Closing Stock Market SummaryThe S&P 500 gained 1.7% on Wednesday in a broad-based advance to close at its highest level since March 6. The Nasdaq Composite (+2.1%) and Russell 2000 (+3.0%) increased more than the benchmark index, while the Dow Jones Industrial Average rose 1.5%.
Stocks reclaimed the prior day's losses at the open and proceeded to drift higher throughout the day. The market remained resilient with little news to meaningfully deter its bullish mindset or economic recovery hopes. All 11 S&P 500 sectors contributed to the advance.
The energy sector (+3.8%) followed oil prices ($33.51, +1.21, +3.8%) higher after EIA data showed an unexpected weekly decline in crude inventories. The financials (+2.2%) and communication services (+2.7%) sectors followed suit, with the latter benefiting from a 6.0% gain in shares of Facebook (FB 229.97, +13.09). The health care sector (+0.1%) eked out a small gain.
In Washington, the Senate passed the Holding Foreign Companies Accountable Act, which requires certain foreign companies listed in the U.S. to certify that they are not owned or controlled by a foreign government. Failure to provide appropriate certification could result in de-listing.
The increased scrutiny on Chinese companies pressured shares of Alibaba (BABA 216.79, -0.41, -0.2%) and Baidu (BIDU 108.52, -1.23, -1.1%), while the broader U.S. market was barely bothered by the bill's potential to worsen U.S.-China tensions.
Shares of Target (TGT 119.63, -3.53, -2.9%) and Lowe's (LOW 116.99, +0.12, +0.1%) struggled throughout the session despite beating top and bottom-line estimates. TGT shares fell 3%, while LOW shares squandered an early 5% gain. Analog Devices (ADI 114.57, +8.24, +7.8%) was an earnings standout.
Separately, the FOMC Minutes from the April meeting revealed that policymakers discussed targeting yields on shorter tenors and considered changes to how forward guidance is expressed. The 2-yr yield declined two basis points to 0.16%, and the 10-yr yield declined three basis points to 0.68%. The U.S. Dollar Index declined 0.2% to 99.14.
Wednesday's economic data was limited to the weekly MBA Mortgage Applications Index, which decreased 2.6% following a 0.3% increase in the prior week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report, Existing Home Sales for April, the Philadelphia Fed Index for May, and the Conference Board's Leading Economic Index for April on Thursday.
- Nasdaq Composite +4.5% YTD
- S&P 500 -8.0% YTD
- Dow Jones Industrial Average -13.9% YTD
- Russell 2000 -19.3% YTD
FOMC Minutes: Key Highlights
- Participants relayed information from their Districts that the burdens of the present crisis would fall disproportionately on the most vulnerable and financially constrained households in the economy. Participants agreed that recently enacted fiscal programs were delivering valuable direct financial aid to households, businesses, and communities that would provide some relief during the economic shutdown."
- "In their consideration of monetary policy at this meeting, participants noted that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
- In light of their assessment that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term, all participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to ¼ percent."
- "Some participants commented that the Committee could make its forward guidance for the path for the federal funds rate more explicit. For example, the Committee could adopt outcome-based forward guidance that would specify macroeconomic outcomes—such as a certain level of the unemployment rate or of the inflation rate—that must be achieved before the Committee would consider raising the target range for the federal funds rate.
- A few participants also noted that the balance sheet could be used to reinforce the Committee's forward guidance regarding the path of the federal funds rate through Federal Reserve purchases of Treasury securities on a scale necessary to keep Treasury yields at shortto medium-term maturities capped at specified levels for a period of time."
FSCT – Advent – OG Risk Arb comments on the decision by FSCT to initiate litigation today
Eric K. Laumann
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