Sector Investing

[ReturntoSender]

Wall Street Edges Higher Following FOMC Minutes
20-Feb-19 16:25 ET
Dow +63.12 at 25954.44, Nasdaq +2.30 at 7489.09, S&P +4.94 at 2784.66

https://www.briefing.com/investor/markets/stock-market-update/2019/2/20/wall-street-edges-higher-following-fomc-minutes.htm

[BRIEFING.COM] The S&P 500 increased 0.2% on Wednesday, as the minutes from the Federal Reserve's January meeting came in mostly in-line with expectations. Price action, overall, was kept in check with earnings reports driving the notable movers in the stock market.

The Dow Jones Industrial Average gained 0.2%, and the Russell 2000 gained 0.5%. The Nasdaq Composite, however, finished flat.

The S&P 500 materials (+1.7%), financials (+0.6%), and industrials (+0.5%) sectors outperformed the broader market. Conversely, the real estate (-0.7%), health care (-0.1%), consumer staples (-0.1%), and communication services (-0.1%) sectors finished in the red.

The main takeaway from the FOMC Minutes was that the Fed is going to be patient in raising rates and is likely to stop reducing the assets on its balance sheet later this year. The surprise - or maybe the important revelation - for the market to consider was the implication that the Fed could turn away from a "patient" mindset with raising interest rates if market uncertainty abates.

Separately, there was little news on the current U.S-China trade talks, but investors did get an update on trade negotiations with the EU. President Trump expressed his displeasure with talks, telling reporters that if the U.S. cannot make a deal with EU, the White House will impose auto tariffs.

The minutes, along with the EU trade update, contributed to some volatility that yielded modest losses for the major averages. Investors regrouped, however, lifting the averages back into the green to extend the stock market's lengthy rally.

Semiconductor stocks outperformed, driven in part by an upbeat earnings report from Analog Devices (ADI 106.82, +2.60, +2.5%). Their outperformance helped keep the Philadelphia Semiconductor Index (+0.9%) rally going and provided some support for the information technology sector (unch).

On the other hand, CVS Health (CVS 64.22, -5.66, -8.1%) and Southwest Airlines (LUV 54.41, -3.26, -5.7%) disappointed investors with some downside guidance. Specifically, CVS guided earnings for Q1 and fiscal 2019 below estimates, and Southwest Airlines cut its first quarter unit revenue guidance to 3-4% growth, year-over-year, from 4-5% growth.

The outsized loss from CVS weighed on the health care sector (-0.1%). Airline stocks also underperformed on concern other carriers could follow suit with unit revenue revisions of their own.

U.S. Treasuries were little changed during Wednesday's session. The 2-yr yield and the 10-yr yield finished flat at 2.50% and 2.65%, respectively. The U.S. Dollar Index was unchanged at 96.55. WTI crude rose 1.2% to $57.15/bbl.

Reviewing Wednesday's economic data, which included the weekly MBA Mortgage Applications Index:

The weekly MBA Mortgage Applications Index increased 3.6% following a revised 6.9% decline (from -3.7%) in the prior week.

Looking ahead, investors will receive several economic reports on Thursday: Durable Orders for December, the weekly Initial and Continuing Claims report, the Philadelphia Fed Index for February, Existing Homes Sales for January, and the Conference Board's Leading Economic Indicators Index for January.

Russell 2000 +17.3% YTD
Nasdaq Composite +12.9% YTD
Dow Jones Industrial Average +11.3% YTD
S&P 500 +11.1% YTD