U.S. Stocks Near Flatline Ahead of Fed Minutes Release
By Riva Gold
October 12, 2016
U.S. stocks bounced between small gains and losses Wednesday as investors prepared for the release of Federal Reserve minutes.
The Dow Jones Industrial Average was mostly flat at 18129. The S&P 500 edged up less than 0.1%, and the Nasdaq Composite fell 0.1%.
Expectations have steadily grown for the Fed to raise interest rates before year-end. Policy makers in the Fed’s September meeting voted to leave rates unchanged, but three officials dissented in favor of an increase. Comments from Fed officials since have supported the case for a raise.
“We’re a market that is run by central banks right now,” said Bret Chesney, portfolio manager at Alpine Global.
Investors believe the Fed meeting’s minutes, due at 2 p.m. EDT, are likely to bolster expectations for a December rate increase. Fed-fund futures, used by investors to bet on central bank policy, currently show a more-than 70% chance of a rate rise by December, according to CME Group.
Utility stocks—favored by income-hungry investors in a low-yield environment—led gains after a large decline in recent months. “It’s basically just a relief drift in sectors that have had the crap kicked out of them,” said Ray Moore, a trader at Raymond James.
Traders said activity was lighter than usual due to the Jewish Yom Kippur holiday.
U.S. crude oil fell 1.2% to $50.17 a barrel after the Organization of the Petroleum Exporting Countries said its production increased last month. OPEC members had reached an agreement last month to cut production, though details on how to execute are still being negotiated. Energy stocks, down 0.7%, were the biggest decliners in the S&P 500.
A downbeat start to the U.S. earnings season also continued to weigh on global shares.
Shares of Illumina fell 1.2% after a 25% tumble Tuesday on news that the company cut its revenue guidance. Aluminum giant Alcoa fell 2.9%, continuing its descent after reporting disappointing third-quarter earnings Tuesday, leaving some investors worried about the rest of the earnings season.
In the three quarters in which Alcoa fell more than 10% after its report, the S&P 500 traded down 7.5%, 2.6%, and 6.5% for the remainder of those three earnings seasons, according to Bespoke Investment Group.
Overseas, the Stoxx Europe 600 inched down 0.4% in afternoon trade.
Europe’s technology sector was down 2.3%, leading declines, after Ericsson AB issued a profit warning for the third quarter, a week after it announced plans to slash almost 20% of its domestic workforce. Shares in the Swedish company fell more than 17%, while Nordic rival Nokia fell 4.6%.
In currencies, the British pound was little changed at $1.2222 after four consecutive days of losses. The pound touched a historic low against a basket of currencies Tuesday, according to Bank of England data. It recovered during Asian trading hours, rising more than 1.5% against the dollar, after media reports suggested that U.K. Prime Minister Theresa May had agreed to hold a parliamentary vote on her plans for taking Britain out of the European Union.
The U.K. parliament won’t be given a vote on the formal process for withdrawing from the EU, a spokeswoman reiterated Wednesday, after the Labour Party scheduled a parliamentary debate.
The pound right now is a barometer of the government’s thinking on its exit negotiations, said Russ Mould, investment director at AJ Bell. “It’s very difficult to know exactly what will come out of government at the moment,” he said.
London’s export-heavy FTSE 100 index, which touched its highest level in decades Tuesday, pulled back 0.4% as the British currency recovered.
The WSJ Dollar index, which measures the dollar against a basket of 16 currencies, rose 0.2%.
In bonds, the yield on the 10-year U.S. Treasury note rose to 1.792% from 1.760% on Tuesday. The yield on the 10-year U.K. government bond rose to 1.033%.
Earlier, shares in Asia fell on continued expectations for a U.S. rate increase in December. Japan’s Nikkei Stock Average fell 1.1%, while the Hang Seng Index fell 0.6%.
View original article