As was widely expected, the Federal Reserve did not raise the federal funds rate in September, holding it at 0.25% at least (most likely) until December.
Though it’s theoretically what investors wanted — cheap money — the market is finally starting to understand that the Fed’s inability to justify a rate hike is a sign of economic weakness.
Confused investors sent the S&P 500 lower by 0.26% on Thursday, to a close of 1990.20.
It wasn’t all about the Fed and interest rates, however. Verizon Communications Inc. (NYSE:VZ), Oracle Corporation (NYSE:ORCL) and Petroleo Brasileiro SA – Petrobras (ADR) (NYSE:PBR) were all in trouble both before and after we heard Janet Yellen’s final decision regarding a rate hike this month.
Here’s why.
Verizon Communications Inc. (VZ)
In retrospect, it probably wasn’t the best word Verizon Communications could have chosen to describe what’s apt to happen to its bottom line next year.
On Thursday, Verizon Communications warned VZ shareholders that 2016’s earnings may “plateau” at 2015’s levels, sending Verizon stock down 2%.
Although the company probably didn’t intend that message to be interpreted as a permanent situation, in that Merriam-Webster defines the word (in its verb version) as “a period when something does not increase or advance any further,” it’s not difficult to understand how the market presumed the company was hitting a long-term headwind.
And truth be told, Verizon is running into a large degree of telecom market saturation at a point when most telecoms are pulling out all the stops to win market share. Still, new wireless video products and a foray into the Internet of Things market should still provide growth opportunities for the company beyond 2016.
Petroleo Brasileiro – Petrobras (ADR) (PBR)
Already beaten down and bleeding thanks to a downgrade of the nation’s sovereign credit rating, Brazilian oil driller and explorer Petroleo Brasileiro — aka Petrobras — suffered again today not only on yet another tepid day for weak oil prices but following news that its CEO of Petrobras Distribuidora (Petrobras Distribution) was resigning for health reasons.
This isn’t the CEO of the entire company; Aldemir Bendine will remain at that helm indefinitely. But, it’s another loss that could end up making a tough situation even worse. It was only a few days ago that Chairman of the Board Murilo Ferreira, who plays an integral part in Petroleo Brasileiro’s leadership, announced he’d be taking a leave of absence until the end of November.
That degree of disruption at a time when reliable, proven leadership is needed sent PBR shares down 2% on Thursday.
Oracle Corporation (ORCL)
Last but not least, Oracle may have topped its earnings estimates for the fiscal first quarter, but lackluster sales left the market unimpressed, sending ORCL lower to the tune of 4% on Thursday.
Last quarter, the database and cloud-based services company earned 53 cents per share on $8.45 billion. Earnings topped expectations for a profit of 52 cents per share of ORCL, although the top line came up short of an estimated $8.51 billion.
Perhaps more troubling is the fact that earnings fell from last year’s fiscal Q1 income of 62 cents per share, while revenue fell 2% thanks to the inflated value of the dollar.
Sales would have grown 7% on a constant-currency basis, but again, ORCL shareholders weren’t impressed, since the lowered revenue outlook implies more of the same weakness is in store.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
