Stocks Inch Lower as December Hike Odds Rise

Advertisement

In the wake of Wednesday’s surprisingly hawkish Federal Reserve policy statement, futures market odds of a December rate hike moved up to 50-50, the highest they’ve ever been.

And while stocks surged into the close yesterday, driven by financial stocks poised to benefit from higher long-term yields, traders were more cautious today — unsure if the end of the long experiment with near-zero interest rates will really be benign.

In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost a fraction, the Nasdaq Composite fell 0.4% and the Russell 2000 finished the day 1.1% less than it started. Also, the dollar weakened, gold declined and crude oil gained, rising 0.4% to close at $45.77 a barrel.

Healthcare stocks led the way with a 0.4% gain, helped by a 6% gain in Allergan PLC (NYSE:AGN) on the confirmation of earlier reports in the Wall Street Journal that it is in preliminary talked with Pfizer Inc. (NYSE:PFE) about a combination. MGM Resorts International (NYSE:MGM) gained 4.8% after announcing plans to spin off 10% of its real estate assets, including The Mirage, into a publicly traded company.

Utilities led the decliners, continuing a selloff started on Wednesday, as these yield-sensitive names are hurt by higher rate expectations. GoPro Inc. (NASDAQ:GPRO) dropped 15.2% after Q3 results missed expectations and Q4 guidance was below consensus estimates. Weaker demand and excess inventory of the new HERO Session camera were cited.

In earnings news, Starbucks Corporation (NASDAQ:SBUX) reported earnings after the close of 43 cents per share (vs. 44 cents expected) on revenues of $4.91 billion (vs. $4.89 billion expected). Guidance was a little soft was well, with 44 to 45 cents per share expected in the first quarter vs. 47 cents analysts were looking for. Shares dropped 1.3% in after-hours trading.

Shares of LinkedIn Corp (NYSE:LNKD) surged more than 12% in after-hours trading after the company reported a top- and bottom-line beat. Earnings came in at 78 cents per share vs. the 47 cents analysts were expecting. Revenues clocked in at $779.6 million vs. $757 million expected. The company also raised forward guidance.

10-29-15-GDP

On the economic front, GDP growth slowed in the third quarter to a seasonally adjusted annualized rate of 1.5%, below the 1.7% analysts were expecting and well below the 3.9% growth in the second quarter. Domestic spending was solid, but residential and nonresidential investment as well as net exports were soft. Inventories weighed as well.

Attention now turns to Friday’s reports on personal income and outlays and the employment cost index. Both will be closely monitored for clues as to labor market tightness and the health of the consumer — all of which will be used to determine whether or not the Fed will actually pull the rate hike trigger in two months’ time.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/hike-lnkd-sbux-gdp/.

©2024 InvestorPlace Media, LLC