Market Primer: Friday, September 20: US Markets Fall As Investors Re-Evaluate
US markets leveled out on Thursday after posting record high gains on Wednesday following the US Federal Reserve’s decision to maintain its stimulus spending.
Most are expecting to see increased volatility in equity markets on Friday as index managers rebalance their portfolios.
In other news around the markets:
- The Federal Reserve’s decision to maintain its $85 billion per month stimulus has created uncertainty about the bank’s ability to communicate its intentions. Some have criticized the Fed, saying their guidance led the majority of investors and analysts to believe the taper would begin in September. However, in the bank’s defense, Wednesday’s shock is an example of how forward guidance can be easily misread and nuanced by investors.
- Despite the criticism Apple has received for its product pricing, the new iPhone is expected to have a record debut as it goes on sale on Friday in the US, UK, Germany, France, Singapore, Hong Kong, and for the first time on the same day as the rest of the world, China. The iPhone’s performance in China will be particularly important as many worry that the price of the phone is too high for the market there.
- The Reserve Bank of India’s new Governor Raghuram Rajan surprised analysts by increasing interest rates in an effort to control inflation. Most were expecting Rajan to maintain the benchmark interest rate, but his decision to raise it was seen as a determined effort to fight inflation and get the nation back on track.
- The Reserve Bank of Australia board member John Edwards voiced his frustration with the Federal Reserve’s decision not to taper, which has pushed the Australian dollar to a three month high. He also expressed concern that the FOMC sees the US economy as too weak to stand on its own, and worried about the bank’s revised, lower forecast for 2013 and 2014.
Asian markets were mixed heading into the weekend; the NIKKEI was down 0.26 percent and the KOSPI lost 0.39 percent. China’s Shanghai composite was up 0.29 percent along with the Shenzhen composite which gained 0.49 percent. The Hang Seng index had the largest gains, up 1.67 percent.
European markets were quiet on Friday with minimal losses. The UK’s FTSE was down 0.15 percent and the STOXX 600 lost 0.02 percent. The DAX lost 0.14 percent and France’s CAC 40 was down 0.17 percent.
Brent futures gained 0.19 percent on Friday, but WTI futures were down 0.08 percent. Gold lost 0.76 percent and silver was down 2.00 percent. Industrial metals fared better with aluminum up 2.46 percent and tin up 1.28 percent.
The euro to dollar ratio was relatively flat, and the pound gained 0.11 percent against the dollar. The yen strengthened 0.18 percent against the dollar and the Australian dollar was unchanged at $0.9437.
Notable companies that reported earnings on Thursday included:
- ConAgra Foods, Inc. (NYSE: CAG) reported EPS of $0.37 on revenue of $4.20 billion, compared to last year’s EPS of $0.44 on revenue of $3.31 billion.
- IHS Inc. (NYSE: IHS) reported EPS of $1.27 on revenue of $480.30 million, compared to last year’s EPS of $0.99 on revenue of $385.61 million.
- Pier 1 Imports, Inc. (NYSE: PIR) reported EPS of $0.17 on revenue of $395.64 million, compared to last year’s EPS of $0.19 on revenue of $367.62 million.
- Rite Aid Corporation (NYSE: RAD) reported a loss of $0.04 per share on revenue of $6.30 billion, compared to last year’s loss of $0.05 per share on revenue of $6.23 billion.
Stocks moving in the pre-market included:
- Fifth Street Financial Corp. (NASDAQ: FSC) lost 3.61 percent in pre-market trade after news that the company priced a public offering of 15.5 million shares at a prices of $10.31 per share
- BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) was up 4.06 percent in pre-market trade after news that Roche was looking to acquire the company.
- ONYX Pharmaceuticals, Inc. (NASDAQ: ONXX) was up 0.97 percent in pre-market trade after Amgen announced that it had received approval on its acquisition of ONYX.
- Cisco Systems, Inc. (NASDAQ: CSCO) lost 1.23 percent in pre-market trade after Credit Suisse gave the stock an Underperform rating.
- Facebook, Inc. (NASDAQ: FB) was up 0.57 percent in pre-market trade as the company worked to show the effectiveness of ads placed on their site.
No notable earnings reports are expected on Friday.
Friday’s economic calendar includes eurozone consumer confidence, Canadian CPI, Spanish trade balance and Italian industrial sales.
Good luck with your trades!
For a recap of Thursday’s market action, click here
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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