Wall Street trade was volatile on Wednesday after publishing the report of the last Federal Reserve meeting, with indexes still showing slight increases. According to the latest meeting minutes, the central bank will be patient about future interest rate hikes.
The blue-chip index Dow Jones Industrial Average rose by 0.24%. The broad benchmark S&P 500 moved up by 0.18%. Technological index Nasdaq managed to rise by a modest 0.03%, marking an eight-day winning streak.
However, the S&P 500 was still about 5.4% from its closing record high on September 20, 2018. The stock market tanked in the final three months of last year, culminating with December’s terrible decline of more than 9 percent, the worst final month of the year since 1931. The S&P 500 lost more than 6 percent for all of 2018.
The Fed’s report stresses the risks to the economy, including the potential for a sharper than expected slowdown in global economic growth, especially in China and Europe. The central bankers also warn for rapid reduction in fiscal stimulus or a further tightening of financial market conditions.
Some investors might be encouraged by the normalization of the bank’s balance sheet.
The Cboe Volatility Index (VIX), considered to be the best measure of market fear, fell by 5.7% to 14 points.
After the Fed meeting in January, the main indexes rose by more than 4%.
Meanwhile, the US and Chinese officials started a new round of talks on Tuesday, with the next higher-level meeting expected later this week. President Donald Trump said on Tuesday he could extend the deadline for a deal after March 1, stating that it was not a magical date. Extending the current deadline would prevent an increase of US tariffs on Chinese imports from 10% to 25%.
The investors are expecting some conditional deal, but uncertainty about bilateral negotiations is likely to continue, especially for structurally important issues such as intellectual property.
The US government debt yields held steady on Wednesday after the Federal Reserve’s latest meeting minutes revealed that policymakers judged that a “patient” approach to interest rate hikes is the best path forward.
The yield on the benchmark 10-year Treasury note inched higher to 2.65%, while the yield on the 30-year Treasury bond hovered just below 3%. The yield on the 2-year note slipped to 2.495%.
Corporate stocks performance
The stocks of the US pharmaceutical company CVS Health have fallen by more than 8% after the forecast for lower-than-expected profit in 2019. The main reason for this is the acquisition of health insurer Aetna in November 2018 for nearly 70 billion USD.
The stocks of Southwest Airlines fell by 5.65% after slashing its revenue guidance. The company said the recent US government shutdown cost it 60 million USD in sales.
Magellan Health is up 8.1% after Reuters reported that Starboard Value is urging the company to sell itself.
Teva Pharmaceutical industries moved down by 2.9% after Mizuho downgraded the stock to Hold.
Wix.com is down 12.3% despite an upbeat fourth quarter, on disappointing guidance.
The stocks of the largest technology giants FAANG (Facebook, Apple, Amazon, Netflix, and Google) finished without a single direction. Facebook and Apple added 0.17% and 0.64% respectively, while Netflix, Amazon, and Alphabet wiped out 0.56%, 0.34%, and 0.56% respectively.
Corporate earnings reports
Quick service restaurant Domino’s Pizza Enterprises saw net profit after tax fall by 9.2% over the half year to December 30, 2018, reaching 53.3 million USD, while revenue increased 23.7% to 702 million USD. In Australia and New Zealand, the business grew market share in the pizza and fast food categories, and performed particularly well in New Zealand, though fell short of internal expectations and targets.
CVS Health beat fourth-quarter earnings forecasts, but a struggling long-term care business took a 2.2-billion USD bite out of the company’s performance and its initial 2019 forecast was weaker than expected. CVS Health expects adjusted earnings between 6.68 USD and 6.88 USD this year, well short of the per-share earnings of 7.35 USD anticipated by Wall Street.