FOMC Decision Boosts Stocks and Bonds; Amazon's Phone Is a Hit With Investors
Today's financial recap and tomorrow's financial outlook.
The FOMC reduced its monthly asset purchases by $10 billion, as was broadly expected. The committee's statement reflected a less optimistic tone than the market had anticipated, with weaker growth noted in consumer spending. The committee's central tendency for 2014 real GDP growth was reduced to a range of 2.1% - 2.3%, from 2.8% - 3.0%, at its March meeting. Additionally, its median long-run Fed funds forecast was reduced to 3.75% from 4%. Lastly, the addition of Vice Chairman Fischer to the committee added another dovish forecast for Fed funds over the next three years.
Both stocks and bonds rallied in reaction to the Dovish commentary from the Fed.
The S&P 500 (INDEXSP:.INX) finished up 0.77% at 1,957, breaking the record high from earlier this month. However, the strength was not quite so broad-based -- both the Nasdaq Composite (INDEXNASDAQ:.IXIC) and Russell 2000 (INDEXRUSSELL:RUT) underperformed.
Importantly, the strongest sector was utilities, which is typically indicative of cautious sentiment.
Elsewhere, transport stocks impressed, led by FedEx (NYSE:FDX), which was up nearly 6% on better-than-expected fourth-quarter earnings. FedEx missed analysts' expectations in the last two quarters, setting the stage for a nice upside surprise.
Amazon.com (NASDAQ:AMZN) rose 2.62% to $334.16 after unveiling its highly-anticipated Fire Phone, which goes on sale soon at AT&T (NYSE:T). Amazon also benefited from positive comments by FedEx regarding e-commerce shipment activity.
Adobe Systems (NASDAQ:ADBE) was another winner, shooting up 8.17% on its own better-than-expected earnings report, driven by solid demand for its Creative Cloud service.
OpenTable (NASDAQ:OPEN), which is set to be acquired by PriceLine (NASDAQ:PCLN) for $103 per share, squeezed higher to finish at $105.17, implying that traders are speculating on a competing bid.
On the negative side, biotech, industrials, and housing names underperformed.
In international news, the Financial Times reported that the IMF is urging the ECB to conduct large-scale purchases of sovereign bonds to hold down rates and stabilize the Eurozone economy.
The situation in Iraq remains tense. Iraq asked the US for air support as ISIL (also known as ISIS) insurgents attempted to overtake the country's biggest oil refinery. Stateside, there has been heavy debate over just how much the US should get involved, particularly when it comes to the use of ground troops.
Tomorrow's Financial Outlook
Weekly jobless claims are scheduled to be released tomorrow morning. Claims are expected to remain near their average for the last four months at 313,000. Additionally, the second regional manufacturing survey for June, from Philadelphia, will be released. The survey is expected to drop to 14.0 from 15.4 last month, still showing strong growth.
Overnight, New Zealand will report first quarter GDP, the last developed market country to do so. Swiss National Bank will announce its rate decision tomorrow a.m. in what should be the morning's most important market event. It's expected that the SNB will lower its rate below zero in response to a similar decision by the ECB, to prevent excessive capital inflows into the country. If so, it would shift safe asset flows away from Switzerland and into the US or other highly-rated countries.
Oracle (NYSE:ORCL), considered a barometer stock for the corporate tech sector, is scheduled to report earnings tomorrow afternoon. Smith & Wesson (NASDAQ:SWHC), Kroger (NYSE:KR), and Rite Aid (NYSE:RAD) are all scheduled to report earnings as well.
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