MarketWatch – Dow poised to halt 3-day skid as stocks stage post-Fed rally

Commentary, News

Bed Bath & Beyond tumbles after results


U.S. stocks rose in early trading on Thursday, with major indexes climbing throughout the session and setting major indexes up to snap a multiday losing streak.

Where are the major benchmarks trading?

The Dow Jones Industrial Average DJIA, +0.44%  was up 76 points, or 0.3%, at 26,457. The S&P 500 SPX, +0.56%  rose 13 points, or 0.5%, to 2,919. The Nasdaq Composite Index COMP, +0.60%  climbed 65 points, or 0.8%, to 8,055.

While major indexes have been trending higher, with both the Dow and the S&P 500 hitting records as recently as last week, they have come under some pressure this week. The Dow has fallen for three straight sessions, as of Wednesday, while the S&P has dropped for four.

Based on their Wednesday closing levels, the Dow is 1.4% below its intraday record while the S&P is 1.1% under its own. The Nasdaq Composite Index is 1.4% under its record, which it hasn’t hit since Aug. 30.

Despite the recent declines, market volatility has been extremely muted of late, with slight intraday moves. The S&P 500 hasn’t closed with a move of 1% in either direction in months, a historically long time.

Don’t miss: Should investors fear October, a historic ‘jinx month’ for stocks?

What’s driving trading?

Investors continued to digest comments from the Federal Reserve from Wednesday afternoon, when the U.S. central bank raised interest rates, as had been widely expected, and indicated it would do so again at its December meeting, as well as three more times in 2019.

The Fed also raised its gross domestic product growth forecasts for 2018 and 2019, and dropped the phrase that its policy remains “accommodative.” However, the removal of the word should be taken as an indication that the economy is performing as expected, emphasized Fed Chairman Jerome Powell during the news conference following the Fed’s announcement.

While the Fed’s policy of gradually raising interest rates has been widely forecast and expected by market participants, investors cited changing monetary policy as a key potential headwind. One analyst recently wrote that rate increases in both September and December would result in the fed-funds rate crossing the “bear market trigger,” resulting in “stocks falling faster than the Fed can react.”

In the latest economic data, jobless claims rose less than expected in the latest week, though they remain near multidecade lows. Orders for durable goods rose 4.5%, faster than had been expected. U.S. real gross domestic product for the second quarter rose at a 4.2% annualized rate, unchanged from the earlier estimate, the Commerce Department said.

U.S. pending home sales unexpectedly dropped in August, falling 1.8% in the latest example of weak housing data.

Political issues will also be in focus with the hotly anticipated hearing of Supreme Court nominee Brett Kavanaugh. While the hearing has no direct relevance on the economy—though some have speculated that whether Kavanaugh is confirmed could influence turnout in the midterm elections—interest surrounding the hearing could result in a drop in trading volume, market watchers said. Any extended decline in liquidity could leave equities more susceptible to greater swings in volatility.

Issues surrounding trade policy will also remain in focus, particularly the elevated tensions between the U.S. and China. On Wednesday, President Trump accused Beijing of trying to interfere in the U.S. midterm elections and of attempting to damage him politically. The accusations come as a trade dispute between the two countries grows more heated with the imposition of a 25% tariff on more than $200 million of Chinese imports to the U.S.

Read: Why trade tensions could become a bigger risk for stocks on Jan. 1

While investors have repeatedly shrugged off the trade issue, focusing instead of strong economic data and corporate earnings, any additional developments on this front could dictate short-term market direction.

What are market analysts saying?

“We’re seeing a little bit of a rebound from yesterday and other recent selling. We’ll be watching to see how the market adjusts to an environment with higher interest rates, but in general the economic data has been pretty good, with durable goods especially solid today,” said Michael O’Rourke, chief market strategist at JonesTrading.

“Today might be somewhat quiet, since I suspect a lot of people will be distracted by the Kavanaugh hearings.”

What stocks are in focus?

Bed Bath & Beyond IncBBBY, -22.65%  tumbled 21% after it reported earnings and revenue that missed expectations.

Accenture PLC ACN, -1.42% reported its fourth-quarter earnings and revenue that beat expectations. It also raised its dividend by 10%.The stock fell 1.9%.

McCormick & Co. IncMKC, -2.23% reported adjusted third-quarter earnings that slightly topped forecasts, but sales that were slightly under analyst expectations. Shares fell 2.9%.

Rite Aid CorpRAD, +1.56%  reported a surprise fiscal second-quarter loss, but sales that beat expectations. It also affirmed its full-year sales outlook. The stock rose 2.7%.

Geron CorpGERN, -64.53%  shares plummeted 65% after a collaboration deal with Janssen was terminated. Inc. CRM, +1.49%  late Wednesday reiterated its revenue forecast, saying sales would be supported by customers who use more than one public cloud service. Shares rose 1.2%.

Where are other markets trading?

Shares in Asia fell, amid the escalating tensions between the U.S. and China. Major European indexes were also lower, with Italy’s uncertain budget situation in particular focus.

Crude oil CLK9, +0.67%  extended its recent rally, jumping 1.1% and bringing its month-to-date rise to 3.7%. Gold GCM9, -0.69%  edged lower while the U.S. dollar index DXY, +0.41%  was up 0.4%.

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