Stocks rallied in a big way after the Minutes from the latest Federal Reserve monetary policy meeting showed that the Fed remains particularly cautious about raising interest rates in the face of a strengthening US dollar and a slowing global economy.
First, the scoreboard:
- Dow: 16,989.69, +270.3, (+1.6%)
- S&P 500: 1,968.86, +33.8, (+1.7%)
- Nasdaq: 4,469.60, +84.3, (1.9%)
And now, the top stories Wednesday:
1. The biggest story on Wednesday was the release of the Minutes from the Federal Reserve’s September monetary policy meeting. The minutes were interpreted as “dovish,” by the market, essentially meaning that the market now expects the Fed to wait longer than it currently expected to raise interest rates after the end of its current quantitative easing program, which is set to end this month. The Minutes also showed that a number of FOMC members were concerned about a strengthening US dollar and a slowing global economy. FOMC members also indicated that they want to eventually clarify that their forward guidance, or projections about when it might raise interest rates, will be data dependent.
2. Aluminium giant Alcoa was scheduled to report third quarter earnings after the market close on Wednesday, marking the unofficial start of third quarter corporate earnings season. Expectations were for Alcoa to report earnings per share of $US0.23 on revenue of $US5.85 billion. Overall, S&P 500 companies have pared their expectations for Q3 earnings, with earnings growth now expected to come in at 4.6%, down from 9% at the end of the second quarter. You can read Business Insider’s full earnings preview here.
3. Crude oil prices continued to slide, falling another 1.5% to about $US87.50 per barrel, and as Business Insider’s Joe Weisenthal noted on Wednesday, there are two ways to take this move: the decline in oil signals a global slowdown, while cheaper gas could mean more take-home pay for consumers.
4. The Congressional Budget Office on Wednesday said that the US budget deficit plunged to $US486 billion in fiscal 2014, the smallest deficit recorded since 2008 and the fifth-consecutive year that the deficit declined as a percentage of GDP.
5. A report from the Brookings Institute showed that fiscal policies which have throttled back government spending have been a drag on economic growth since 2011.
6. Activist hedge fund investor Carl Icahn tweeted that he will be sending an “interesting” open letter to Apple CEO Tim Cook on Thursday. Icahn added that he will appear on CNBC on Thursday afternoon to discuss the letter. In the past, Icahn has urged Apple to increase its shareholder buyback as a way to return cash to shareholders.
7. Shares of Sears Holdings lost about 4% on Wednesday after a report from Bloomberg said that a “medium-sized” vendor had halted shipments to the retailer. Sears later responded to the report, which it called “misleading,” and said that it continues to meet all of its obligations and that is has “significant financial flexibility.”
8. GoPro shares fell more than 3.5% after two analysts issued cautious commentary on the stock. Analysts at Barclays said that while they do not expect the company’s sales to slow, the end of the lock-up period which prevents company insiders from selling stock after the IPO could weigh on share prices later this year. Analysts at Piper Jaffray wrote that the stock’s, “current valuation leaves little room for additional upside.”