Both the Dow and the Standard & Poors 500 showed losses, on Wednesday, as financial stocks rose in anticipation of the soon-to-come minutes from the September Federal Reserve policy meeting. Five of the eleven major S&P indexes are down in all.
Unfortunately, the Nasdaw also fell a few points, but this was more a result of dragging technology stocks. And yes, that includes heavy movers like Microsoft (down 1.3 percent) and Cisco Systems (down 2.5 percent). In addition, oil prices are down more than 1.3 percent, which also helped to pull down the numbers (Exxon Mobil and Chevron—both components of the Dow—fell 0.9 percent).
Overall, the Standard & Poors 500 earnings are expected to fall about 0.7 percent in the third quarter. This will mark the fifth quarter in a row of negative earnings.
Obviously, the US central bank did not raise any interest rates last month but it was not a unanimous decision. Three members did not favor the decision and the upcoming minutes release should help shed a little more light on this.
Traders continue to price small odds of a rate increase next month—because the meeting will fall just before the US presidential election. However, the odds of a rate increase improve to 71 percent for December, as it is, of course, the end of the year.
Wunderlich Equity Capital Markets chief market strategist Art Hogan comments, “We’ve had a drop in commodity prices and some lackluster earnings yesterday and that is an overhang in the market. Today the markets trading orderly ahead of the Fed minutes, which is likely to solidify that we are going to move in December.”
Indeed, the time is ripe for such a move. Corporate earnings have been down—and falling—for several quarters in a row. Furthermore, companies in the S&P 500 are expected to report blanketing decline in earnings for the sixth time in a row.
At market open, on Wednesday, the Dow Jones industrial average fell 40.68 points, by 0.22 percent, to settle at 18,087.98. In addition the S&P 500 fell 3.22 points, by 0.15 percent, to settle at 2,133.51. Finally, the Nasdaq Composite fell 14.51 points, or 0.28 percent, to settle at 5,232.28.
But while these numbers are not necessarily that impressive, the reality of the US stock market is that things are improving. The reason we need the rate hike is that this trend cannot continue without it.