What’s the Dow Jones doing before today’s Fed policy statement?

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November 8, 2018 12:55pm NYSE:DIA

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From Mark Decambre & Chris Matthews: U.S. stocks were mixed in up-and-down trade on Thursday, with the Nasdaq and S&P 500 trading slightly lower, while the Dow gained some buoyancy ahead of a monetary-policy statement from the Federal Reserve, which could offer fresh clues on the pace of rate increases.

How did the benchmarks perform?

The Dow Jones Industrial Average DJIA, +0.28% was up 75 points, or 0.3%, at 26,253, while the S&P 500  SPX, -0.02% was virtually unchanged at 2,812 and the Nasdaq Composite Index NQZ8, -0.58%  fell 0.3%, or 20 points, to 7,550.

On Wednesday, the Dow rose 545.25 points, or 2.1%, to 26,180, while the S&P climbed 58.43 points, or 2.1%, to 2,813. The Nasdaq jumped 194.79 points, or 2.6%, to 7,570.75. All three indexes ended the day just shy of their intraday highs and booked their best daily gains in weeks.

Wednesday’s performance also marked the Dow and S&P 500’s best day since Oct. 16, while the Nasdaq enjoyed its best session since Oct. 25.

The Dow and S&P 500 have thus far risen on three straight sessions, while the Nasdaq has booked back-to-back advances.

What’s driving the market?

Stocks have been mostly climbed in the past few days, with midterm election results removing on measure of uncertainty that had weighed on investor sentiment.

Although investors will continue to process the long-term implications of Democrats wresting control of the House of Representatives and Republicans retaining a majority in the Senate–a widely expected outcome–fresh jitters around Fed policy will likely draw the lion’s share of Wall Street’s focus.

Read: Fed to remain stoic in face of market gyrations

The Fed concludes its two-day policy sit-down at 2 p.m. Eastern Time Thursday, where it will likely delay a move to raise interest rates until December. Still, the central bank will deliver insights about the health of the economy, its expectations for inflation and any lingering effects of a protracted trade spat between the U.S. and China.

Meanwhile, quarterly earnings continue to roll in. Around 87% of companies in the S&P 500 have reported third-quarter results so far, with average earnings growth of over 25%, according to FactSet data. Investors fear that steady growth may not last for long, especially as expansion elsewhere in the world has stalled out.

DJIA, +0.28% See: Here’s why stock investors say ‘gridlock is good’ after midterms deliver split Congress

One additional item on investors’ radar is White House drama, after Jeff Sessions resigned as attorney general Wednesday at the request of President Donald Trump.

Trump had repeatedly laid blame for the existence of special counsel Robert Mueller’s investigation into potential connections between the Trump campaign and Russian interference into the 2016 election on Sessions.

Read: How the midterms made history: Numerous firsts emerge from Election Night results

Which stocks were in focus?

Shares of Tesla IncTSLA, +1.33%  were in focus after the electric car maker named Robyn Denholm as its new chairman, replacing Chief Executive Elon Musk as the head of the board with a relative outsider who will face the difficult task of overseeing the maverick billionaire. The stock is up 4.2% Thursday.

Shares of Arris International PLARRS, +10.24% rallied 2.8% after the cable-industry vendor said it was being acquired by CommScope Holding Co. Inc.COMM, -23.11%

Shares of Cardinal Health Inc. CAH, +4.51% are up 2.4% Thursday, after the health care services company reported fiscal first-quarter profit and revenue that rose above expectations, boosted by strength in its pharmaceuticals business.

D.R. Horton Inc. DHI, -5.35% reported fiscal fourth-quarter earnings on Thursday that matched expectations, but revenue that came up shy, as rising prices and higher interest rates have led to some moderation in demand. The stock is down 5% Thursday.

Shares of Monster Beverage CoMNST, -3.20% are down 3.2%, after CEO Rodney Sacks said in an earnings call with analysts that Coca-Cola Co.KO, -0.10% planned to release two new competitor drinks. The stock had been down as much as 11.6% Thursday morning.

Monster has entered into arbitration with Coca-Cola, its biggest shareholder, to determine whether Coca-Cola will be permitted to launch competitor drinks in April 2019, and the result of the dispute could have implications for whether or not Coke will fully acquire Monster, as some analysts have counseled.

Wynn Resorts Ltd. WYNN, -12.09%  stock dropped 12.3% Thursday, after an earnings call with analysts Wednesday evening in which CEO Matthew Maddox said he anticipates a “soft” market in the fourth quarter for its Macau business line.

TripAdvisor, IncTRIP, +15.50% stock is rallying 15.8%, after a Wednesday-evening earnings beat.

Shares of Broadcom IncAVGO, +3.31% were up 2.6% Thursday, after J.P. Morgan resumed coverage of the company, rating it overweight with a $325 price target. News was also published Wednesday that the company laid off more than 300 workers at CA Technologies, which Broadcom acquired in a deal that closed on Monday,

Shares of Perrigo Co. Plc PRGO, -14.19% are down 14.7%, following the release of third-quarter earnings before the bell Thursday.

L Brands IncLB, +4.59% stock is up 3.4% Thursday morning, after the Victoria’s Secret parent company reported same-store sales growth of 4% for the four weeks ending Nov. 3, and raised its guidance for the third quarter. The company attributed the outperformance to its Bath & Body Works brand.

Square IncSQ, -9.15% stock is down 9.6%, after the company issued disappointing guidance for the fourth quarter Wednesday evening.

Shares of Qualcomm IncQCOM, -7.17% were off 7.2% early Thursday, following the announcement Wednesday evening that the company lost money in the third-quarter.

Alarm IncALRM, +3.95% shares are surging more than 6.2%, after the property monitoring company’s earnings and outlook topped Wall Street estimates.

Walt Disney CoDIS, -0.45% Activision Blizzard IncATVI, -2.83% Dropbox Inc.DBX, -0.37% and Yelp IncYELP, -1.45% are all set to report after the close of trade Thursday.

What are the strategist saying?

“I think the fact that we’re stable today after that runup yesterday is a positive sign,” Ed Keon, chief investment strategist at QMA, told MarketWatch. “I find it encouraging that bond yields ended up higher yesterday and they’re higher today. It suggests that the market is a little less worried about a recession and more confident of growth.”

Keon doesn’t expect much new information from the Fed’s statement Thursday, as there has been little change to either unemployment or inflation data since the FOMC’s September meeting. If, however, the Fed does include language in its statement that indicates it will be “flexible in its approach,” to the course of future interest rates, expect to see the market rally, Keon said.

Michael O’Rourke, chief market strategist at JonesTrading, warned clients not to be comforted by the Wednesday rally, which, he argued in a research note, “has the hallmarks of bear market rally­­­–a strong move on light volume thanks to a hollow catalyst.”

“Other market headwinds will be reasserting themselves soon enough,” O’Rourke wrote. “Did this market just rally sharply in reaction to a political election result on a day where the attorney general’s resignation potentially may place the nation on a path to a constitutional crisis? The catalyst is beginning to look even more hollow.”

What data are ahead

First-time unemployment claims fell by 1,000 in the week ended Nov. 3 to 214,000, the Labor Department said Thursday. That was slightly higher than the 210,000 forecast by economists polled by MarketWatch. The total number of Americans collecting jobless benefits fell to its lowest level since the summer of 1973.

The SPDR Dow Jones Industrial Average ETF Trust (DIA) was trading at $262.53 per share on Thursday afternoon, up $0.75 (+0.29%). Year-to-date, DIA has gained 7.01%, versus a 5.66% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 82 ETFs in the Large Cap Value ETFs category.

This article is brought to you courtesy of MarketWatch.

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