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Apple Soars On Earnings; Fed Leaves Rates Unchanged
01-Aug-18 16:20 ET
Dow -81.37 at 25333.82, Nasdaq +35.50 at 7707.29, S&P -2.93 at 2813.10

https://www.briefing.com/investor/markets/stock-market-update/2018/8/1/apple-soars-on-earnings-fed-leaves-rates-unchanged.htm

[BRIEFING.COM] Equities had a mixed outing on Wednesday as investors took in the latest batch of corporate earnings and digested the Fed's latest policy directive. The S&P 500 and the Dow Jones Industrial Average finished with modest losses, shedding 0.1% and 0.3%, respectively, while the tech-heavy Nasdaq Composite climbed 0.5%.

The Fed left interest rates unchanged as expected, keeping its target range at 1.75% to 2.00%, and characterized the economy as strong, signaling that the central bank is still on track to raise rates two more times this year. The next rate hike will likely come in September, with the CME FedWatch Tool placing the chances at 91.2%.

On the corporate front, Apple (AAPL 201.50, +11.21) gobbled up all the attention after releasing its fiscal Q3 results on Tuesday evening. The world's largest tech company beat earnings and revenue estimates and issued positive guidance for Q4, helping to restore faith in FAANG names after a disappointing report from Facebook (FB 171.65, -0.93) last week.

Apple shares rallied 5.9%, hitting a new record high and pushing the company's market cap to $990 billion -- within striking distance of the unprecedented $1 trillion mark. Underpinned by Apple, the information technology sector finished atop the sector standings, adding 1.0%. Only two other groups -- real estate (+0.7%) and health care (+0.1%) -- finished in the green.

The financial sector (unch) got off to a good start, rising as much as 1.1%, but tumbled back to its flat line following news that Fidelity will be offering new index funds with zero fees, creating concerns over the future profitability of competitors like BlackRock (BLK 479.45, -23.31, -4.6%) and T. Row Price (TROW 117.27, -1.81, -1.5%).

Meanwhile, the trade-sensitive industrial sector (-1.3%) slid following reports that the White House is considering upping planned tariffs on $200 billion worth of Chinese goods to 25% from 10%, and the energy sector (-1.3%) tumbled amid a drop in oil prices; WTI crude declined 1.5% to $67.68/bbl, a six-week low, after the weekly EIA inventory report showed an unexpected build of 3.8 million barrels.

In other news, Cigna (CI 182.93, +3.51) climbed 2.0% and Express Scripts (ESRX 74.44, -5.02) lost 6.3% following reports that activist investor Carl Icahn has built a sizable stake in Cigna and plans to vote against its planned purchase of Express Scripts. Also of note, Pandora Media (P 7.73, +0.99) spiked 14.7% on earnings.

Elsewhere, Treasuries sold off on Wednesday, even before the Fed's rate decision, with longer-dated issues showing relative weakness. The yield on the benchmark 10-yr Treasury note climbed four basis points to 3.00%, and the 2-yr yield ticked up one basis point to 2.68%. Yields move inversely to prices.

Reviewing Wednesday's economic data, which included the ADP Employment Change report for July, the Construction Spending report for June, the ISM Index for July, and the weekly MBA Mortgage Applications Index:

The ADP National Employment Report showed an increase of 219,000 in July (Briefing.com consensus 175,000), and the June reading was revised to 181,000 from 177,000.
The ADP reading is seen as a prelude to the BLS's nonfarm payrolls figure (Briefing.com consensus 190,000), which will be released on Friday.
The ISM Index for July decreased to 58.1 from an unrevised reading of 60.2 in June, while the Briefing.com consensus expected a reading of 59.4.
The key takeaway from the report is that manufacturing demand is strong, evidenced by the 15th straight month the New Orders Index has been 60% or higher.
Construction spending declined 1.1% in June (Briefing.com consensus +0.2%), and the May reading was revised to +1.3% from +0.4%.
The key takeaway from the report is that the upward revision to spending in May mitigated most of the headline disappointment for June, which implies the June downturn is not as bad as it appears at first blush.
The weekly MBA Mortgage Applications Index decreased 2.6% to follows last week's downtick of 0.2%.

Looking ahead, investors will receive the weekly Initial Claims report and the Factory Orders report for June on Thursday.

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