Stock Market News for July 10, 2014 – Zacks Investment Research
Benchmarks ended higher on Wednesday boosted primarily by encouraging minutes of the FOMC meeting. Federal Reserve officials discussed how the central bank will end its easy monetary policy. Policy makers will end the asset purchase program by October provided the economy shows signs of strength. They also clarified that this was not an indication that rates would be hiked immediately. Meanwhile, the earnings season kicked off on an upbeat note with Alcoa reporting better-than-expected second quarter results.
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The Dow Jones Industrial Average (DJI) gained 0.5% to close Wednesday’s trading session at 16,985.61. The Standard & Poor 500 (S&P 500) advanced almost 0.5% to finish at 1,972.83. The tech-laden Nasdaq Composite Index closed at 4,419.03; gaining 0.6%. The fear-gauge CBOE Volatility Index (VIX) dropped almost 2.8% to settle at 11.65. Total volume for the day was roughly 5.28 billion shares, lower than last month’s average of 5.79 billion. Advancers outpaced declining stocks on the NYSE. For 56% stocks that advanced, 40% declined.
Benchmarks were positively impacted after minutes from the Federal Open Market Committee’s (FOMC) June 17-18 meeting indicated that the Federal Reserve will end its bond purchase program in October provided the economy stays on track. The Federal Reserve decided to end its asset purchases with a final reduction of $15 billion at its October meeting. Till that time, the Federal Reserve plans to trim its bond purchases by $10 billion at each meeting.
However, the central bank said the decision to end bond purchases in October shouldn’t be interpreted as a sign that hike in key interest rates is likely to begin sooner. The central bank plans to keep the rates near zero for a considerable period of time.
Last month, the central bank had trimmed its bond buyback plan by $10 billion. It was the fifth consecutive month that the central bank had reduced its asset purchase plan. Currently, the quantum of asset purchases at $35 billion a month. According to its statement, the FOMC will most “likely reduce the pace of asset purchases in further measured steps”. At the same time, the Federal Reserve will keep its monetary policy “highly accommodative” and suggested there would be no immediate rate hikes. The FOMC had decided during its two-day policy meeting to remain committed to low-interest rates. The FOMC released a statement saying benchmark interest rates were left unchanged at 0.00-0.25%.
Coming back to yesterday’s events, Alcoa Inc. (AA – Analyst Report) was one of the S&P 500’s biggest gainers in percentage terms. Shares of the aluminum producer went up 5.7% after the company reported better-than-expected quarterly earnings and revenue results. After the closing bell on Tuesday, Alcoa posted second-quarter earnings of 18 cents per share excluding one-time special items, topping the Zacks Consensus Estimate of 13 cents. Alcoa also posted revenues of $5,836 million for the quarter. It exceeded the Zacks Consensus Estimate of $5,626 million. Strong results from its downstream and primary metals businesses, aided by higher aluminum pricing helped Alcoa post upbeat second quarter 2014 results.
Among other major releases, the largest U.S. mortgage lender, Wells Fargo & Company (WFC – Analyst Report) is expected to release earnings numbers on Friday. The next week, heavy-weights such as JPMorgan Chase & Co. (JPM – Analyst Report), The Goldman Sachs Group, Inc. (GS – Analyst Report), Intel Corporation (INTC – Analyst Report) and Google Inc. (GOOGL – Analyst Report) are expected to post quarterly earnings results. Over the next two weeks, more than 130 companies in the S&P 500 are expected to report quarterly results.
According to FactSet Research Systems Inc. (FDS – Analyst Report), earnings for the S&P 500 are expected to rise 4.9% this quarter, outpacing the 2.1% rise reported in the first quarter of 2014. On the other hand, Thomson Reuters Corporation (TRI – Snapshot Report) projected S&P 500 companies’ profits to grow at 6.2% for the second quarter. This was less than the company’s earlier forecast of 8.4% at the beginning of April.
Airline stocks gained on Wednesday. Shares of American Airlines Group Inc. (AAL – Snapshot Report) advanced 4.3% after the airliner said it expects second-quarter passenger revenue per available seat mile to grow between 5.5% and 6.5% from a year earlier. Shares of other U.S. airline companies such as Southwest Airlines Co. (LUV – Analyst Report), Delta Air Lines Inc. (DAL – Analyst Report) and United Continental Holdings, Inc. (UAL – Analyst Report) increased 1.9%, 1.4% and 1.3%, respectively.
Eight out of 10 sectors of the S&P 500 ended in the green. The Consumer Discretionary Select Sector SPDR (XLY) gained 1.2%, the highest among the S&P 500 sectors. Key stocks from the sector such as The Walt Disney Company (DIS), Comcast Corporation (CMCSA), Amazon.com Inc. (AMZN) and McDonald’s Corp. (MCD) advanced 1.6%, 2.7%, 1.9% and 0.9%, respectively.
The Energy Select Sector SPDR (XLE) gained 0.7%, the second highest among the S&P 500 sectors. Key energy stocks such as Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Schlumberger Limited (SLB), Halliburton Company (HAL) and Transocean Ltd. (RIG) increased 0.7%, 1.2%, 0.2%, 1.5% and 0.8%, respectively.
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Stock Market News for July 10, 2014 – Zacks Investment Research
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