Market Snapshot: Stocks open higher ahead of Fed decision

thumbnail

Stocks opened higher on Wednesday, buoyed by expectations of another Federal Reserve interest-rate cut, while a flood of quarterly corporate results continued to come in mixed, but better than some analysts had feared.

What are major indexes doing?

The Dow Jones Industrial Average opened 1 point higher, at 27,072, but immediately began flickering between gains and losses, while the S&P 500 opened half a point higher, less than 0.1%, at 3,037.39 . The Nasdaq started trading nearly 6 points higher, at 8,282.67, a 0.1% gain.

The S&P 500

SPX, -0.09%

 notched an all-time intraday high Tuesday morning, but ended slightly lower after equities lost steam. The large-cap index, which posted a record close on Monday, lost 2.53 points Tuesday, or 0.1%, to end at 3,036.89. The Dow

DJIA, +0.03%

 gave up 19.30 points, or 0.1%, to finish at 27,071.42, while the Nasdaq Composite

COMP, -0.14%

 shed 49.13 points, or 0.6%, closing at 8,276.85.

What’s driving the market?

The Federal Reserve will be in the spotlight Wednesday. Policy makers are widely, but not universally, expected to lower the fed-funds rate by a quarter percentage point, the third cut this year. The key question is the signals the central bank and Chairman Jerome Powell will send regarding prospects for additional cuts. Traders have scaled back bets for further reductions later this year and in 2020.

Read: 3 things to watch from the Fed meeting

Also see: Meet the lonely economist who thinks the Fed might just leave interest rates unchanged

With a quarter-point rate cut reflected up to 95% in asset prices, there “ is only a little upside potential left to be explored on the interest rate front,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note.

That means the Fed statement “is what matters the most to investors at today’s decision announcement. The sweet blend of better-than-expected third-quarter earnings and the progress in trade negotiations with China suggests an increased likelihood of a hawkish Fed statement,” she said.

Indeed, some investors contend a signal the Fed is moving to the sidelines could rob equities of a source of support that’s helped them to rally back to record territory. The Fed is set to announce its policy decision at 2 p.m. Eastern, followed by Powell’s news conference at 2:30 p.m.

Also read: Can the stock market march higher without the promise of more Fed cuts?

Don’t miss: Here’s how the stock market tends to perform after the Fed cuts rates 3 times in a row

Earnings have been “fine,” and trading activity in the past few weeks has been all about re-positioning, said Sahak Manuelian, head of equity trading for Wedbush Securities. As some political headwinds ease up and central banks remain accommodative, traders “are feeling like, I’m too far into staples and defensives, and I need to have some exposure to cyclicals.”

Market breadth has also been improving, Manuelian said, helping to confirm some of the march higher for stock prices. And the better-than-expected third-quarter gross domestic product report is another sign that consumers aren’t slowing down, Manuelian told MarketWatch.

U.S. goss domestic product, the official scorecard for the economy, grew at an 1.9% annual pace in the third quarter, the Commerce Department said Wednesday, down just a tick from 2% growth in the spring. Confident consumers kept the U.S. economy humming along in the third quarter, spending more than enough to counter a big drop in business investment tied to falling oil prices and the ongoing trade war with China.

Private-sector employers added 125,000 jobs in October, payroll processor ADP said, spot on the consensus forecast.

See: Confident consumers keep U.S. economy humming along, GDP grows 1.9% in third quarter

What companies are in focus?

Investors continue to wade through the busiest week of earnings season.

General Electric Co.

GE, +11.91%

shares jumped 9% after it narrowed its third-quarter loss.

Yum Brands

YUM, -10.15%

  reported earnings in line with expectations ahead of the opening bell, but the stock fell sharply at the open.

Royal Caribbean Cruises Ltd.

RCL, -0.09%

  shares jumped nearly 2% in early trading despite slightly missing expectations for both per-share earnings and revenue.

Shares of Molson Coors Brewing Co.

TAP, -1.96%

 tumbled more than 3% after it said 2019 revenue would be flat to slightly down.

Shares of Advanced Micro Devices Inc.

AMD, -2.08%

 were slightly higher in morning action after the chip maker delivered third-quarter earnings late Tuesday that were in line with estimates and said it expected about the same for the current quarter.

See: AMD looks like a bright star in a darkened chip sector

In other corporate news, Fiat Chrysler Automobiles NV

FCAU, +0.42%

FCA, +9.60%

 and Peugeot maker PSA Group of France

UG, +4.09%

 confirmed they are in talks over a potential combination, which would create a $46 billion trans-Atlantic auto giant that would rank as the world’s fourth-largest by volume.

Anixter International Inc.

AXE, +14.91%

 said Wednesday it has agreed to be bought by an affiliate of private-equity firm Clayton, Dubilier & Rice in a deal valued at $3.8 billion. CD&R would pay $81 for each share of the network and electrical products company, a 13% premium to Tuesday’s closing price of $71.40. Shares surged 15%.

Results from Apple Inc.

AAPL, +0.25%

 are due after the bell, along with earnings from Facebook Inc.

FB, -0.90%

and ride-hailing company Lyft Inc.

LYFT, -0.80%.

What are other markets doing?

The yield on the 10-year U.S. Treasury note

TMUBMUSD10Y, -1.48%

  was one basis point lower, at 1.82%. The price of West Texas Intermediate crude oil

CL00, -0.54%

  was down 27 cents, 0.5%, to 55.27.

In Asia, the China CSI 300

000300, -0.49%

  lost 19 points, 0.5%, to 3,891.23. The STOXX Europe

SXXP, -0.29%

  dipped less than a point to 398.22.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top