After The Close
The major stock indexes reversed course and finished lower today during a session that had investors awaiting an expected interest-rate hike by the Federal Reserve at 2:00 p.m. EDT. Wall Street’s expectations were confirmed when the central bank raised its target for short-term interest rates by 0.25%, to a range of 2.00%-2.25%.
At the closing bell, the Dow Jones Industrial Average dropped 107 points; the NASDAQ dipped 17 points; and the S&P 500 gave back 10 points. All three of these closely watched indexes had shown fairly sizable gains for much of the day. Sentiment seemed to sour when it became apparent the wording of the Fed’s release indicated that its policy is no longer accommodative.
Even when stocks were up ahead of the Fed’s announcement, the broader market was less enthused. The advance-decline lines on the New York Stock Exchange and the NASDAQ clearly tilted to the downside when all was said and done.
In addition, there was a bit of disconnect in terms of the expected reaction of the financial sector to the Fed’s rate hike, as well as to the prospect of further interest-rate increases. Banks stocks moved lower, likely since long-term rates barely budged. The interest-rate sensitive utility sector did sell off moderately, though, as would be expected.
Elsewhere, economic data showed a rise in new-home sales for August. Sales were up 12.7% for the year as a whole and 3.5% versus July. Year to date, new-home sales are 6.9% higher. Shares of homebuilders eased nevertheless, given the prospect of higher mortgage rates.
Meantime, oil stocks backed off as the price of oil in New York trading fell about $0.65 a barrel, to around $71.65. Weekly crude oil inventories rose more than expected, according to the Energy Department. September is normally a slow month for energy demand in any case, with the summer driving season over and heating season still several weeks away.
In corporate news, entertainment industry leader Twenty-First Century Fox (FOXA) indicated that it plans to sell its stake in European pay-TV provider Sky plc. That would clear the way for cable TV operator Comcast (CMCSA) to gain control of Sky. Comcast recently outbid Walt Disney Co. (DIS – Free Walt Disney Stock report) in an auction to acquire most of Sky. Regardless, Disney stands to enjoy the proceeds of Fox’s sale of Sky, since it is purchasing the bulk of Twenty-First Century Fox’s assets.
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Then, after this decent start, with the financial stocks leading the way, as interest rates ticked higher on the expectation that the Federal Reserve will be hiking borrowing costs this afternoon by 25 basis points, the advance hit a few small wrinkles, taking the tech-laden NASDAQ and the smaller-cap indexes, notably the S&P 400 and the Russell 2000, incrementally lower for a time. The Dow Jones Industrial Average, however, held in the black. Interestingly, it had been the opposite on Monday, when the NASDAQ had edged higher at the close, while the Dow had lost 181 points.
Investors, meantime, waited eagerly for the Fed meeting to begin and end, which it will do in several hours from now. Expectations are overwhelming for a rate hike at that time and for another one in December. As noted, the banking stocks were performing well in the morning. Importantly, investors will not only be watching for what the Fed does with interest rates, but even more so what it says about the future of monetary policy. Indeed, the so-called drive toward normalization of monetary policy, which would give the lead bank the firepower to fight the next business downturn, remains a potential headwind for the market.
Also on the minds of traders was China, with that economic powerhouse engaging in a tit-for-tat exchange of tariffs with the United States. Elsewhere, the Administration seems to be making some headway in negotiations with our allies on trade. Overall, the equity market continued to drift modestly higher as the morning moved along, with the Dow still leading the way. In fact, things changed little as the morning concluded. However, as the afternoon got under way, there were fresh worries on the trade front after the President, speaking at the United Nations, struck a more nationalistic tone.
That set the market on its heels to a degree. And, as was the case on Monday, the Dow led the way lower, holding with a loss of some 50 to 60 points as the final hour of trading began. As was the case the day before, the NASDAQ, garnering some strength from technology gains, edged into the black. It would seem that whenever the trade rhetoric turns negative, the Dow suffers to a greater degree than the other indexes. The market would then stay range-bound into the close, with the Dow and the S&P 500 Index both lower and the NASDAQ and the Russell 2000 continuing to stay in the black, if modestly.
Finally, in economic news, the Conference Board reported a further gain in consumer confidence in September, with that Index rising to its highest level in some 18 years. In all, the result was just off the best levels of all time also recorded in 2000. That result, albeit better than forecast, did not move the needle much on Wall Street, as the focus remained on trade and China. In all, at the close, the Dow pressured by some weakness in the industrial zone, fell by 70 points; the S&P 500 eased by four points; but the NASDAQ edged up by 14 points.
Looking to a new day now, and one that will likely be dictated by trade developments and rhetoric early in the trading day, but by the Federal Reserve and its rate decision and commentary down the stretch, we see that stocks higher in Asia overnight. In Europe, the leading bourses now are tracking in an uneven pattern, at this hour. In other markets, oil, a gainer early on yesterday, is now off slightly, while yields on the 10-year Treasury, which ended the day yesterday at 3.10%, now are at 3.09%. Meanwhile, U.S. equity futures now are suggesting a higher opening when trading resumes this morning.
