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The Dow continued to gain on Wednesday after the central bank kept monetary policy unchanged as expected. Bank stocks gained as Fed funds futures revealed there was a 75% possibility of an interest-rate hike in June. However, S&P 500 and the Nasdaq ended in the red as Apple shares declined due to fall in sales of the iPhone.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) gained 8.01 points to close at 20,957.90. The S&P 500 fell 0.1% to close at 2,388.13. The tech-laden Nasdaq Composite Index declined 0.4% to close at 6,072.55. The fear-gauge CBOE Volatility Index (VIX) declined 0.3% to 10.56. A total of around 7.3 billion shares were traded on Wednesday, higher than the last 20-session average of 6.6 billion shares. Decliners outnumbered advancing stocks on the NYSE by a 1.47 to 1 ratio.
Fed’s Two Day Policy Meeting
The central bank on Wednesday decided not to raise key interest rates at its recent two-day policy meeting. However, the central bank did not provide any insights into further rate hikes. Moreover, the central bank did not disclose any details regarding its plans to reduce its $4.5 trillion balance sheet.
Meanwhile, the central bank dismissed the slowdown in first quarter GDP growth as temporary. According to the Fed, job gains have been “solid”, justified by continuing growth in consumer spending. As per estimates released by the Bureau of Economic Analysis, personal income increased $40.0 billion or 0.2% in March against the Consensus estimate of 0.3%.
Federal Reserve’s Open Market Committee hoped that “gradual adjustments” in monetary policy would result in expansion of economic activity, strengthening of the labor market, and stabilization of inflation rate around 2% over the medium term. The central bank’s inflation rate target is at 2%, a level which the economy hit only in February.
Apple Drags Down Nasdaq & S&P 500
Shares of Apple Inc. (AAPL – Free Report) declined 0.3% on Wednesday, even after the tech giant’s iPhone shipments came in at 50.7 million for its fiscal second quarter, below the 52.5 million analysts had been looking for, as well as down year over year from 51.2 million in Q2 2016. Mac sales were right in-line at 4.2 million, but iPads were also down — 8.9 million units shipped in the quarter from the 9.6 million expected.
Owing to persistent macroeconomic weakness, Apple revenues declined around 14% year over year in the Greater China region to $10.7 billion. Moreover, Gross margin was 38.9%, a decline of 50 basis points (bps) from the year-ago quarter. Operating expenses increased 9.4% year over year to $6.5 billion due to higher research & development expenses. As a result, operating margin plunged 100 bps from the year-ago quarter to 26.7%.
However, the company reported earnings of $2.10 per share in the reported quarter, beating the Zacks Consensus Estimate of $2.02. Moreover, the company saw revenue figures of $52.9 billion, surpassing the Zacks Consensus Estimate of $52.6 billion. Meanwhile, decline in Apple’s shares had an adverse impact on the performance of technology sector which ultimately dragged down the Nasdaq. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
According to ADP data released on Wednesday, hiring for the private sector declining in April, marking its slowest pace in four months. There was an addition of seasonally adjusted 177,000 jobs last month. Meanwhile, investors remained focused on the Labor Department’s employment report, which is scheduled to be released on Friday.
As per Institute for Supply Management (ISM), economic activity in the non-manufacturing sector experienced growth in April. The nonmanufacturing index closed at 57.5 which came above the consensus of 56.1 and 2.3% higher than the reading of 55.2 in March. The Non-Manufacturing Business Activity Index advanced to 62.4%, which is 3.5% higher than the reading of 58.9 percent in March.
Stocks that made Headlines
Digital home entertainment services and solutions provider, TiVo Corporation (TIVO – Free Report) reported strong results for first-quarter 2017, wherein both the top and bottom lines came ahead of our expectations. (Read More)
North American energy firm Williams Companies Inc. (WMB – Free Report) reported adjusted earnings from continuing operations of 14 cents per share missing the Zacks Consensus Estimate of 20 cents on increased costs. (Read More)
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