Stocks gained Wednesday after the Federal Reserve left interest rates unchanged as it awaits more evidence higher rates are taming inflation.
Bond yields retreated on the Treasury's quarterly refunding announcement, and then fell further with the announcement of the Fed's rate decision. The 10-year yield sank as much as 19 basis points to less than 4.8%. The 2-year yield sank to a 2-month low below 5%.
The number and rate of job openings and separations changed little in September. Economists were expecting a modest decline in job openings, but the results were welcome enough after August's surprisingly strong Job Openings and Labor Turnover Survey (JOLTS) report roiled markets, sending equity indexes to 4-month lows and Treasury yields to their highest since 2007.
Stocks rebounded yesterday afternoon to close modestly higher after trading in the red throughout much of the morning.
S&P 500 Gains and Losses Today
Here are the S&P 500 stocks that gained and lost the most today, and the stories behind the session's market movers.
Powell Comments Send Dow Surging 200 Points
Fed Chair Jerome Powell’s comments on the Fed’s decision to keep interest rates unchanged propelled the Dow Jones Industrial Average higher Wednesday afternoon. The index closed higher for the third straight session, rising 221 points, or about 0.7%.
Microsoft (MSFT) shares gained 2.4% as it introduced Microsoft 365 Copilot, an artificial intelligence add-on, to its Office app. Analysts at Piper Sandler estimated the $30-per-month addition could generate more than $10 billion in annual revenue by 2026.
Amgen (AMGN) shares moved up by 2% after falling yesterday despite beating sales and earnings estimates in the third quarter.
Shares of Apple (AAPL) rose 1.9% ahead of its earnings report after markets close tomorrow.
Walgreens Boots Alliance (WBA) shares fell 2.1% on the third day of a 3-day walkout by pharmacy staff to protest understaffing and burdensome workloads.
Shares of Nike (NKE) declined 1.8%.
Chevron (CVX) dropped 1.2% after Senate Majority Leader Chuck Schumer urged the U.S. Federal Trade Commission to look into its proposed $53 billion acquisition of Hess Corp, as well as Exxon Mobil’s (XOM) acquisition of Pioneer Natural Resources. Exxon shares dipped 0.2%.
Highlights from Powell's Comments
Fed Chair Jerome Powell on Wednesday reiterated the Fed's commitment to return inflation to its 2% target.
“We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time. And we’re not confident yet that we have achieved such a stance,” he said. However, he added, they’re also not confident that they haven’t.
When asked about future meetings, Powell insisted the Federal Open Market Committee "is not thinking about rate cuts right now at all," and had not "made any decisions about future meetings."
"The committee," he also said, "is not considering changing the pace of its balance sheet runoff. It’s not something we’re talking about considering.”
And on the surprising resilience of the U.S. economy in the face of the Fed's rate hikes: “I still believe, and my colleagues for the most part still believe, that it is still likely … that we will need to see slower growth and some softening in the labor market to fully restore price stability.”
Stocks Rally as Powell Elaborates on Fed Rate Decision
Stocks rallied Wednesday afternoon as Fed Chair Jerome Powell spoke to reporters about the Federal Open Market Committee’s (FOMC) decision to keep rates unchanged for the second time since July.
The Dow surged more than 200 points to trade as high as 33,300, about 0.7% above yesterday’s close. The Nasdaq surged to trade 1.3% higher and the S&P 500 jumped 1%, putting stocks on track for their third day of gains this week.
Stocks to Watch Wednesday Afternoon
Trane Technologies Plc (TT): Shares of the heating and HVAC system manufacturer jumped more than 10% after saying net revenue grew 12% and adjusted EPS increased 23% last quarter amid strong demand.
Assurant Inc. (AIZ): Shares of the insurance company rose 10% after its third-quarter results beat analysts’ sales and earnings estimates, with adjusted earnings per share increasing more than 300% to $4.29.
Match Group (MTCH): Shares of the dating site and app operator fell 16% after it said current-quarter sales could come in below forecasts due to the possibility of shrinking ad spending amid a global economic slowdown and greater-than-expected negative foreign exchange impacts.
Estée Lauder Company (EL): Shares of the cosmetics giant sank 17% after it cut its full-year earnings outlook as it struggles with a sluggish economic recovery in China.
Federal Reserve Holds Interest Rate At 22-Year High
The Federal Reserve kept steady pressure on inflation and the economy Wednesday, as officials wait to see what further effects high borrowing costs will have on the economy.
As widely expected, the Federal Open Market Committee (FOMC), the Fed’s policy-setting body, voted unanimously to hold the influential fed funds rate at a range of 5.25% to 5.50%. The rate has been in that range since July and is the highest since 2001.
A policy statement issued by the FOMC was little changed from the one it released at its last meeting in September. It emphasized the need to control inflation while acknowledging high interest rates could hurt the economy more the longer they stay in place, while leaving the door open for further increases if inflation doesn't continue its downward trajectory.
Paycom Shares Tumble as Popularity of Its Automated System Eats Into Other Revenue Sources
Paycom Software (PAYC) shares cratered after the payroll and human resources services provider posted worse-than-expected results and slashed its outlook, blaming a shift to an automated system that ate into other sources of revenue.
Paycom reported third-quarter fiscal 2023 earnings per share (EPS) of $1.30, with revenue rising 21.6% year-over-year to $406.3 million. Both were short of estimates.
CFO Craig Boelte noted that many of Paycom's clients have switched to the company’s Beti automated payroll system, and that has “eliminated certain billable items, which is cannibalizing a portion of our services and unscheduled revenues.”
Paycom shares lost more than a third of their value following the news, and they traded at their lowest level since early 2019. Shares of payroll providers Automatic Data Processing (ADP) and Paychex (PAYX) also lost ground.
AMD Shares Jump on Earnings Beat
Shares of Advanced Micro Devices (AMD) rose 8% after the chipmaker’s third-quarter earnings topped Wall Street estimates. The company also said it’s forecasting $2 billion in data center revenue next year, with artificial intelligence uptake driving demand.
AMD earnings by the numbers
- Adjusted earnings per share: $0.70 vs. $0.67 expected, according to analyst estimates compiled by Visible Alpha
- Revenue: $5.8 billion vs. $5.7 billion expected
AMD saw sales of its Ryzen 7000 computer processing unit (CPU) jump 42% year-over-year, helping to offset lower revenue from its gaming and embedded units.
CVS's Results Beat Forecasts, but Shares Fall as It Cuts Full-Year Unadjusted EPS
CVS Health (CVS) posted better-than-expected results on gains in its health services business, but shares fell 1% in early trading Wednesday as the big pharmacy chain reduced its unadjusted profit guidance.
CVS reported third quarter fiscal 2023 earnings per share (EPS) of $2.21, with revenue increasing 10.6% year-over-year to $89.76 billion. Both exceeded forecasts.
Sales at its Health Services segment were up 8.4% to $48.89 billion, boosted by its pharmacy drug mix, growth in specialty pharmacy, brand inflation, and the acquisitions earlier this year of Oak Street Health, which offers primary care to senior citizens, and in-home healthcare provider Signify Health. Revenue at its Health Care Benefits division added 16.9% to $26.30 billion with growth along all its product lines.
Shares of CVS traded near a three-year low early in the session before recovering somewhat, although they remained in the red. They're down more than 25% in 2023.
Manufacturing Activity Shrinks for 12th Consecutive Month
Economic activity in the U.S. manufacturing sector shrank in October for the 12th straight month as businesses and consumers pulled back on spending amid an uncertain economic outlook.
The Manufacturing Purchasing Managers Index (PMI) slipped 2.3 percentage points to 46.7% in October, indicating the fall back into contraction after modest growth in September. A reading above 48.7% is often interpreted as a sign of an expanding economy. Overall, new orders and backlogs contracted, as did employment and raw materials inventories.
Here’s what purchasing managers in various industries are saying about the state of business:
- Furniture & related products: “Business is decent — not great, but steady and solid. We are meeting our sales and margin goals, but it’s definitely hard to guess the future.”
- Chemical products: “Economy absolutely slowing down. Less optimism regarding the first quarter of 2024.”
- Fabricated metal products: “A slow fourth quarter, and we’re clearly in a mild industry recession. However, demand is down less than 5 percent, and customer confidence of a recovery in the second half of 2024 is solid. Supplier deliveries are stable, and suppliers are seeking more work. But they’re not yet willing to adjust prices to compete for it.”
Job Openings, Quits Held Steady in September
The number of job openings changed little in September, as did the number of people quitting their jobs, a sign the labor market remains strong, but not red hot.
There were 9.6 million job openings on the last day of September, nearly the same as the month before when openings unexpectedly surged, according to the Bureau of Labor Statistics. The number of hires totaled 5.9 million, nearly unchanged from August, while the number of separations—including people laid off and quitting their jobs—also held steady at 5.5 million.
One of the only figures to change month-over-month was the separation rate, which ticked down to 3.5% from 3.6% in August. That drop was driven by a decline in layoffs, which totaled 1.5 million in September, down from nearly 1.7 million the prior month.
Early Market Movers
- General Holdings Inc. (GNRC): Shares of the energy tech company jumped 13% after reporting better-than-expected third-quarter sales and earnings, with commercial and industrial sales increasing nearly 25%.
- CRISPR Therapeutics AG (CRSP): Shares rose 6% after an FDA advisory panel said a treatment for sickle cell disease that the gene editing company developed with Vertex Pharmaceuticals is safe enough for clinical use, paving the way for federal approval.
- Toyota Motor Corp. (TM): Shares of the carmaker gained over 4% after it reported a nearly threefold increase in sales and raised its full-year earnings guidance. Revenue and earnings were given a boost by a weak yen, which increased the value of Toyota’s overseas sales.
- Paycom Software Inc. (PAYC): Shares of the payroll management software company sank 36% to their lowest since early 2019 after it reported worse-than-expected current quarter sales and earnings guidance.
- The Estée Lauder Company (EL): Shares sank nearly 20% to a 6-year low after the cosmetics company slashed its full-year earnings outlook on China’s weak post-Covid recovery.
- DuPont de Nemours Inc. (DD): Shares of the chemicals company fell 4% after it missed third-quarter sales estimates and cut its full-year revenue outlook on sluggish demand.
Treasury Refunding Announcement Sends Bonds, Stocks Higher
The Treasury on Wednesday said it intends to gradually increase auction sizes this quarter, though at a more modest pace in longer-dated bonds.
The Treasury anticipates auction sizes for 2-, 3-, 5-, and 7-year Treasurys to increase by $9 billion, $6 billion, $9 billion, and $3 billion, respectively, by the end of January. The size of 10-year and 30-year auctions is only expected to increase by $2 billion and $1 billion, respectively, from October to January.
The Treasury anticipates one more quarter of increased auction sizes as it seeks to finance the government's growing deficit.
Treasurys rallied on the announcement, with the yield on the 30-year bond dropping nearly 8 basis points to just over 5%. Yields on 2- and 10-year Treasurys slumped by 6 basis points.
Stocks also rallied, with S&P 500 and Nasdaq 100 futures rebounding to trade higher about half an hour before markets opened.
Stock Futures Lower Ahead of Treasury Refunding, Fed Rate Decision
Futures contracts connected to the Dow Jones Industrial Average were 0.3% lower in premarket trading Wednesday.
S&P 500 futures fell about 0.4%.
Nasdaq 100 futures also lost 0.4%.