Fed Speaks, Market Pauses to Think
Nothing happened, but a lot did
This week, Fed Chair Janet Yellen and the FOMC rolled out the plan to start shrinking the Fed’s massive $4.5 trillion debt with a T balance sheet. The Fed also signaled its hawkish intention to raise rates by another quarter of a point (and four times by the end of 2018). The US ten-year yield responded by moving to 2.3%—the highest reading since August. On the surface, the indices didn’t move much at all, but recent companies’ reporting continued to slide or at least they weren’t bought on the dip. Oil was the week’s winner and gold notched its second losing effort. Here’s a roundup of the action.
- North Korea and the US continued the saber rattling with President Trump at the United Nations. We all learned the word “dotard.”
- The S&P downgraded China to A+ from AA- following Moody’s back in May. The downgrade was predicated on the large buildup of debt in the country.
- Equifax (EFX) rebounded. Apple (AAPL) and Oracle (ORCL), the losers two weeks ago, still struggled.
- Last week, companies reported mixed results. Adobe (ADBE) and Bed Bath & Beyond (BBBY) struggled, while FedEx (FDX) and Finish Line (FINL) maintained their positions. Blackberry (BBRY) bounced and then gave it all back, while KB Homes (KBH) made multimonth lows. CarMax (KMX) had a solid report.
- The housing data and the services purchasing managers’ index missed as well.
Here’s how the indices (SPX, DOW, and COMP) and commodities fared:
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In the rest of this report, we’ll look at follow-through stocks from two weeks ago, last week’s earnings, and this week’s events.