Federal Reserve kicks set to provide a policy update Wednesday
The S&P 500 and the Nasdaq closed lower Tuesday as investors sorted through a fresh batch of earnings reports and awaited clarity from the Federal Reserve on its monetary policy plans. However, the Dow bucked the broader weakness, buoyed by Pfizer and 3M.
How did benchmarks fare?
The Dow Jones Industrial Average DJIA, +0.21% rose 51.74 points, or 0.2%, to 24,579.96, while the S&P 500 index SPX, -0.15% slid 3.85 points, or 0.2%, to 2,640, and the Nasdaq Composite Index COMP, -0.81% fell 57.39 points, or 0.8%, to 7,028.29.
What drove the market?
In addition to raw earnings data, investors also focused on comments from companies to glean clues on how slowing global growth and U.S.-China trade tensions will affect American corporations’ profits this year.
Meanwhile, the specter of elevated trade tensions between Beijing and Washington mounted as the Trump administration rolled out criminal charges against China’s Huawei Technologies.
In an indictment unsealed late Monday, federal prosecutors accused Huawei of violating U.S. sanctions on Iran and of stealing trade secrets from a U.S. business partner. Intellectual property theft was an issue that the Trump administration has raised with China as it attempted to resolve a protracted trade dispute with the Asian country. Huawei denied the allegations.
The Fed began its two-day policy-setting meeting with Chairman Jerome Powell scheduled to hold a news conference to discuss the central bank’s plans on Wednesday 2:30 p.m. Eastern Time.
Investors are eager for any new communication on the pace of rate increases and a reduction of the central bank’s balance sheet as the rapidity of those processes had been cause for concern in recent months.
Home prices in November grew at the slowest pace in four years, according to the S&P/Case-Shiller 20-city index, which rose 0.3% in November from October. Home prices rose 4.7% year-over-year.
The Conference Board’s consumer confidence index fell to 120.2 in January, down from 126.6 in December, and below the 125.0 reading expected by economists, according to FactSet data.
In the U.K., Parliament passed several amendments on Brexit, including a proposal to extend the Brexit timeline and to postpone the exit date if no deal was found until late February.
What were strategists saying?
“Earnings numbers are showing definitively that the China slowdown is having an impact on U.S. companies,” said Mark Esposito, president of Esposito Securities, in an interview. “There was reason to think that Apple’s trouble was company specific, but now we’re seeing these other bellwethers like 3M and Caterpillar check in to say they’re also feeling the pain,” he said.
“Since the December meeting, Fed officials appeared to have delivered a coordinated message that the committee is ready to pause on quarterly rate hikes. The committee appears to be willing to wait until heightened uncertainty around the economic outlook dissipates before raising rates again,” said Lewis Alexander, chief U.S. economist at Nomura, in a note.
“Financial conditions have stabilized since this shift in policy became clear. At this point we do not think the committee wants to shift market expectations for policy. We believe the FOMC’s primary objective at the January FOMC meeting will be to confirm and reinforce the recent shift in policy,” he wrote.
Which stocks were in focus?
Pfizer Inc. PFE, +3.14% rose 3.1% after it reported better-than-expected fourth-quarter results but offered guidance that was below analysts’ consensus estimates.
3M Co. MMM, +1.94% gained 1.9% after it reported fourth-quarter results that were better than expected, but cut its full-year 2019 outlook.
Verizon Communications Inc. VZ, -3.25% shares fell 3.3% after the communications giant reported mixed results.
Shares of HCA Healthcare Inc. HCA, +4.78% rose 4.8% after the firm beat analysts’ revenue and profit estimates for the fourth quarter.
Xerox Corp. XRX, +11.40% jumped 11% after its earnings topped expectations and the company issued an upbeat outlook.
Beleaguered California utility PG&E Corp. PCG, +16.49% soared 17% after it filed for chapter 11 bankruptcy protection and reorganization.
Shares of Brinker International Inc. EAT, -10.71% slumped 11% even after the parent of Chili’s and Maggiano’s restaurant announced fiscal second-quarter earnings that were in line with expectations.
Shares of Harley-Davidson Inc. HOG, -5.05% tumbled 5.1% after the motorcycle manufacturer reported fourth-quarter sales and profits below expectations.
How were other markets trading?
Stock markets in Asia closed mostly lower, with the Shanghai Composite IndexSHCOMP, +0.09% slipping 0.1% and Hong Kong’s Hang Seng Index HSI, +0.29%down.
In Europe, stocks closed higher, with the Stoxx Europe 600 rising 0.8%.
Crude oil CLH9, +0.45% climbed, while gold prices GCH9, +0.30% settled higher and the U.S. dollar DXY, -0.06% was flat.