Wednesday was a quiet session as stocks initially opened up higher on the announcement that Janet Yellen would be the next Federal Reserve head, but quickly sold off in the morning. From there stocks move near flatline before pushing back and forth around the unchanged level most of the rest of the session. Momentum stocks continued to face pressure as those who were buying, went into safety sectors such as utilities. The S&P 500 gained 0.06% while the NASDAQ fell 0.46%; this continues the pattern this week of the NASDAQ "catching up" to the S&P 500. Outside of the Yellen news, the major item of the day were the minutes from the last Federal Reserve meeting:
Federal Reserve members engaged in heated debate in September before ultimately deciding not to ease back on their monthly bond-buying program, according to the minutes from the latest Fed meeting. The sheer 12-page length of the document reflected a depth of discussion that focused on whether the economy was strong enough to wind down the buying, as well as whether the Fed was being as clear as it should be with its policy statements. "All members but one judged that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases," the minutes said. The decision to begin pulling back on the $85 billion a month in purchases of Treasurys and mortgage-backed securities was "a relatively close call" for "several members" who were concerned that financial markets had come to expect an unwinding, or tapering.
We'll look at the indexes on a longer time frame today to show why this current drop, especially in the S&P 500, could cause some intermediate term issues. There is a trendline connecting the lows of 2013, and that was violated yesterday. Obviously getting back above that would be step one for the bulls. This is now the third moderate correction of the back half of the year as the S&P 500 at its lows today was down about 5% from peak.
The NASDAQ is a bit choppier long term chart as Apple is such an influence on the index.
Speaking of, Apple is actually holding in relatively well during this correction.
One alternative as the U.S. politicians dance around ahead of the October 16-17th time frame are emerging markets which have held up pretty well during this U.S. selloff.
When markets are selling off like this it is difficult to focus much on individual equities, since most seem to move together but here are 2 widely followed names that were in the news today:
Hewlett-Packard spiked higher following comments from CEO Meg Whitman at an analyst meeting that revenue would stabilize in the fiscal year 2014 and accelerate in 2015. Additionally, the company is expected to report earnings guidance that exceed current Wall Street expectations, according to presentation slides from the company's meeting.
Yum Brands tumbled after the parent company of KFC and Pizza Hut missed forecasts and said it expects full-year earnings declining at a high-single digit to a low double-digit rate.