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Stock Market News For Jun 14, 2018

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U.S. stock markets ended in negative territory on Wednesday after the Federal Reserve announced its second rate hike for the year and indicated that the central bank may raise rates more aggressively going forward. All three major indexes closed in the red. Investors are also closely watching the outcome of the European Central Bank (ECB) meeting, which will take place on Jun 14, to end the ongoing bond purchase program.

The Dow Jones Industrial Average (DJI) closed at 25,201.20, declining 0.5% or 119.53 points. The S&P 500 Index (INX) decreased 0.4% to close at 2,775.63. The Nasdaq Composite Index (IXIC) closed at 7,695.70, shedding 0.1%. A total of 7.1 billion shares were traded on Wednesday, higher than the last 20-session average of 6.7 billion shares. Decliners outnumbered advancers on the NYSE by 1.99-to-1 ratio. The CBOE VIX increased 4.9% to close at 12.94.

How Did the Benchmarks Perform?

The Dow dropped 0.5%, reflecting its second straight loss.  Notably, 23 of the 30-stocks in the blue-chip index closed in the red while 7 traded in the green.

The S&P 500 was down 0.4% due to 2.4% loss of the Homebuilders Select Sector SPDR (XHB) and 2.2% decline of Real Estate Select Sector SPDR (XLRE) and 1.1% loss of Materials Select Sector SPDR (XLB). Notably, nine out of 11 sectors of the benchmark index ended in negative territory.

The tech-laden Nasdaq Composite lost 0.1% after setting an intraday record of 7,748.96. However, the tech-based index ended at its second best level ever.

The Fed Raises Interest rate

On Jun 13, the Fed hiked the benchmark fund rate by 25 basis points from 1.75% to 2% following the end of its two-day Federal Open Market Committee’s (FOMC) policy meeting. This was the second rate hike in 2018 and was in line with market expectations. Notably, the Fed has indicated that it will tighten monetary policy going forward. Eight of 15 Fed officials now expect four rate hikes this year compared with seven at the March meeting.

Moreover, the central bank has issues strong projections regarding the U.S. economy. The growth rate of GDP for 2018 has been revised to 2.8% from 2.7% predicted in March. Unemployment rate is likely come down to 3.6% in 2018 from the previous projection of 3.8%. However, core PCE inflation for 2018 is anticipated to go up to 2% from 1.9% projected in March. In order to cool down the economy, the benchmark federal fund rate is expected to be raised to 2.4% by the end of 2018 in comparison to 2.1% projected in March.

Court Approves AT&T – Time Warner Merger Deal

On Jun 12, after closing bell, a U.S. federal court had given verdict for an unconditional deal through which AT&T Inc. (T - Free Report) will acquire Time Warner Inc. for a consideration of $85.4 billion. The deal originated in October 2016 but was facing obstacles from the U.S. Department of Justice which argued that the proposed merger will give monopolistic power to AT&T in the converged platform of content creations and distribution. Both AT&T and Time Warner carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Following court’s approval of the AT&T – Time Warner Deal, cable TV and media giant Comcast Corp. (CMCSA - Free Report) made a $65 billion bid for Twenty-First Century Fox Inc. (FOXA - Free Report) . This marked a 19% premium over The Walt Disney Co.’s all-stock offer of $52.4 billion for Fox assets. Many more merger deals are now likely in the integrated telecom-cable TV-media space.

Economic Data

The Labor Department reported that producer price index (PPI) for final demand rose 0.5% in May led by a surge in gasoline prices and continued rise in the cost of services. The May reading was higher than the consensus estimate of 0.3% and the April’s reading of 0.1%. In the 12 months through May, the PPI rose 3.1%, the largest advance since January 2012.

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