MARKET SNAPSHOT: Stocks Edge Back Into Negative Territory After Fed Minutes

Date : 10/17/2018 @ 8:41PM
Source : Dow Jones News
Stock : Cronos Group Inc (CRON)
Quote : 10.93  -0.67 (-5.78%) @ 8:59PM

MARKET SNAPSHOT: Stocks Edge Back Into Negative Territory After Fed Minutes

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By Mark DeCambre, MarketWatch , Chris Matthews

Equities trim heavy early declines

Stocks traded modestly lower Wednesday after the release of minutes from the Federal Reserve's last policy meeting, but remained above session lows.

How are benchmarks performing?

The Dow Jones Industrial Average fell more than 300 points in early trading, before paring those losses and briefly edging into positive territory. The Dow was down 67 points, or 0.3% to sit at 25,733 in recent action. The S&P 500 lost 2 points, falling to 2,804, while the Nasdaq Composite Index shed 12 points, or 0.2%, to 7,630.

Read:Why a big, 1-day stock-market bounce doesn't mean 'blue skies ahead' (http://www.marketwatch.com/story/why-a-big-1-day-stock-market-rebound-doesnt-mean-blue-skies-ahead-2018-10-17)

On Tuesday, the Dow jumped 547.87 points, or 2.2%, to 25,798.42. The S&P 500 gained 59.13 points, or 2.2%, to 2,809.92 with tech and health care among the strongest performers in a session where all 11 sectors finished higher. The Nasdaq Composite Index climbed 214.75 points, or 2.9%, to 7,645.49. It was the biggest single-day advance for all three indexes since March 26.

What's driving the market?

The minutes of the Fed's September meeting, which saw policy makers deliver a widely expected quarter-point increase, showed that a majority of policy makers believe interest rates must continue to rise (http://www.marketwatch.com/story/majority-on-fed-believe-interest-rate-policy-will-have-to-become-restrictive-2018-10-17) until policy becomes restrictive.

Minutes aren't ordinarily a source of volatility, however, the outsize focus on Treasury rates--notably a rise in the yield on the 10-year Treasury note to a seven-year high last week--ensured they were closely read. Meanwhile, the market continues to closely watch negotiations between the European Union and Britain as it attempts to exit from the trade bloc with a trade agreement in hand. The potential for a clash between Italy and the European Union over Rome's budget plans (http://www.marketwatch.com/story/italys-government-oks-draft-budget-that-would-widen-deficit-2018-10-15) is also in the spotlight.

Which data were in focus?

The number of new homes under construction fell 0.6% to a seasonally-adjusted annual rate of 1.201 million (http://www.marketwatch.com/story/housing-starts-tick-down-in-another-weak-month-for-residential-construction-2018-10-17) in September. The rate was 1% below last year's levels. The numbers nearly matched the consensus forecast of 1.208 million produced by a MarketWatch survey of economists.

Permits for construction of new homes also fell 5.3% in September from the month before to a seasonally adjusted annual rate of 1.241 million. The number represents a 3.7% increase year-over-year, but still was weaker than average analysts expectations polled by FactSet for a pace of 1.28 million new permits.

What were analysts saying?

"The market is interpreting the Fed minutes as slightly hawkish," said Lindsey Bell, investment strategist with CFRA. For a while the market didn't believe the Fed was serious about raising rates four times this year and three times in 2019, she said. But that changed after hawkish comments from Fed Chairman Powell earlier this month (http://www.marketwatch.com/story/bond-markets-may-have-overreacted-to-powells-long-way-from-neutral-remark-economists-say-2018-10-04). "The FOMC minutes are another reminder that the Fed is serious, and isn't going to let President Trump bully them" into a more dovish stance, said Bell, referring to comments the president made this week (http://www.marketwatch.com/story/trump-delivers-another-attack-on-fed-calling-central-bank-the-biggest-threat-2018-10-16) criticizing Fed policy, the latest in a string of criticisms.

"We had a big day yesterday, and today's open shows that volatility is not going away," said Jeff Carbone, co-founder of asset management firm Cornerstone Wealth Group. With interest rates markedly higher today than even one month ago, investors will remain cautious, and the early morning downturn is evidence of this change in sentiment, he said. "But when you look at the fundamentals of the economy and the market, we expect the market to ultimately move upward."

Mark Espisito, chief executive of Espisito Securities shared this optimism. "We still see a strong earnings season and a strong stock market for the next year or so," he said. "Even when there is a pullback like this morning, it's met with resistance."

He argued that the reversal of steep early morning losses in the major indexes is proof that there is "consistent buying interest when markets move down," because investors are still betting on a strong economy and strong earnings to power stocks higher.

Which stocks were in focus?

Shares of Netflix Inc. (NFLX) were on the rise a day after the company reported better-than-expected quarterly results (http://www.marketwatch.com/story/netflix-earnings-send-stock-surging-suggest-huge-decline-was-an-aberration-2018-10-16). The stock was up 4.3%

Investors soured on shares of International Business Machines Corp. (IBM), after the company announced a revenue miss following the close on Tuesday. Shares were down 7.7%.

Shares of United Continental Holdings(UAL) are up 6.6%, following news that executives raised their forecasts for 2018 profits, even as it missed analysts' third quarter EPS estimates.

Auto parts retailers are having a rough day, with AutoZone, Inc. (AZO) ranking as the S&P's biggest loser Wednesday, down 7.7%. Advance Auto Parts, Inc. (AAP) was also down 5.2%.

Tesla(TSLA) stock is down 2%, following an SEC filling by the company saying it plans to issue $20 million in stock that will be bought by the company's founder, Elon Musk. The stock initially popped on the news (http://www.marketwatch.com/story/teslas-stock-jumps-after-elon-musk-discloses-plan-to-buy-20-million-worth-of-shares-2018-10-17), but reversed course after the market opened. The filing also announced that a federal court approved a settlement between Tesla, Musk and the Securities and Exchange Commission that has the company and its founder each paying $20 million in fines related to Musk's proposal to take Tesla private.

Home Depot(HD) shares are down 3.7%, on falling housing starts data and new housing permit numbers that missed expectations.

Shares of companies in the cannabis industry garnered investor interest on the first day of legal, recreational marijuana use across Canada. Shares of three of four major, publicly listed cannabis firms (http://www.marketwatch.com/story/a-guide-to-pot-stocks-what-you-need-to-know-to-invest-in-cannabis-companies-2018-10-15) were down in morning trading, though all have recovered some from session lows.

Aurora Cannabis (ACB.T)was hit hard after the bell, falling 12.5%, before paring losses to be down 1.8%.

Cronos Group (CRON.T)stock was down 6.4% on the day, while Canopy Growth Corporation(WEED.T) was down 3.8%

Shares in Aphria, Inc. (APH.T), however, rose 4.6% during Wednesday trading.

How did other markets trade?

Asian stocks ended higher, with Japan's Nikkei jumping 1.3%, extending Tuesday's rally in the U.S., while European indexes were trading slightly lower as Italian and British political uncertainty buffeted stock benchmarks.

Crude-oil prices fell, while gold prices were up 0.4% as the U.S. dollar index rose 0.5% Wednesday.

 

(END) Dow Jones Newswires

October 17, 2018 15:26 ET (19:26 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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