Friday, September 20, 2013
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The stock market today will likely be not much different from
what we saw on Thursday as the dust settles on the Fed's
Wednesday surprise. With nothing else on the economic calendar,
the markets will be closely watching a clutch of Fed speakers
today to get a sense of what prompted the FOMC to hold off on
starting the Taper.
The market's initial euphoric reaction to the Fed announcement
Wednesday afternoon gave way to a more contemplative reaction on
Thursday. This tone will likely continue today and the coming
days as the market comes to grip with less clarity on the Fed's
future course. A likely casualty of this development is the Fed's
credibility. Bernanke rightly stated in his press conference that
the FOMC can't be expected to follow market expectations. But
those expectations reflected what investors heard from Bernanke
and other Fed officials.
The Fed may have been surprised by the spike in long-term
interest rates in the wake of Taper talk, as they see QE as
distinct from their long-term guidance. But the market doesn't
see it that way, as investors rightly see the Taper as the
opening shot in a long-run monetary policy normalization process.
The Fed's inability to drive a wedge between Taper and tightening
in investors' minds is likely the primary reason for their
decision to hold-off this week. It is unclear, however, how
effective the Taper delay will turn out to be.
In corporate news,
) will be in the spotlight as the company's new set of iPhones
become available to the familiar long-lines at the company's
retail outlets. The company's stock price has regained some of
its mojo back in recent days, but it still remains more than 30%
below its peak in September 2012. In other news,
) missed expectations in its quarterly earnings report, driven by
weak results at Red Lobster and Olive Garden.
Director of Research