The Federal Reserve’s decision on Thursday to keep interest rates near zero at 0.25%, speaks more to conditions globally than to the outlook stateside. The vote did not sit well with investors, sending stocks reeling after the news and on Friday erasing pre-announcement expectations earlier in the week. Although the Fed is sanguine on the current state of the domestic economy, the FOMC could not ignore falling commodity prices, low inflation and the world’s second largest economy: China and its effects on the U.S. So now the focus is whether the Fed will raise rates at the October or December meeting; and the guessing game continues and traders will move markets accordingly. For the week, equities were mixed once the final bell rang on Friday on extremely high volume in the final hour. The Dow Jones Industrials lost 0.30% and the S&P 500 was negative by half as much, closing at 1,958. The NASDAQ managed a small gain of 0.10% and half of the industry sectors were in the green this past week. With the absence of a rate hike, utilities rebounded by 2.5% on average and financial stocks – looking for some interest rate relief – were negative by over 1%. The price of crude was virtually unchanged from last week’s close and energy stocks were mostly flat. Gold, however, rebounded on the Fed news and spiked over $35/oz. to $1,138. Meanwhile, the third quarter is coming to an end, and doing so in a supportive manner as one looks to the major consumer and industrial markets, which are generally holding their own. There is a positive employment picture and strength in retail sales and building permits being offset by retracements in industrial output and factory orders. In all, the third quarter is likely to see economic growth of 2.0%-2.5%. Third quarter earning’s season is a few weeks off and while sales and earnings may be decent, I am not positive on management’s guidance for the early part of 2016. In general, equities have maintained much of their multi-year improvement, after having fallen into a correction territory over the past few months. While there has been some selective “buying on the dips”, I also see traders selling into rallies and, thus, taking away any meaningful advances. There does not appear to be any market leadership and financial and energy stocks need to weigh in. And the full-year will be negative if the all-important (heavily-weighted) technology stocks don’t show decisive improvement over the next few months.
Here is the answer to last week’s trivia question: Belgian pilsner beer Stella Artois has been brewed since 1926. It is now owned by? Heineken; Anheuser-Busch InBev; Miller-Coors; or Constellation Brands. Answer: Anheuser-Bush InBev. Following this trivia question, Leuven, Belgium-based AB-InBev made a bid on Tuesday for London-based SABMiller, plc. Assuming the number one and number two breweries clear antitrust hurdles, the combined company would control about 30% of the world’s beer market with brands that include Budweiser, Beck’s, Corona, Bud Light, Miller, Carling, Fosters, Peroni as well as Stella Artois among many others.