After The Close
Stock trading was quiet for much of Wednesday as investors waited for the Federal Reserve’s 2:00 Eastern Time decision about interest rates. The Fed’s decision to leave rates unchanged for now was largely expected.
What proved more surprising was that prospects for another rate hike this year firmed up slightly, given the views expressed by policy makers. Wall Street had been giving less weight to that possibility in recent weeks, as inflation remains subdued. The increased chance of a third rate in 2017 sent bond yields higher and weakened support for stocks, before they recovered later in the day.
The Fed also reaffirmed its strategy to begin reducing the size of its balance sheet next month, as well. While not directly affecting interest rates, sales of U.S. Treasuries and mortgage-backed securities would be a mild form of monetary policy tightening.
At the close, the Dow Jones Industrial Average ended up 41 points and the S&P 500 rose slightly; but the NASDAQ fell a handful of points. Market breadth was broadly positive.
Elsewhere, the Dow Jones Transportation Average turned in a good performance, helped by a rise in shares of bellwether shipper Fedex (FDX). Fedex announced its fiscal first-quarter earnings, which were down owing to costs related to a cyber-attack and disruption caused by recent storms, but the feeling was that the effects of these difficulties would be relatively short-lived.
Energy stocks also had a good day, helped by higher oil prices. Quotations for a barrel of oil on the NYMEX rose by about $0.80 in New York trading, and back above $50. That helped the stocks of many drillers and service providers. Oil rose despite a larger-than-expected climb in crude oil inventories, as reported by the Energy Department. But a decline in inventories of gasoline and distillate fuels seemed to help sentiment.
Meanwhile, tech stocks lagged as sector leadership faltered somewhat. Apple (AAPL – Free Apple Stock Report) shares continued their recent weakness, possibly on concerns that the $999 price tag on the iPhone X would crimp sales.
The consumer staples sector also slumped as a disappointing profit report from General Mills (GIS) weighed on shares of packaged foods makers.
Overall, stocks showed nice resilience today.
— Robert Mitkowski
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:30 PM EDT
Equities are putting in a mixed showing this morning, as traders look to the Federal Reserve for guidance. At just about noon in New York, the Dow Jones Industrial Average is ahead 22 points; the broader S&P 500 Index is up one point; while the NASDAQ is lower by 18 points. Nonetheless, there is a slight upward bias to the session, as winners are ahead of losers on the NYSE. Leadership can be seen in the energy, industrial, and basic materials issues, while considerable weakness can be found in the technology stocks.
Meanwhile, traders received a few economic reports this morning. Specifically, existing home sales for the month of August slipped to an annualized rate of 5.35 million units. Analyst had been looking for a somewhat stronger reading. Further, according to the EIA, crude oil inventories rose by 4.6 million barrels during the week of September 15th. However, traders seem to be taking an upbeat view, as the price of oil is up slightly, to just over $50 a barrel, today. Finally, the main event will take place this afternoon, when the FOMC makes an interest-rate decision and offers some remarks about the state of the economy.
A few widely followed corporations delivered their financial results over the past 24 hours. Reports from General Mills (GIS) and Bed Bath & Beyond (BBBY) did little to inspire traders, as those stocks are moving notably lower today. In contrast shares of FedEX (FDX) are headed higher, even though the transportation giant put out a mixed report.
Technically, the stock market continues to do well. However, the third quarter is drawing to a close, and given current valuations, corporations may be under pressure to deliver impressive results.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Another day, another series of records for Wall Street, as the long bull market rushes ahead to yet additional all-time highs on the strength of a durable business expansion, low interest rates abetted by an accommodative Federal Reserve, and generally solid profit matchups. Specifically, the stock market, up in dealings to start the week, moved ahead in modest fashion at the outset of trading yesterday. In all, within minutes after the opening bell sounded, the Dow Jones Industrial Average was up another 40 points and the NASDAQ was better by almost 15 points.
Then, after a brief pause, the market firmed up again as we neared the noon hour on the East Coast, with the Dow jumping forward by some 55 points and the other averages putting in modest advances, as well. Stoking the bullish flames was a general sense that the Federal Reserve, which had just begun its latest FOMC meeting in the morning, would decide to hold interest rates unchanged. The bank's decision is to be announced this afternoon at 2:00 PM (EDT). Expectations are that the Fed will begin to pare its balance sheet, as suggested at past meetings. Also the United Nations is in session, and that can always bring surprises.
Meanwhile, in other of news, the Commerce Department reported that U.S. housing starts had moved a bit lower in August, coming in at a seasonally-adjusted annual rate of 1,180,000 homes. In July, the total had been 1,190,000. The latest number, however, was modestly above the year-earlier tally. Importantly, in a more forward-looking issuance, the Department reported that building permits had risen 5.7% last month to an annualized rate of 1,300,000 homes. In all, this was a reassuring report and suggests that the nation's economy, although experiencing recent weather-related wear and tear, is still on pace for a decent second half.
So, the market moved forward, with some incremental strength evolving in the back half of the trading day. The economic calendar, albeit comparatively light yesterday, save for housing, will be a little busier today, as we will get additional housing-related metrics, as the next hour or so will bring figures on sales of existing homes for August. A nominal increase in that tally is the forecast. We also will hear from the Energy Information Agency, as that group will tally up the latest week's oil data. Then, tomorrow will bring the latest in weekly jobless claims.
The market steadied somewhat as we moved into the home stretch and boosted by stellar gains in the telecom sector and some further strength in the financial group, the large-cap averages all stayed in the plus column. However, the gains were subdued, with the Dow, the best performer, adding 39 points. The S&P 500 and the NASDAQ were up grudgingly, meantime, while the S&P Mid-Cap 400 and the small-cap Russell 200 edged slightly lower. There was a suitably divided tone among the individual issues on the Big Board as the Fed's key monetary meeting continued.
Now, on Fed decision day, we see that stocks were up modestly in overnight trading in Asia, while in Europe, the early reading on the market is rather mixed. Also, Treasury yields, up somewhat yesterday, with the 10-year note climbing to a return of 2.24%, are backing off a bit so far this morning. Further, oil, down about 1% yesterday, is now showing gains as Iraq signals it might go along with output cut extensions, and gold, little changed in dealings in the latest session, is now ahead modestly. But the big story today figures to be the Fed, and while we do not expect any surprises on the interest rate front, there is always some trepidation ahead of the accompany lead bank statement. So, the U.S. equity futures are suitably mixed in the early going.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
