Yahoo Finance Stocks close slightly lower
Stocks posted modest declines at market close Wednesday following a choppy day of trading.
The S&P 500 (^GSPC) was little changed, slipping 0.03%, or 0.71 points, while the Dow (^DJI) declined 0.35%, or 91.74 points, at the end of trading Wednesday. The Nasdaq (^IXIC) fell 0.04%, or 2.79 points.
The Federal Open Market Committee released its September meeting minutes Wednesday afternoon, which provided context around the committee’s decisions to drop “accommodative” language in its September statement and raise the target funds rate to between 2% and 2.25%, as was widely expected. A few officials “expected that policy would need to become modestly restrictive for a time,” and a number felt that “it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level in order to reduce the risk of a sustained overshooting of the Committee’s 2% inflation objective or the risk posed by significant financial imbalances.”
The yield on the benchmark 10-year Treasury note rose to 3.196%, while the yield on the 30-year note increased to 3.363% as of 4:06 p.m. ET.
President Donald Trump continued to assail the Federal Reserve this week, calling the central bank “my biggest threat” in an interview released Tuesday on FOX Business. Trump last week said that he thought “the Fed is going loco” over raising interest rates and reiterated that he believes the Fed is tightening monetary policy unnecessarily in light of recent economic indicators pointing to muted inflation. Fed Chairman Jerome Powell has said that the central bank will not be swayed by political pressures. The central bank raised interest rates three times this year and is expected to make a fourth rate hike before the end of 2018.
ECONOMY: Housing starts stall
New home building fell 5.3% to a seasonally adjusted rate of 1.201 million in September, the Commerce Department said in a statement Wednesday. This fell short of average economist expectations of 1.21 million housing starts for September, according to data compiled by Bloomberg. Building permits – which point to future home building – slipped 0.6% to 1.241 million after falling 4.1% to an upwardly revised 1.249 million in August.
The stagnating September figures come following a steady rise in average mortgage rates, which Freddie Mac reported last week rose to 4.9%, or the highest level in seven years.
“We’re expecting a temporary rebound in both sales and permits later in the fall, but the 30bp-plus rise in mortgage rates in recent months mean the uptick will be short-lived,” Ian Shepherdson, chief economist with Pantheon Macroeconomics, wrote in a note Wednesday. “The bottom line here is straightforward; the housing market has peaked for this cycle.”
STOCKS: Netflix surges past expectations, IBM sinks
Shares of Netflix (NFLX) rose 5.28% to $364.70 each into the close on Wednesday after the internet streaming giant reported new user growth that surged past expectations. Netflix reported after market close Tuesday that it added nearly 7 million new streamers for the period ending September 30, versus the company’s own estimates of an additional 5 million streamers for the quarter. The company also delivered earnings per share of 89 cents versus Wall Street estimates of 68 cents, on revenue of $4 billion. The earnings beat led several major firms to boost their 12-month price targets for the stock. Morgan Stanley reversed its price target to $475 per share from $450 per share on Wednesday, after having cut its price target just a day earlier.
IBM (IBM) beat on earnings per share for the quarter but missed on revenue, sending shares tumbling in early trading. Earnings came in at $3.42 per share, excluding certain items, exceeding analysts’ average estimates of $3.40 per share. However, revenue came in under at $18.76 billion, versus expectations of $19.10 billion, on account of revenue shortfalls from areas including IBM’s Cognitive Solutions, Technology Services and Cloud Platforms segments. The stock fell 7.62% to $134.06 per share at the end of trading, posting the largest declines of the Dow on Wednesday.
Tesla (TSLA) CEO Elon Musk said he plans to purchase $20 million of Tesla common stock at the next open trading window, according to a filing with the Securities and Exchange Commission. Musk is the largest shareholder of Tesla’s stock and held more than 33 million shares prior to the latest announcement. The same filing detailed Tesla and Musk’s recent settlement with the SEC, which was approved by a federal judge earlier this week. The stock turned around Wednesday afternoon, falling 1.74% to $271.78 at market close following reports that the company’s vice president of manufacturing departed.
NEWS: Canada legalizes recreational marijuana
Canada became the first G7 nation to legalize recreational marijuana Wednesday. The legal age for use will be 19 in most provinces. In Canada’s most populated province of Ontario, residents will only be able to order cannabis online until retail stores open next spring. Beyond decriminalizing marijuana use, the legalization of recreational use in Canada opens up the budding cannabis industry to regulation, allowing the government to tax and monitor the industry. CIBC analysts said in a report earlier this year that the legal market for adult-use cannabis in Canada could reach $6.5 billion in retail sales by 2020.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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