that more rate cuts are possible.
U.S. crude <CLc1> settled down $2.17 at $113.46 a barrel,
before recovering in electronic activity to $114.62 after the
Fed's decision. London Brent <LCOc1> fell $1.03 to $112.40 a
barrel.
U.S. gold futures ended sharply lower for a second straight
session, hurt by a slippage in crude oil prices, the stronger
dollar and a drop in gold exchange-traded fund holdings.
The June contract <GCM8> in New York settled down 1.3
percent at $865.10 an ounce, about half an hour before the Fed
announced its decision.
The dollar fell against major trading-partner currencies,
with the U.S. Dollar Index <.DXY> down 0.34 percent at 72.617.
The euro <EUR=> rose 0.29 percent at $1.5612. Against the
yen, the dollar <JPY=> fell 0.04 percent to 103.98.
U.S. Treasury debt prices rose. The benchmark 10-year U.S.
Treasury note <US10YT=RR> added 20/32 to yield 3.75 percent.
The 2-year U.S. Treasury note <US2YT=RR> rose 4/32 to yield
2.28 percent. The 30-year U.S. Treasury bond <US30YT=RR>
climbed 37/32 to yield 4.48 percent.
(Additional reporting by Ellis Mnyandu, Chris Reese and
Gertrude Chavez-Dreyfuss in New York, and Alex Lawler in
London; Editing by Jonathan Oatis)
