After The Close
Equities traded in a sideways range earlier today, but turned nicely higher after 2PM (EDT) following the Federal Reserve’s interest rate announcement. The central bank chose to cut interest rates by another 0.25%, making this the third reduction this year. However, the bank hinted that further easing may not be easily forthcoming. While Wall Street seemed pleased with the news, the market’s reaction was somewhat subdued at first. At the end of the session, the Dow Jones Industrial Average was ahead 115 points; the broader S&P 500 Index was up 10 points; and the NASDAQ was higher by 27 points. Market breadth was mixed, with advancers and decliners about even on the NYSE. From a sector perspective, the high-yielding utility stocks and healthcare names pressed nicely higher, while the basic materials issues moved sharply lower.
Meanwhile, in addition to the Fed’s announcement, a couple of other economic news items were released today. Specifically, the labor market seems to be holding up well. According to the latest Automatic Data Processing (ADP) employment change report 125,000 private sector jobs were added to the economy in October, which was well ahead of the consensus forecast. In addition, the advanced estimate for third quarter GDP showed the economy expanding at an annualized rate of 1.9%, which was also somewhat better than had been anticipated. Tomorrow, we will get look at a number or economic reports, including the latest weekly jobless claims, and the monthly personal income and spending numbers.
In the corporate arena, the third-quarter earnings season continues. Among the widely followed names, we heard from General Electric (GE). Shares of the conglomerate were up nicely today, after the company put out a better-than-anticipated result and investors seemed more confident that the business may be turning business around. Further, Advanced Micro Devices (AMD) put out a respectable quarterly issuance, but cautious guidance did little to impress investors.
Technically, the market has been doing well. The third-quarter earnings season seems to be going a bit better than had been anticipated. However, while there have been signs of progress, it is still unclear if a comprehensive deal with China will materialize.
– Adam Rosner
At the time of this article’s writing, the author had a position in General Electric (GE).
Before The Bell
The stock market, buoyed by back-to-back strong sessions, took a sideways step in the early going yesterday, as it attempted to make it three up days in a row. There were no major breaking stories to report, and earnings season, which has been a satisfying one on the whole, continued to bring smiles to most investor faces. However, there was one outlier to the upbeat profit scene. And that was Alphabet (GOOG), the parent company of Google. The giant search engine company posted disappointing earnings and the stock quickly lost about $25 a share. That selloff in this high-profile tech issue sent the NASDAQ down by 30 points in the first hour.
However, we noted that the early move was a sideways one, meaning that while the NASDAQ gave ground, the 30-stock Dow Jones Industrial Average and the S&P 500 Index were both higher during that span, with the Dow climbing modestly in the first hour. The mixed trading pattern--a rising Dow and a falling NASDAQ then would continue over the next half hour, with the blue chips actually strengthening somewhat. Other tech casualties, in addition to Alphabet, included Apple (AAPL – Free Apple Stock Report), which saw profit taking after spirited advances earlier. Conversely, the Dow was helped by gains in its drug stocks, namely Merck (MRK – Free Merck Stock Report) and Pfizer (PFE – Free Pfizer Stock Report).
In other news on this first day of the Federal Reserve's FOMC meeting (which will conclude this afternoon at 2:00 PM (EDT), the Conference Board reported that its Consumer Confidence Index eased from 126.3 in September to 125.9 in October. Expectations had been for a gain to 128.8. Overall, this flattish reading left the index had a high enough level to believe that the economy, at least the consumer side of things, would continue to improve going forward, if even at a sluggish pace. Later in the week, we will get data on job creation and manufacturing.
Meanwhile, the market continued to move ahead unevenly, with the NASDAQ still behind the pack, but with the Dow and the S&P 500 both pressing forward, if modestly. Regarding the Fed, as noted, the bank began its meeting yesterday morning and will announce its interest rate decision in a matter of hours. The overwhelming expectation is that the bank will lower interest rates by 25 basis points. The uncertainty is whether it will suggest a pause could follow or that it will suggest a further near-term easing in the coming months. Wall Street could well celebrate the latter.
This bifurcated market action continued as the morning ended and the afternoon began. In total, though, the overall movements remained small to that point, as the focus shifted toward the Fed and the uncertainty engendered by all Fed meetings. The market then weaved uneven patterns through the afternoon, alternating between small increases and narrow losses on the Dow and progressively bigger deficits for the NASDAQ. A continuing sharp drop in shares of Apple as the session wound down added to that composite's losses. As the session concluded, all three of the large-cap indexes were lower.
In all, the Dow would finish off by 19 points; the S&P 500 would end lower by three points; while the NASDAQ, pressured by a drop in a number of tech issues, would give back 49 points. The rest of the market had a divided tone. As to bonds, yields ended a little lower on the day as eyes were starting to be turned towards the Fed.
Looking out at a new day, and ahead of the FOMC meeting's announcement, the leading averages were lower in Asia overnight, while in Europe, the principal bourses are mixed so far this morning. Finally, Treasury note yields are edging lower; oil prices are easing; and the equity futures are suggesting an modest start to the new trading day.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
