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End of Day Brief - Wednesday April 28 - Stocks slightly down on Fed/Earnings news

SP 5004183.18-3.54(-0.08%)
10-yr Note +1/321.613
NYSEAdv 1898 Dec 1317 Vol 820.0 mln
NasdaqAdv 2276 Dec 1794 Vol 4.5 bln

Industry Watch

Strong: Energy, Communication Services
Weak: Information Technology, Health Care

Moving the Market

-- Fed Chair Powell said it's not time to start talking about tapering asset purchases

-- Fed keeps rates and pace of asset purchases unchanged, as expected

-- Dow underperformed amid disappointing earnings reactions in Microsoft (MSFT), Boeing (BA), and Amgen (AMGN)

-- Alphabet (GOOG) crushed EPS estimates

Stocks were mostly in a holding pattern in morning trading as investors awaited the Fed announcement this afternoon. The Fed, to no one's surprise, kept rates steady and signaled it sees no change to its policy stance for quite some time. The market gyrated a bit as Fed Chair Powell held a question and answer session following the FOMC meeting, during which he reiterated that it "is not time yet" to start talking about talking about tapering asset purchases. Next up in terms of closely watched events will be Apple's (AAPL) earnings this evening.

ECONOMIC EVENTS: In the U.S., the advance indicators report revealed a bigger than expected March widening in the goods trade deficit to a new all-time high of $90.6B.

In Federal Reserve news, the central bank kept its interest rate benchmark unchanged at 0%-0.25%, as widely expected. Inflation has risen, largely on "transitory factors," said the Fed, which added that it expects it will be appropriate to maintain the 0%-0.25% target range until labor market conditions have reached levels "consistent with the Committee's assessments of maximum employment" and inflation has risen to 2% and is on track to moderately exceed 2% "for some time."

TOP NEWS: Class A shares of Alphabet (GOOGL) were 3% higher after the tech giant reported much better than expected first quarter earnings and revenue, with revenue in its advertising, cloud, and traffic acquisition segments showing year-over-year growth in the quarter. CFO Ruth Porat said she is "very pleased" with the ongoing momentum in Google Cloud, and the company noted on its quarterly call that it saw "phenomenal growth" in its YouTube business. In addition, Alphabet said along with its quarterly report that its board authorized the repurchase of up to an additional $50B of Class C (GOOG) stock.

In other tech giant news, Microsoft (MSFT) shares were 2.8% lower after the company reported upbeat third quarter results, with CEO Satya Nadella saying that digital adoption curves aren't slowing down. While the shares fell in after-hours trading yesterday and remain lower during the current session, several analysts raised their price targets on Microsoft, with Piper Sandler analyst Brent Bracelin saying the selloff presents a buying opportunity.

Shares of Boeing (BA) also slid 2.8% after the company reporting worse than expected core losses, with the planemaker saying it is continuing to make progress on the "safe return to service" of the 737 MAX globally. Boeing noted on its quarterly call that it continues to see passenger traffic returning to 2019 levels in 2023-2024 and that its 2021 financials hinge on a commercial market recovery.

Meanwhile, Starbucks (SBUX) shares fell 3.2% after the coffee giant reported lower than expected revenue for Q2, with the company saying on its quarterly call that resurgent COVID-19 restrictions in China hurt its quarterly results. Of note, Starbucks said it expects store visitation frequency to normalize in the second half of the year.

Additionally, Spotify (SPOT) shares declined 12.4% in New York trading after the audio streaming firm reported quarterly results, with monthly active users in the quarter growing 24% year-over-year. Of note, Spotify confirmed that it is raising prices for its subscription products in 12 additional markets.

MAJOR MOVERS: Among the noteworthy gainers was MicroVision (MVIS), which rose 4.1% after completing the development of its A-Sample hardware and development platform featuring its long-range sensor platform. Also higher was Deutsche Bank (DB), which gained 11.1% after reporting quarterly results.

Among the notable losers was Spirit Airlines (SAVE), which declined 5.7% after Evercore ISI analyst Duane Pfennigwerth downgraded the stock to In Line from Outperform. Also lower were Pinterest (PINS) and Enphase (ENPH), which fell 14.5% and 14.1%, respectively, after reporting quarterly results.

Reviewing Wednesday's economic data:

  • The Advance report for International Trade in Goods for March showed a deficit of $90.6 billion versus $86.7 billion in February. The Advance report for Retail Inventories for March decreased 1.4%, while the Advance report for Wholesale Inventories for March increased 1.4%.
  • The MBA Mortgage Applications Index decreased 2.5% following an 8.6% increase in the prior week.

Looking ahead, investors will receive the advance estimate for Q1 GDP, the weekly Initial and Continuing Claims report, and Pending Home Sales for March on Thursday.

  • Russell 2000 +16.7% YTD
  • S&P 500 +11.4% YTD
  • Dow Jones Industrial Average +10.5% YTD
  • Nasdaq Composite +9.0% YTD

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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