With little surprise, the Federal Reserve passed on a rate hike at their mid-week meeting, but indicated an increase is likely by year-end. While the decision was mostly priced into the market, it nonetheless provided a relief rally of about 1.5% before Friday’s swoon with a weekly gain in the Dow of about 0.75%. The S&P 500 and the NASDAQ fared better with a gain of about 1.2% for the week. The Fed said in a statement that the case for raising rates has strengthened, but it feels that a wait-and-see approach is more prudent pending improvements in its key benchmark indicators. The central bank believes that business growth was neither strong enough nor inflation high enough to pull the cord. While the job picture has brightened and inventories are bottoming, industrial output, retail sales and housing starts eased a bit last month.
For the week, all stock sectors participated in the advance with interest sensitive utilities and telecom stocks leading the pack by 3.4% and 2%, respectively. And advancing stocks on the NYSE out performed decliners by about 4 to 1. While West Texas crude edged up about 3% on the week to close at $44.48/bbl., energy-related stocks were the weakest of the bunch with only a slight upward bias on average. Gold, however, managed a $31.40/oz. advance on the heels of the rate news.
The end of the third quarter is upon us and earning’s reports will be coming out shortly. There have been more cuts in guidance by companies in the S&P 500 than positive estimates by about two-to-one. Stock market volatility is on the rise, reflecting ongoing uncertainty about the Fed and the upcoming election. However, most averages are testing new highs and valuations are such that any adverse earnings, guidance or economic news can take the froth out of the market. Until then, the so-called Goldilocks environment indicates equities are the place to be.
Today’s Trivia Question: The person responsible for providing liquidity and maintaining an orderly market for an exchange listed stock is known as a? Floor Broker, Registered Representative, Broker-Dealer or Specialist.