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Market Update

Stocks Rally as Fed Calm Returns to Street Psyche

November 19, 2015

Stocks gained Wednesday and could build on that move if early Thursday indicators hold. In fact, stock bulls around the world appeared to find some comfort in greater clarity from the Federal Reserve. Mixed earnings and a couple of much-anticipated initial public offerings (IPOs) could factor into trading.

Release of the Fed’s October meeting minutes largely strengthened  expectations for a rate hike in December, and at this point the “will they or won’t they” tussle is getting a little old. This time around, markets generally embraced the notion that Fed confidence is a good thing. Said the panel of central bankers: "It may well become appropriate to initiate the normalization process at the next meeting," according to their October minutes. Officials could chime in with more later this afternoon, with speeches from Atlanta Fed President Dennis Lockhart and Fed Vice Chairman Stanley Fischer on tap.

With a degree of confidence back in the stock market, too, S&P 500 (SPX) 2100 comes back into play here (figure 1).

FIGURE 1: REBOUND. The S&P 500 (SPX), charted here on the new-look thinkorswim® platform, rallied Wednesday, hitting its highest level in a week. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Fed: Criteria Met. The economy has met the two of the Federal Reserve’s tests that could justify an interest rate hike, Loretta Mester, the president of the Cleveland Fed, said in a Thursday CNBC interview. According to Mester, the goal of full employment has basically been met and also said she is "reasonably confident" that inflation would move higher towards the 2% annual target. Mester, who holds a policy vote in 2016, said the minutes of the October meeting do not box the Fed into hiking at the meeting next month, and simply reflected the current thinking that "things were on track."

Best Buy Warns. Best Buy (BBY) shares were punished early Thursday for missing on revenue. The electronics retailer reported a sharper-than-expected slowdown in sales at existing stores in its latest quarter and warned that revenue for its December quarter would fall. Count it among the list of retailers bracing for a potentially disappointing holiday shopping season. BBY, down 20% this year, slid 8.6% premarket. Best Buy had squeezed out stronger profits lately amid cost cuts and rebounding revenue. For Q3, it reported earnings of $125 million, or $0.36, up from $107 million, or $0.30 a share, a year earlier. Excluding certain items, per-share profit rose to $0.41, above the $0.35 expected by analysts surveyed by Thomson Reuters.

Good Trading,



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