U.S. markets continued their rally from Tuesday after Federal Reserve chairwoman Janet Yellen told markets that the Fed was raising interest rates from 0.25% to 0.5%, but expects that going forward, the economy will warrant only gradual rises in the federal funds rate. Yellen reassured investors that Fed policy remains “accommodative” and not to attach to much importance to the first rate hike in nine years.
While the increase had been widely expected, traders were unsure of what language would accompany the hike.
Apparently, they liked what they heard.
The Dow Jones Industrial Average was 1.3% higher, while the S&P 500 and Nasdaq were both up 1.5%. Leading the way were Joy Global Inc (NYSE:JOY), Honeywell International Inc. (NYSE: HON) and SolarCity Corp (NASDAQ:SCTY) — and here’s why:
SolarCity Corp (SCTY)
An extension to a favorable tax law for solar companies powered SCTY stock 34% higher today, along with several other companies in the same sector.
A deal struck by congressional leaders last night included an extension of the investment tax credit beyond 2016 and into 2021. This is a 30% federal tax credit given to either businesses or homeowners who install solar systems on their premises.
Although it is expected by the end of this week, the overall Congressional body still needs to approve the deal.
Other solar companies, such as Sunedison Inc (NYSE:SUNE), Canadian Solar Inc. (NASDAQ:CSIQ) and First Solar, Inc. (NASDAQ:FSLR) also surged higher on the news.
Joy Global Inc. (JOY)
Wednesday was a mixed day for JOY stockholders.
The mining equipment manufacturer posted fourth-quarter earnings of 43 cents a share on revenue of $853 million. The EPS was a penny better than the analysts’ estimates and quite a bit more than the estimates for $789 million. That’s the good news.
But Joy Global initially tanked as a reaction to lowered 2016 guidance and a severe reduction of the dividend, from 20 cents per share quarterly to 1 cent. Analysts were looking for $1.09 a share on $2.76 billion revenue for 2016, and instead JOY predicted a range of 10 cents to 50 cents and $2.4 billion to $2.6 billion.
Still, investors regained their composure by 10 a.m. — the stock bottomed, picked up steam and ultimately finished the day up 6%.
Honeywell International Inc. (HON)
HON stock had its best day in 10 months, rocketing more than 5% higher as the maker of jet engines reaffirmed its 2015 earnings and forecast its 2016 earnings between $6.45 to $6.70 a share. Honeywell had previously called for profits of $6.10 a share. Wall Street was expecting only $6.50 a share.
In addition, HON said it expects 2016 revenue to fall between $39.9 billion and $40.9 billion. But its 2015 revenue forecast was reduced from $38.7 billion to $38.5 billion.
It has been a tough year for HON, but the company has taken measures to reduce costs, such as closing factories and cutting jobs, and invested in new products to boost earnings.
As of this writing, Ethan Roberts does not hold a position in any of the aforementioned securities.
