U.S. stocks remained mostly lower on Thursday as the Federal Reserve kept interest rates unchanged in an unanimous decision and signaled that it would continue to tighten monetary policy at a gradual pace.
How are benchmarks performing?
The Dow Jones Industrial Average
gained 40 points, or 0.2%, to 26,221, while the S&P 500 index
shed 4 points, or 0.2%, to 2,809 and the Nasdaq Composite
fell 26 points, or 0.4%, to 7,544.
On Wednesday, all three indexes ended the session just shy of their intraday highs and booked their best daily gains in weeks. The Dow and S&P 500 have risen for three straight sessions, while the Nasdaq has booked back-to-back advances.
What’s driving the market?
In a statement that was largely intact from its September meeting, the Fed said, “The Committee expects further gradual increases in the target range for the federal funds rate.” It also said the risks to the economic outlook “appear roughly balanced” and noted that inflation remains near its 2% target.
The absence of any major changes to its commentary suggests that the central bank still plans to raise interest rates in December and three hikes next year, in line with market expectations.
With the exception of Thursday’s weak patch, stocks have mostly risen this week with midterm election results removing a measure of uncertainty that had weighed on investors’ sentiment.
Meanwhile, quarterly earnings continue to roll in. Around 87% of companies in the S&P 500 have reported third-quarter results so far, with average earnings growth of over 25%, according to FactSet data. Investors are worried that steady growth may not last for long, especially as expansion elsewhere in the world has stalled.
One additional item on investors’ radar is drama surrounding the resignation of Jeff Sessions as attorney general Wednesday.
President Donald Trump had repeatedly blamed Sessions for special counsel Robert Mueller’s investigation into potential connections between the Trump campaign and Russian interference during the 2016 election.
On the data front, first-time unemployment claims fell by 1,000 in the week ended Nov. 3 to 214,000, the Labor Department said. That was slightly higher than the 210,000 forecast by economists polled by MarketWatch. The total number of Americans collecting jobless benefits fell to its lowest level since the summer of 1973.
What are the strategists saying?
“I think the fact that we’re stable today after that runup yesterday is a positive sign,” Ed Keon, chief investment strategist at QMA, told MarketWatch. “I find it encouraging that bond yields ended up higher yesterday and they’re higher today. It suggests that the market is a little less worried about a recession and more confident of growth.”
Keon doesn’t expect much new information from the Fed’s statement as there has been little change to either unemployment or inflation data since the FOMC’s September meeting. If, however, the Fed does include language in its statement that indicates it will be “flexible in its approach,” to the course of future interest rates, expect to see the market rally, he said.
Michael O’Rourke, chief market strategist at JonesTrading, warned clients not to be comforted by the Wednesday rally, which, he argued in a research note, “has the hallmarks of bear market rally—a strong move on light volume thanks to a hollow catalyst.”
“Other market headwinds will be reasserting themselves soon enough,” O’Rourke wrote. “Did this market just rally sharply in reaction to a political election result on a day where the attorney general’s resignation potentially may place the nation on a path to a constitutional crisis? The catalyst is beginning to look even more hollow.”
Which stocks are in focus?
Shares of Tesla Inc.
rose 1.3% after the electric car maker named Robyn Denholm as its new chairman, replacing Chief Executive Elon Musk as the head of the board with a relative outsider who will face the difficult task of overseeing the maverick billionaire.
Shares of Cardinal Health Inc.
gained 4.1% after the health-care-services company reported fiscal first-quarter profit and revenue that rose above expectations, boosted by strength in its pharmaceuticals business.
D.R. Horton Inc.
declined 6.5% after it reported fiscal fourth-quarter earnings in line with expectations, but its revenue fell short as rising prices and higher interest rates have led to some moderation in demand for housing.
Shares of Monster Beverage Co.
fell 3.4% after CEO Rodney Sacks said in an earnings call with analysts that Coca-Cola Co.
planned to release two new competitor drinks. Monster has entered into arbitration with Coca-Cola, its biggest shareholder, to determine whether Coca-Cola will be permitted to launch competitor drinks in April 2019, and the result of the dispute could have implications for whether or not Coke will fully acquire Monster.
Wynn Resorts Ltd.
stock sank 12% after an earnings call late Wednesday during which CEO Matthew Maddox said he anticipates a “soft” market in the fourth quarter for its Macau business line.
How are other markets trading?
—Mark DeCambre contributed to this article
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