From Briefing.com: 4:10 pm : The stock market ended the midweek session on a lower note, extending its retreat after the Federal Open Market Committee announced a 25-basis point rate hike. The S&P 500 settled lower by 0.8% while the Russell 2000 (-1.2%) underperformed. Going into today's session, market participants were all but sure that the Fed would raise rates for the first time since last December. The central bank lived up to that expectation, but the accompanying "dot plot" indicated that policymakers expect to raise rates three times in 2017. This is at odds with the fed funds futures market, which expects just two hikes in 2017.
During her press conference, Fed Chair Janet Yellen was asked if fiscal policies that fail to boost productivity could prompt the Fed to be more aggressive when it comes to hiking rates, but Ms. Yellen's response only acknowledged the presence of considerable uncertainty on the fiscal front.
Treasuries retreated in reaction to the rate increase while the U.S. Dollar Index (102.10, +1.04) jumped 1.0% to mark a fresh high for the year. As for Treasuries, short-dated issues bore the brunt of today's selling while the long end remained anchored. The 2-yr yield jumped eight basis points to 1.25% while the 10-yr yield rose five basis points to 2.52%. The long bond ended slightly lower with its yield increasing one basis point to 3.14%.
All eleven sectors ended the day in negative territory with rate-sensitive groups leading the retreat. Real estate (-1.9%) and utilities (-2.0%) settled near the bottom of the leaderboard while consumer staples (-1.0%) and telecom services (-1.0%) posted slimmer losses. The health care sector (-0.4%) ended a bit ahead of the market thanks to the outperformance among biotech names. The iShares Nasdaq Biotechnology ETF (IBB 269.42, +0.37) added 0.1%.
Most cyclical sectors struggled at the start while technology (-0.3%) and financials (-0.6%) displayed early strength. The financial sector surged in immediate reaction to the rate hike, but reversed just below its high from December 8. The economically-sensitive sector remains higher by 4.2% for the month, trading only behind telecom services (month-to-date +4.8%).
The energy sector (-2.1%) settled at the bottom of the leaderboard, pressured by daylong weakness in crude oil. The energy component sank 3.7% to $51.03/bbl, beginning its retreat after yesterday's bearish API inventory report. Crude saw no respite from a bullish inventory report that was released by the Energy Information Administration this morning.
With all eyes on the Fed, stock-specific news was relegated to the backburner, masking press reports from China that suggested an unnamed U.S. automaker will be fined for monopolistic behavior. General Motors (GM 35.95, -1.41) lost 3.8% while Ford (F 12.53, -0.24) surrendered 1.9%.
Investor participation was ahead of average with more than 1.2 billion shares changing hands at the NYSE floor.
Economic data included Retail Sales, PPI, Industrial Production, and Business Inventories:
Retail sales increased just 0.1% (Briefing.com consensus +0.3%) after a downwardly revised 0.6% increase (from +0.8%) for October. A 0.5% decline in auto sales was the main drag on total retail sales
Excluding autos, retail sales were up 0.2% (Briefing.com consensus +0.4%), aided by modest sales increases in most retail categories
Both the final demand indexes for PPI and core-PPI, which excludes food and energy, were up 0.4% in November against the Briefing.com consensus estimates of +0.1% and +0.2%, respectively
With prices rising at the producer level, some angst may arise about higher consumer inflation going forward
Industrial production declined 0.4% in November following an upwardly revised 0.1% increase (from 0.0%) in October. Taking the revision into account, the decline in November was largely in-line with the Briefing.com consensus estimate that called for a 0.3% decline
Business inventories declined 0.2% in October (Briefing.com consensus -0.1%) versus a downwardly revised unchanged reading (from +0.1%) for September
Sales increased 0.8% on top of an upwardly revised 0.8% increase (from +0.7%) for September
The weekly MBA Mortgage Index fell 4.0% to follow last week's 0.7% decline
Tomorrow will also be pretty busy on the economic front with weekly initial claims (Briefing.com consensus 256K), November CPI (Briefing.com consensus 0.2%), December Philadelphia Fed (Briefing.com consensus 9.0), December Empire Manufacturing (Briefing.com consensus 3.0), and Q3 Current Account Balance (Briefing.com consensus -$111.60 billion) all set to be released at 8:30 ET. The December NAHB Housing Market Index (Briefing.com consensus 63) will be reported at 10:00 ET.
Russell 2000 +19.5% YTD
Dow Jones Industrial Average +13.6% YTD
S&P 500 +10.2% YTD
Nasdaq Composite +8.6% YTD
DJ30 -118.68 NASDAQ -27.16 SP500 -18.44 NASDAQ Adv/Vol/Dec 900/1.79 bln/2320 NYSE Adv/Vol/Dec 582/1.25 bln/2401 3:35 pm :
Crude oil ended pit trading at its lowest level of the session on the heels of API, EIA, & monthly OPEC data - see 13:48 comment for more color
Jan 2017 crude oil futures fell $1.95 (-3.7%) to $51.03/barrel
Baker Hughes rig count data will be released at 1 pm ET on Friday
EIA highlights:
Crude oil inventories had a draw of -2.6 mln barrels (consensus called for a draw of -1.58 mln barrels)
Gasoline inventories had a build of +0.5 mln barrels (consensus called for a build of +2.54 mln barrels)
Distillate inventories had a draw of -0.8 mln barrels
Natural gas ended pit trading at its highest level of the session ahead of tomorrow's inventory data release
Jan 2017 natural gas closed $0.07 higher (+2.0%) at $3.54/MMBtu
Weekly EIA data will be released tomorrow at 10:30 am ET.
In precious metals, gold & silver ended pit trading at session highs ahead of the Fed's decision (gold & silver have since gone negative)
Feb 2017 gold ended today's session up $4.50 (+0.4%) to $1163.70/oz
Mar 2017 silver closed today's session $0.24 higher (+1.4%) at $17.22/oz
The dollar index rallied +0.6% around the 101.69 level following the Fed's decision to increase the Fed Funds rate by 25 basis points
Commodities, as measured by the Bloomberg Commodity Index, were -0.3% around the 87.63 level
There were essentially two sessions today: before the Fed, and after the Fed. Before the Fed, the broader market hovered near flat lines. After the Fed, all three major US indices were markedly on a negative bias. Prompting the move was the decision by the Federal Open Market Committee to raise interest rates by a 25-basis points. Ultimately, stocks ended lower as the S&P 500 lost the most, shedding 18.44 points (-0.81%) to 2253.28. The Dow Jones Industrial Average lost 118.68 (-0.60%) to 19792.53, and the Nasdaq Composite was down 27.16 points (-0.50%) to 5436.67 when the bell rang.
Going into today's session, market participants were all but sure that the Fed would raise rates for the first time since last December. The central bank lived up to that expectation, but the accompanying "dot plot" indicated that policymakers expect to raise rates three times in 2017. This is at odds with the fed funds futures market, which expects just two hikes in 2017.
During her press conference, Fed Chair Janet Yellen was asked if fiscal policies that fail to boost productivity could prompt the Fed to be more aggressive when it comes to hiking rates, but Ms. Yellen's response only acknowledged the presence of considerable uncertainty on the fiscal front.
Treasuries retreated in reaction to the rate increase while the U.S. Dollar Index (102.10, +1.04) jumped 1.0% to mark a fresh high for the year. As for Treasuries, short-dated issues bore the brunt of today's selling while the long end remained anchored. The 2-yr yield jumped eight basis points to 1.25% while the 10-yr yield rose five basis points to 2.52%. The long bond ended slightly lower with its yield increasing one basis point to 3.14%.
The Technology (XLK 48.94, -0.17 -0.35%) space was strong for most of the session, but fell along with the majority of stocks following the Fed. Component NVIDIA (NVDA 96.45, +5.28 +5.79%) was the best performer today after being upgraded premarket to a Buy rating from a Hold at Evercore ISI. All other sectors measured by the S&P closed in the red today -- XLU -2.06%, XLE -2.00%, XLRE -1.75%, XLB -1.19%, XLP -1.09%, XLI -1.01%, XLY -0.68%, XLV -0.52%, XLF -0.47%, IYZ -0.42%.
In the S&P 500 Information Technology (818.93, -2.05 -0.25%) space, trading jostled for position in the final moments of action today but ultimately fell under the spell of the Fed. Component Akamai Tech (AKAM 66.99, +1.85 +2.84%) was strong following a premarket upgrade to Outperform from Perform at Oppenheimer, while Qualcomm (QCOM 67.56, -1.78 -2.57%) was the polar opposite, shedding more than 2% after being downgraded to Neutral at JP Morgan. Other names in the space which underperformed today included ADSK -3.56%, XRX -3.23%, FSLR -3.21%, SWKS -2.26%, QRVO -2.17%, RHT -1.82%, STX -1.57%, ATVI -1.55%, ACN -1.40%, TEL -1.37%, YHOO -1.35%.
Other notable news items among sector components:
Arista Networks (ANET 97.88, +2.85 +3.00%) reportedly won a lawsuit related to networking switches against Cisco (CSCO 30.46, -0.13 -0.42%).
Harmonic's (HLIT 4.85, -0.35 -6.73%) CFO Harold Covert intends to resign in the coming months in order to spend more time with his family on the East Coast. The company has begun a search for a new CFO.
IBM's (IBM 168.51, +0.22 +0.13%) Vice President and Controller resigned. Reports out also indicated the company is planning to hire 25,000 people in the US (meeting with Trump later this week).
Advanced Micro (AMD 10.55, +0.01 +0.09%) unveiled upcoming high-performance processors based on 'Zen' core architecture with Ryzen processors in advance of the official launch in Q1 2017.
Neustar (NSR 33.45, +5.80 +20.98%) to be acquired for $33.50 per share in cash by group led by Golden Gate Capital.
E*TRADE (ETFC 34.92, flat) reported November DARTs up 24% month-over-month and up 40% year-over-year. Net brokerage accounts were up 0.5% month-over-month.
Violin Memory (VMEM 0.04, -0.12 -73.11%) filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code and is seeking to hold an auction in early January for the business.
Twitter (TWTR 18.93, -0.44 -2.27%) announced that now anyone can broadcast live video directly from its apps. Powered by Periscope, live video on Twitter allows people to share and experience everything from significant moments to daily life together with an audience.
Harman (HAR 109.89, -0.11 -0.10%) shareholder might vote against Samsung (SSNLF 1250.00, flat) M&A deal, according to WSJ.
Facebook (FB 120.21, -0.10 -0.08%) is speaking with TV studios about licensing content, according to Re/Code.
Analyst actions:
NVDA was upgraded to Buy from Hold at Evercore ISI,
FFIV was upgraded to Buy from Neutral at Citigroup,
AKAM was upgraded to Outperform from Perform at Oppenheimer,
USM was upgraded to Equal Weight from Underweight at Morgan Stanley,
KLAC was upgraded to Strong Buy from Buy at Needham;
QCOM was downgraded to Neutral from Overweight at JP Morgan,
ZAYO was downgraded to Equal Weight from Overweight at Morgan Stanley;
XLNX was initiated with a Buy at Evercore ISI,
MOMO was initiated with a Hold at Deutsche Bank,
AIRG was initiated with a Hold at Wunderlich,
LDOS was initiated with a Neutral at Goldman
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