Dow Today – Dow ends slightly lower after Fed leaves easy-monetary policies unchanged
U.S. stock indexes had a mixed finish Wednesday, after the Federal Reserve said it would keep interest rates steady near zero and retain its full range of tools to support the economic recovery during the pandemic.
Investors also were focused on results streaming in from the busiest week of corporate earnings reports for the second quarter.
- The Dow Jones Industrial Average shed 127.59 points, or 0.4%, to close at 34,930.93, after swinging in and out of positive territory.
- The S&P 500 index edged almost a point lower, ending at 4,400.64.
- Nasdaq Composite rose 102.01 points, or 0.7%, finishing at 14,762.58.
- The Russell 2000 Index of small-cap stocks, rose 1.5%.
On Tuesday, the Dow fell 85.79 points, or 0.2%, to 35,058.52. The The S&P 500 declined 20.84 points, or 0.5%, to 4,401.46 to snap a five-session winning run. The tech-heavy Nasdaq dropped 180.14 points, or 1.2%, to 14,660.58, its largest one day fall since May 12.
What drove the market?
Stocks mostly got a boost after the Federal Reserve opted not to tighten monetary policy following a two-day meeting, reiterating that the path of recovery will depend on the virus.
Fed Chairman Jerome Powell stressed that vaccinations have been a major aid in the U.S. economic recovery, in an afternoon press briefing, but cautioned that their slowing pace and the delta variant of the coronavirus also remain risks.
Investors were hoping for clarity on when the central bank will begin tapering its $120 billion monthly bond purchases but Powell said the topic continues to be studied by the central bank and reiterated that any future decisions will remain data dependent. “I would want to see some strong job numbers,” Powell said.
“I think it’s one more small step forward in their patient and methodical path” toward eventually scaling back monthly bond purchases, said Jason England, global bonds portfolio manager at Janus Henderson Investors, in an interview with MarketWatch. “Obviously, they’ve made progress on the inflation front, but not as much on jobs.”
Powell stressed again that he expects inflation to eventually pull back closer to the Fed’s 2% annual target.
See: Fed says economy has ‘made progress’ toward standards for tapering, but not enough to start yet
And: Fed is walking ‘bit of a tightrope’ between downside risks and inflation
Beyond the Fed update, investors remained bullish on the strength of second-quarter earnings reported thus far, with the earnings growth rate in the April through the end of June up nearly 80%, led by a 168% rate for the financial sector, according to data compiled by S&P Global Market Intelligence.
Social-media group Facebook FB, online payments processor PayPal PYPL, chip group Qualcomm QCOM and auto maker Ford F will report after the close of Wednesday’s session.
Robinhood Markets, Inc., a popular online brokerage with individuals, is expected to price its initial public offering on Wednesday and to begin trading under the “HOOD” ticker on Thursday.
Read: Robinhood asking for $35 billion valuation in its IPO: Here are the 5 most eye-popping disclosures from the filing
Ahead of the Robinhood IPO, the company said regulators are investigating whether its employees traded popular meme stocks GameStop Corp GME and AMC Entertainment Holdings, Inc.AMC before the platform publicly announced trading restrictions in those names on Jan. 28.
On the public health front, the U.S. Centers for Disease Control and Prevention on Tuesday recommended that Americans — even those who are fully vaccinated — in parts of the country with “substantial or high” rates of COVID-19 go back to wearing masks in public indoor spaces as the delta variant of the coronavirus results in rising cases of COVID.
“The delta variant is an unknown right now,” said Eric Merlis, head of global markets trading at Citizens Bank. “It seems like stocks, for the most part, have looked past it, not ignoring it.”
“It seems like something we are going to have to learn to deal with,” he told MarketWatch. “But that’s the positive outlook on it, and that opens up the possibility of more downside risk than upside risk.”
Google on Friday said it would postpone its return to office effort for most workers until mid-October in light of the delta variant, but also outlined a new policy where all workers eventually will need to be vaccinated at its U.S. campuses and globally.
On the data front, the U.S. trade deficit in goods rose 3.5% in June to record $91.2 billion, and advanced U.S. wholesale inventories climbed 0.8%, while retail inventories increased by 0.3% last month.
Which companies were in focus?
- Shares of Boeing Co. (BA) rose 4.2% Wednesday, after the aerospace and defense giant swung to a surprise profit, amid higher commercial volume and lower period costs.
- Pfizer Inc. PFE shares rose 3.2% after the company said Wednesday that a third dose of its COVID-19 vaccine likely provides further protection against the delta variant, which is more infectious and thought to be driving the recent surge in cases, hospitalizations, and deaths in the U.S.
- McDonald’s Corp. MCD reported second-quarter net income totaling $2.219 billion, or $2.95 per share, up from $483.8 million, or 65 cents per share, last year. Its stock fell 1.9%.
- Bristol-Myers Squibb Co. BMY said Wednesday it swung to a profit of $1.055 billion, or 47 cents a share, in the second quarter, after a loss of $85 million, or 4 cents a share, in the year-earlier period. Shares gained 1.8%.
- Humana Inc. HUM shares skid 5.8% lower after it reported second-quarter profit and revenue that beat expectations, but maintained its full-year adjusted earnings outlook, while saying it expects to record a $1 billion gain in the current quarter on its ownership of Kindred at Home.
- Tapestry Inc. TPR said Wednesday that it will raise wages for all U.S. employees to at least $15 per hour, effective Sept. 5. Its shares lost 1.3%.
- Apple Inc. shares slipped 1.2% after the iPhone maker said profit nearly doubled, but also projected a growth slowdown.
- Microsoft Corp. shares fell 0.1% after the software giant topped $60 billion in annual earnings for the first time to end a record-breaking year.
- Alphabet Inc.‘s Class A stock jumped 3.2% after the Google parent reported strong advertising sales that sent revenue and earnings well past analysts’ estimates.
- Starbucks Corp. shares fell 2.9% after the coffee group swung to a quarterly profit, but also reported rising costs for Americas operations.
- Walmart Inc. WMT said early Wednesday that it has partnered with Adobe Inc. ADBE to bring its technology to other businesses.
- Shares of Canadian cannabis company Tilray Inc. TLRY jumped 25.8% in trade Wednesday, after it swung to a profit in its fiscal fourth quarter.
How other assets performed
- The yield on the 10-year Treasury note was up 2.4 basis points at 1.259%. Yields and debt prices move in opposite directions.
- The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, was up 0.3%.
- Oil futures settled at a 2-week high, with the U.S. benchmark CL00 up 1.1% at $72.39 a barrel, while gold futures GC00 ended fractionally, or 0. 01%, lower.
- In European equities, the Stoxx 600 Europe index SXXP closed 0.7% higher and London’s FTSE 100 UKX added 0.3%.
- Elsewhere in Asian trade, the Shanghai Composite SHCOMP finished 0.6% lower, while Japan’s Nikkei 225 fell 1.4%.
Barbara Kollmeyer contributed reporting