Markets & Finance

Stocks Finish Lower after Fed Hike


Stocks finished lower Wednesday after the Federal Reserve raised the benchmark U.S. interest rate to 2%, as expected. Traders kept an eye on the price of crude oil, which moved higher on the back of some weaker-than-expected inventory data.

The Dow Jones industrial average moved down 0.89 points, or 0.01%, to 10,385.48. The broader Standard & Poor's 500 index was fell 1.17 points, or 0.10%, to 1,162.91. The Nasdaq composite index shed 8.77 points, or 0.43%, to 2,034.56.

The Federal Open Market Committe (FOMC) raised the Fed funds target rate 25 basis points, as expected, to 2%. Using the same phrasing as the last announcement, the Fed said in its post-meeting statement that "the stance of monetary policy remains accommodative," and that "accomodation can be removed at a measured pace," implying that the Fed will continue to raise rates again in December unless economic data charts a drastically more negative course than it does now, says Action Economics.

Later in the week, there will be plenty of other economic reports to watch. Updates on October retail sales, University of Michigan consumer sentiment, and business inventories will come on Friday.

Further ahead on the earnings calendar, look for Dell (DELL), Agilent (A), Target (TGT), Kohl's (KSS), and Tiffany (TIF) on Thursday.

Among Wednesday's economic reports, U.S. trade deficit narrowed to $51.6 billion in September from August's downwardly revised $53.5 billion. Exports rose 0.8%, while imports declined 0.8%. The report implies that fourth-quarter GDP will push toward 3.8%, according to Action Economics.

First-time jobless claims rose by 2,000 to 333,000 for the week of Nov. 6, although the four-week moving average fell to 336,000 from a revised 341,500.

In the energy markets Wednesday, December NYMEX crude oil moved up to $48.75. A weekly report showed crude inventories rising to 2.8 billion barrels, falling short of expectations.

In corporate news, a recent study found that patients who use Pfizer's (PFE) drug Bextra have twice the incidence of heart attacks and strokes as those taking a placebo, according to the New York Times. The stock fell 1.1%.

Drugmaker Intermune (ITMN) received a subpoena from the Department of Justice pertaining to its major drug Actimmune, including information on the promotion and marketing of the drug. Shares fell 2.3%.

In earnings news, Cisco Systems (CSCO) reported its fiscal first quarter results after the close Tuesday. The telecom equipment maker's earnings climbed to 21 cents per share, vs. 15 cents one year earlier, in line with analyst's estimates. Cisco had a dimmer outlook for the future, and warned of an increased threat from competition. The stock fell by 6%.

Federated Department Stores (FD) posted 42 cents, vs. 36 cents earnings per share on slightly higher same-store sales, exceeding average analyst estimates by 3 cents. Shares were unchanged.

Goodyear Tire (GT) announced third-quarter earnings of 21 cents per share, its second straight quarter of profits, vs. a loss of 68 cents a share last year. This beat average analyst estimates of 19 cents per share, but worries still remain about the tiremaker's future growth. The stock fell 1.3%.

Treasury Market

Treasury prices went up in a relief bid after the as-expected rate hike, but returned to previous levels as there was no evidence in the Fed's statement that the rate increases will stop anytime soon, says Action Economics. The benchmark 10-year note yield finished the session at 4.25%.

The dollar continued to weaken vs. the euro, hovering just under the $1.29 per Euro mark, near all-time lows.

World Markets

European stock markets finished higher Wednesday. London's Financial Times-Stock Exchange 100 index was up 17 points, or 0.4%, to 4,734, after the Bank of England said that inflation may accelerate less than expected this year.

Germany's DAX index gained 24 points, or 0.6%, to 4,089 despite declining oil prices. In Paris, the CAC 40 index rose 15 points, moving to 3,785.

In Asia, the markets finished higher Wednesday. Japan's Nikkei 225 index rose 30 points, or 0.3%, to 10,994. In Hong Kong, the Hang Seng index rose 156 points, or 1.2%, to 13,672, with strength in the financial services and utilities sectors.


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