Benchmarks mostly eked out gains on Wednesday, led higher by real estate, utilities and telecom sectors. Investors placed their bets on such dividend payers, which are conceived to be relatively safe investment choices. The lack of any indications in the Fed minutes about the timing of a rate hike and an erratic earnings season lured investors to latch onto dividend payers. The Nasdaq, on the other hand, was dragged down by declines in biotech stocks for the second consecutive session.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) increased 0.1%, to close at 18,144.20. The S&P 500 also advanced 0.1% to close at 2,139.18. The tech-laden Nasdaq Composite Index closed at 5,239.02, losing almost 0.2%. The fear-gauge CBOE Volatility Index (VIX) soared 9.8% to settle at 16.87. A total of around 5.6 billion shares were traded on Wednesday, lower than the last 20-session average of 6.77 billion shares. Advancers outpaced declining stocks on the NYSE. For 50% stocks that advanced, 47% declined.
Fed Minutes: Fails to Confirm Rate Hike
Minutes from the Fed’s September meeting showed that policy makers were divided over the timing of a rate hike. They kept rate hike on hold last month despite a “reasonable argument” for an increase. While some officials called for a rate hike “relatively soon”, others wanted to see further progress towards full employment and faster inflation.
Ahead of the release of the minutes, New York Fed President Bill Dudley had said that “slack” in the labor market was a reason the central bank hasn’t been more aggressive in hiking rates. Even though it is widely expected that the Fed will hike rates after the U.S. presidential election, traders have think there is a mere 9% chance of a rate hike in the month of November.
Yield-Sensitive Sectors Gain
Big dividend payers posted significant gains on Wednesday after Fed minutes provided little insight about the next interest rate hike. Investors also continue to remain wary of what might turn out to be an erratic earnings season. Instead, they place their bets on dividend payers, which are conceived to be relatively safe investment choices.
Alcoa Inc. (AA - Analyst Report) had unofficially kicked off the earnings season, with its earnings and revenues falling short of expectations. In fact, earnings growth is expected to take a beating in the third quarter, which will be the sixth quarter in a row of earnings declines for the S&P 500 index. Total earnings for the index are expected to be down 2.9% from the same period last year on 1.2% higher revenues. Earnings growth is expected to be negative for half of the 16 Zacks sectors, led by Energy (- 68.3%), Transportation (- 21.4%), and Autos (- 18.5%) (read more: What Will the Q3 Earnings Season Bring?).
Investors bought big dividend payers like real estate investment trust, utilities and telecom companies. Real estate investment trusts like Crown Castle International Corp. (CCI - Analyst Report) and American Tower Corporation (AMT - Analyst Report) gained 2.8% and 2.4%, respectively. Utility company like WEC Energy Group, Inc. (WEC - Analyst Report) and Phone Company Verizon Communications Inc. (VZ - Analyst Report) also increased 1.5% and 0.8%, respectively.
Biotechs Weigh on Nasdaq
Broad based selloff among biotech stocks had a negative impact on the Nasdaq. The iShares Nasdaq Biotechnology (IBB) declined 2.5%, while the broader Health Care Select Sector SPDR ETF (XLV) fell by 0.5%.
Key biotech stocks such as Biogen Inc. (BIIB - Analyst Report) and Amgen Inc. (AMGN - Analyst Report) decreased 2.2% and 0.3%, respectively. Both the two companies possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Made Headlines
CSX Corporation Beats on Q3 Earnings and Revenues
CSX Corporation (CSX - Analyst Report) reported third-quarter 2016 earnings of 48 cents per share, which beat the Zacks Consensus Estimate of 45 cents. (Read More)
Delta Air Lines Beats on Q3 Earnings, Misses Sales
Delta Air Lines Inc.’s (DAL - Analyst Report) third-quarter earnings (excluding special items) of $1.70 per share beat the Zacks Consensus Estimate by 5 cents. (Read More)
Newell: Game Plan in Action, Inks Deal to Sell Tools Brands
Newell Brands Inc. (NWL - Analyst Report) inked a definite deal to sell its Irwin, Lenox and Hilmor brands of the Tools segment, to Stanley Black & Decker Inc. (SWK). (Read More)
Apple Reportedly Has a Seat on Didi Chuxing's Board
Apple Inc. (AAPL - Analyst Report) has reportedly got a seat on the board of Didi Chuxing, China’s largest cab hailing service. (Read More)
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