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May 24, 2017 - US Daily Stock Market Update
Stocks Add to Gains as Fed Supports Balance Sheet Reduction, Rate Hike 'Soon' By The Street
Stocks added to gains on Wednesday after Federal Reserve minutes showed a central bank comfortable with moving rates higher again.
The S&P 500 was up 0.2%, the Dow Jones Industrial Average added 0.32%, and the Nasdaq grew 0.25%.
In meeting minutes from their May meeting, "most" members of the Federal Open Market Committee showed a willingness to hike interest rates again "soon." The pace of subsequent rate hikes appears a point of debate, though, with several members backing a faster rate, while a few supported slower increases.
"Most participants judged that if economic information came in about in line with their expectations, it would soon be appropriate for the Committee to take another step in removing some policy accommodation," the minutes noted.
Most members also supported a plan to gradually reduce the Fed's balance sheet, a process that should begin this year. Members agreed to continue discussions on the committee's reinvestment policy at its June meeting. Tighter monetary policy is seen as the Fed's vote of confidence in the health of the economy.
The central bank opted to leave rates unchanged at its meeting on May 2-3, though signaled a willingness to move on rates sooner than later. Members of the FOMC noted that economic growth had slowed, though fundamentals remained solid. The committee viewed slowing growth in the first quarter as transitory. Meeting minutes could also signal when the Fed could begin reducing its $4.5 trillion balance sheet.
Markets already have high expectations for an interest rate increase at the next meeting of the Federal Open Market Committee, the second of three expected rate increases this year. Wall Street has priced in a nearly 79% chance of a 25-basis-point increase to the federal funds rate when the FOMC meets June 13-14, according to CME Group fed funds futures.
Existing home sales declined in April as tight supply continued to choke demand. Sales of previously-owned homes fell 2.3% in April from March's 10-year highs, coming in at a seasonally adjusted annual rate of 5.57 million. Inventory dropped 9%.
Crude oil prices fluctuated on Wednesday after a weekly inventory reading from the Energy Information Administration showed a larger-than-expected decline. Domestic crude inventories fell by 4.4 million barrels, nearly double consensus and a sharp acceleration from a decline of 1.8 million barrels a week earlier. Gasoline and distillates stockpiles also declined. Stockpiles have declined for seven weeks in a row.
A joint committee comprised of Organization of Petroleum Exporting Countries and non-OPEC producers recommended a nine-month extension to an output cut agreement. An extension to the deal will be the main point of conversation when the 13 OPEC member countries meet in Vienna on May 25. The current agreement, established last November, is set to expire at the end of June.
"An agreement to extend production cuts by nine months should help to reduce global oil stocks," Fawad Razaqzada, market analyst at Forex.com, wrote in a note. "Any short-term weakness in oil prices -- say, as a result of profit-taking -- may very well be short-lived."
West Texas Intermediate crude oil was down 0.3% to $51.33 a barrel on Wednesday.
Moody's lowered the credit rating for China, the world's second-largest economy, amid concerns for rising debt levels and slowing growth. Moody's clipped China's rating by one notch, taking it to A1 from a previous grade of Aa3, marking the country's first downgrade in nearly 30 years.
The credit agency said the new rating outlook is stable, however, and that the country remains resilient to negative shocks and that growth is likely to remain comparably strong in the near-term. However, Moody's said the downgrade "reflects the expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows."
Intuit (INTU) increased 6% after exceeding analysts' estimates on the top- and bottom-line over its third quarter. Earnings of $3.90 a share came in 3 cents above estimates. Revenue increased 10.4% to $2.54 billion and exceeded consensus by $40 million. Adjusted fourth-quarter earnings are expected to come in at 16 cents to 18 cents a share.
Container Store (TCS) rocketed 26% higher after earnings came in nearly double expectations. Net income of 17 cents a share beat estimates of 9 cents, while revenue of $221 million came in $8 million above consensus. The retailer also announced restructuring plans and layoffs, which are expected to save $12 million to $15 million this fiscal year.
Tiffany & Co. (TIF) tumbled 6% after reporting a surprise decline in same-store sales over its recent quarter. The jewellery retailer reported a 3% decline in worldwide same-store sales, a surprise to analysts looking for a 1.6% increase. Earnings of 74 cents a share exceeded consensus by 4 cents, while revenue of $899.6 million fell short of an analyst target of $914.7 million.
Lowe's (LOW) declined 4% after falling short of earnings and revenue estimates over its recent quarter. Adjusted earnings of $1.03 a share grew from 87 cents a year earlier, though came in below analysts' expectations for $1.06 a share. Revenue of $16.86 billion narrowly missed estimates of $16.95 billion. Same-store sales increased 1.9% over the quarter.
Bunge (BG) fluctuated on Wednesday morning after noting that it wasn't engaged in "business combination discussions" with Glencore (GLNCY) . Shares had spiked more than 16% on Tuesday on reports of merger discussions. "Bunge is committed to continuing to execute its global agri-foods strategy and pursuing opportunities for driving growth and value creation," the company said in a brief statement late Tuesday.
Buffalo Wild Wings (BWLD) added more than 5% after Institutional Shareholders Service recommended two activist nominees put forth by activist investor Marcato Capital Management to serve on the wing chain's board. ISS has backed Marcato founder Mick McGuire and former Pizza Hut CEO Scott Bergren. Marcato had also put forth former chief development officer at TGI Fridays, Lee Sanders, though ISS did not back his nomination.
Abercrombie & Fitch (ANF) surged nearly 9% before trading was halted on Wednesday afternoon. A jump in activity came after The Wall Street Journal reported takeover interest.
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