Commenting on today’s trading in which the biggest news was the Fed’s decision to leave the benchmark rate unchanged, Gorilla Trades strategist Ken Berman said:
While bulls were in control for the better part of the day, the late-session dip confirmed that investors remain nervous about the impact of the coronavirus outbreak. The Fed’s message was exactly what bulls needed in the tense environment, reassuring investors about the Central Bank’s flexibility, but the reports regarding the global travel restrictions to China weighed heavily on trade-related stocks towards the end of the day.
The major indices finished mixed and flat following a choppy session on Wall Street, as traders digested the positive earnings surprises and Fed Chair Jerome Powell’s cautious words regarding the economy. The Dow was up 12, or 0.04%, to 28,734, the Nasdaq gained 5, or 0.1%, to 9,275 while the S&P 500 declined by 3, or 0.1%, to 3,273. Decliners outnumbered advancing issues by a 5-to-4 ratio on the NYSE, where volume was slightly above average.
Fed leaves benchmark rate unchanged
The key sectors diverged substantially today, with materials still being clearly the worst-performing issues, due in part to the higher-than-expected U.S. crude oil inventories number. Industrials and consumer goods were the strongest throughout the day, but the defensive utilities and healthcare sectors also shined, especially in the second half of the session. Financials were under pressure again, because of the decline in Treasury yields after the benchmark rate unchanged. Tech stocks were mixed, as the main semiconductor manufacturers struggled. Gold prices were up slightly on the day after the Fed decision.
Yesterday afternoon’s and this morning’s corporate earnings reports were clearly bullish, with especially Apple’s (AAPL, +2.1%) numbers boosting investor confidence. Even though the tech sector and the Nasdaq lagged behind the broader market in early trading, the market-leading index performed well in the second half of the session. Microsoft (MSFT, +1.6%) and Facebook (FB, +2.5%) also contributed to the broad rally ahead of their earnings releases, but while Microsoft released an upbeat report in after-hours trading, the shares of Facebook took a hit due to the firm’s disappointing quarter.
Macro news
The Fed kept its benchmark rate unchanged as it was widely expected, and while there were a few surprising bits in the Central Bank’s monetary statement, stocks barely budged in the wake of the announcements. Treasury yields declined, due to Chairman Jerome Powell’s cautious words with regards to the consumer economy and the coronavirus outbreak, but volatility remained relatively low in the last couple hours of trading. The Fed is expected to leave its benchmark rate unchanged throughout the year, even considering the recent uptick in domestic economic activity.
The economic calendar will be almost empty tomorrow, but the two releases could both make significant waves on Wall Street. The first reading of the fourth-quarter GDP print will be closely watched following last quarter’s solid 2.1% reading, and analysts expect growth to remains above the key 2.0% level. Digging deeper in the GDP report, the GDP Price Index will be important due to the Fed’s neutral stance, while investors hope that the weekly number of new jobless claims will remain near the 200,000 level. Stay tuned!
