By Chris Matthews and Barbara Kollmeyer, MarketWatch
S&P 500 snaps three-day streak of closing at record
highs
U.S. stocks retreated into the close Wednesday after Federal
Reserve Chairman Jerome Powell acknowledged a slowdown in business
and household spending, but described low inflation as "transitory"
and denied there was a "strong case" to expect an interest-rate cut
in the near term.
How did major indexes performing?
The Dow Jones Industrial Average fell 162.77 points, to
26,430.14, a loss of 0.6%, while the S&P 500 index fell 22.10
points, or 0.8%, to 2,923.73. Meanwhile, the Nasdaq Composite Index
fell 45.75 points, a loss of 0.6%, to 8,049.64
Though the S&P 500 index also set a new intraday high early
Wednesday at 2,954.10, the index ended up posting its worst daily
performance in more than a month.The Nasdaq rose 50.61 points to
8,146 at session highs, while the Dow was up as many as 96.48
points, to reach 26,689.39.
Tuesday and Wednesday marked the first two-session slide for the
Nasdaq since March 22 and 25, while the Dow had its worst day since
April 9.
What's drove the market?
After perking up briefly following the announcement of the Fed's
decision to leave the benchmark fed-funds rate at a range between
2.25% and 2.5%
(http://www.marketwatch.com/story/fed-sticks-with-patient-policy-notes-weaker-core-inflation-2019-05-01),
stocks turned significantly lower during and after Powell's news
conference.
While the Fed statement highlighted data showing that the rate
of price inflation has fallen and remains under the central bank's
2% target, Powell stressed that he saw "no strong case" for
expecting the central bank's next move to be a rate cut, investors
in the fed funds futures market have predicted. According to CME
Group
(https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html),
fed funds futures markets are showing a 59.8% likelihood that the
Fed cuts interest rates before year-end.
Live blog recap:Powell addresses reporters after Fed keeps rates
unchanged
(http://www.marketwatch.com/story/live-blog-of-fed-interest-rate-decision-and-powell-press-conference-2019-05-01)
Dow component Apple (AAPL) was in the spotlight after the iPhone
maker reported another fall in profit and revenue, but beat
expectations for first-quarter performance
(http://www.marketwatch.com/story/apple-stock-gains-after-earnings-outlook-tops-expectations-2019-04-30).
Moreover, Apple signaled that the worst is over for its China
business, and did report momentum in its services businesses, which
stock bulls see as key to the company's growth. Shares rose
4.9%.
First Take: Apple is optimistic, and it isn't because of the
iPhone
(http://www.marketwatch.com/story/apple-is-optimistic-and-it-isnt-because-of-the-iphone-2019-04-30)
Which stocks were in focus?
Shares of CVS Health Corp.(CVS) rallied 5.4% after the pharmacy
and health-care services giant reported first-quarter earnings
(http://www.marketwatch.com/story/cvs-healths-stock-surges-after-profit-revenue-and-same-store-sales-beat-expectations-2019-05-01)
and sales that beat Wall Street expectations, while raising its
outlook for the full-year 2019.
Estée Lauder Cos. Inc. (EL) shares fell 0.9%, reversing early
morning gains as high as 4.9%, after the makeup manufacturer
reported first-quarter sales that beat analyst expectations, while
predicting revenue would grow between 7% and 8% during the
full-year 2019.
Molson Coors Brewing Co. (TAP) fell 7.5%, after the company
reported first-quarter earnings
(http://www.marketwatch.com/story/molson-coors-earnings-fall-short-of-estimates-2019-05-01)
that fell short of forecasts.
Shares of Humana Inc. (HUM) retreated 3.6%, even after the
insurer reported first-quarter earnings and revenue
(http://www.marketwatch.com/story/humana-tops-first-quarter-revenue-and-earnings-expectations-2019-05-01)
Wednesday morning that topped Wall Street expectations, while also
raising its full-year guidance.
Yum! Brands Inc.(YUM)stock fell 2.4% Wednesday, after the Taco
Bell parent reported first-quarter results
(http://www.marketwatch.com/story/yum-brands-earnings-beat-expectations-2019-05-01).
Shares of Royal Caribbean Cruises Ltd. (RCL) rose 6.7%
Wednesday, after the cruise operator reported first-quarter
earnings
(http://www.marketwatch.com/story/royal-caribbeans-stock-surges-after-earnings-revenue-beat-expectations-2019-05-01),
revenue and net yields that beat expectations.
Hotel operator Hilton Worldwide Holdings Inc. (HLT) announced
first-quarter earnings growth of 16% Wednesday, well above Wall
Street forecasts. Share rose 6.5%.
Chip group Qualcomm Inc.(QCOM), social-gamer Zynga Inc.(ZNGA),
wearables maker FitBit Inc.(FIT) and mobile payment group Square
Inc.(SQ) were scheduled to report Wednesday evening.
Read:Qualcomm short sellers are out in full force ahead of
earnings
(http://www.marketwatch.com/story/qualcomm-short-sellers-are-out-in-full-force-ahead-of-earnings-2019-05-01)
(http://www.marketwatch.com/story/qualcomm-short-sellers-are-out-in-full-force-ahead-of-earnings-2019-05-01)Check
out:Qualcomm earnings, schmernings: Tell us more about the Apple
settlement
(http://www.marketwatch.com/story/qualcomm-earnings-schmernings-tell-us-more-about-the-apple-settlement-2019-04-29)
What are analysts saying?
"The feature out of this meeting for investors is the Fed's
economic outlook, which highlights 'sustained expansion of economic
activity' balanced with a soft global economic picture and "muted
inflation pressures," wrote Jason Pride, chief investment officer
of private wealth at Glenmede, in emailed comments.
"With the U.S. economy at or near full employment, the
expectation for future rate changes will essentially be a
referendum on inflation, which has remained habitually below the
Fed's 2% target this cycle," he said.
Chris Gaffney, president of the world markets division at TIAA
Bank, put the whipsaw market reaction across assets down to an
initial overreaction to the Fed's tweak to IOER (interest on excess
reserves), which it lowered.
"Investors took this move as an indicator that the next interest
rate move will be a cut in the fed-funds rate. This is what drove
the dollar lower and also triggered a drop in interest rates across
all maturities of the U.S. Treasury curve," Gaffney wrote in an
email.
"Powell reiterated twice during the Q&A that this move in
the IOER was not an indication of future policy but instead was a
technical adjustment," he added. "Markets reversed course following
Powell's explanation of move."
What else was on the economic calendar?
Payroll firm ADP released its estimate of private-sector job
growth in April, showing the U.S. economy added 275,000 new jobs
(http://www.marketwatch.com/story/adp-private-sector-job-growth-surges-by-275000-but-theres-a-caveat-2019-05-01),
well above the 176,000 consensus estimate, according to FactSet.
However, Mark Zandi, Moody's Analytics chief economist and
architect of the ADP report said that the figure "overstates the
case" of job growth and predicted that Friday's official government
job report will show less robust employment growth.
Markit's manufacturing purchasing managers index for April came
in at 52.6, a slight uptick from the near two-year low seen last
month, and above consensus expectations for a reading of 52.4,
according to FactSet data.
The more closely watched Institute for Supply Management
manufacturing index came in at 52.8%
(http://www.marketwatch.com/story/manufacturers-grow-at-slowest-pace-in-april-since-president-trump-elected-ism-finds-2019-05-01),
well below consensus expectations of 54.7%, according to a
MarketWatch poll of economists, and below the March reading of
55.3%.
The Commerce Department said construction spending fell by 0.9%
(http://www.marketwatch.com/story/construction-spending-tumbles-in-march-as-housing-takes-it-on-the-chin-2019-05-01)
in March, compared with February, below economists expectations of
a 0.4% decline, per a MarketWatch survey.
How did other markets fare?
Most stock markets in Asia were closed for holidays
(http://www.marketwatch.com/story/australian-stocks-rise-with-most-asian-markets-closed-for-holiday-2019-04-30),
though Australia's S&P/ASX 200 closed up 0.8%, while New
Zealand's NZK-50 fell 0.5%. European stock markets were also
largely closed for May Day celebrations, while The U.K's FTSE 100
closed 0.4% lower
(http://www.marketwatch.com/story/sainsburys-leads-london-markets-quietly-higher-2019-05-01).
The price of crude oil was on the decline
(http://www.marketwatch.com/story/us-oil-prices-drop-on-indication-of-domestic-supply-build-global-brent-gains-2019-05-01)
Wednesday, along with gold prices
(http://www.marketwatch.com/story/gold-edges-lower-ahead-of-fed-decision-2019-05-01).
The U.S. dollar was advancing
(http://www.marketwatch.com/story/dollar-skid-continues-ahead-of-federal-reserve-decision-2019-05-01),
relative to its peers.
(END) Dow Jones Newswires
May 01, 2019 16:19 ET (20:19 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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