Benchmarks ended higher on Wednesday boosted primarily by
encouraging minutes of the FOMC meeting. Federal Reserve officials
discussed how the central bank will end its easy monetary policy.
Policy makers will end the asset purchase program by October
provided the economy shows signs of strength. They also clarified
that this was not an indication that rates would be hiked
immediately. Meanwhile, the earnings season kicked off on an upbeat
note with Alcoa reporting better-than-expected second quarter
For a look at the issues currently facing the markets, make sure to
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained 0.5% to close
Wednesday's trading session at 16,985.61. The Standard & Poor
500 (S&P 500) advanced almost 0.5% to finish at 1,972.83. The
tech-laden Nasdaq Composite Index closed at 4,419.03; gaining 0.6%.
The fear-gauge CBOE Volatility Index (VIX) dropped almost 2.8% to
settle at 11.65. Total volume for the day was roughly 5.28 billion
shares, lower than last month's average of 5.79 billion. Advancers
outpaced declining stocks on the NYSE. For 56% stocks that
advanced, 40% declined.
Benchmarks were positively impacted after minutes from the Federal
Open Market Committee's (FOMC) June 17-18 meeting indicated that
the Federal Reserve will end its bond purchase program in October
provided the economy stays on track. The Federal Reserve decided to
end its asset purchases with a final reduction of $15 billion at
its October meeting. Till that time, the Federal Reserve plans to
trim its bond purchases by $10 billion at each meeting.
However, the central bank said the decision to end bond purchases
in October shouldn't be interpreted as a sign that hike in key
interest rates is likely to begin sooner. The central bank plans to
keep the rates near zero for a considerable period of time.
Last month, the central bank had trimmed its bond buyback plan by
$10 billion. It was the fifth consecutive month that the central
bank had reduced its asset purchase plan. Currently, the quantum of
asset purchases at $35 billion a month. According to its statement,
the FOMC will most "likely reduce the pace of asset purchases in
further measured steps". At the same time, the Federal Reserve
will keep its monetary policy "highly accommodative" and suggested
there would be no immediate rate hikes. The FOMC had decided during
its two-day policy meeting to remain committed to low-interest
rates. The FOMC released a statement saying benchmark interest
rates were left unchanged at 0.00-0.25%.
Coming back to yesterday's events, Alcoa Inc. (
) was one of the S&P 500's biggest gainers in percentage terms.
Shares of the aluminum producer went up 5.7% after the company
reported better-than-expected quarterly earnings and revenue
results. After the closing bell on Tuesday, Alcoa posted
second-quarter earnings of 18 cents per share excluding one-time
special items, topping the Zacks Consensus Estimate of 13 cents.
Alcoa also posted revenues of $5,836 million for the quarter. It
exceeded the Zacks Consensus Estimate of $5,626 million. Strong
results from its downstream and primary metals businesses, aided by
higher aluminum pricing helped Alcoa post upbeat second quarter
Among other major releases, the largest U.S. mortgage lender, Wells
Fargo & Company (
) is expected to release earnings numbers on Friday. The next week,
heavy-weights such as JPMorgan Chase & Co. (
), The Goldman Sachs Group, Inc. (
), Intel Corporation (
) and Google Inc. (
) are expected to post quarterly earnings results. Over the next
two weeks, more than 130 companies in the S&P 500 are expected
to report quarterly results.
According to FactSet Research Systems Inc. (
), earnings for the S&P 500 are expected to rise 4.9% this
quarter, outpacing the 2.1% rise reported in the first quarter of
2014. On the other hand, Thomson Reuters Corporation (
) projected S&P 500 companies' profits to grow at 6.2% for the
second quarter. This was less than the company's earlier forecast
of 8.4% at the beginning of April.
Airline stocks gained on Wednesday. Shares of American Airlines
Group Inc. (
) advanced 4.3% after the airliner said it expects second-quarter
passenger revenue per available seat mile to grow between 5.5% and
6.5% from a year earlier. Shares of other U.S. airline companies
such as Southwest Airlines Co. (
), Delta Air Lines Inc. (
) and United Continental Holdings, Inc. (
) increased 1.9%, 1.4% and 1.3%, respectively.
Eight out of 10 sectors of the S&P 500 ended in the green. The
Consumer Discretionary Select Sector SPDR (XLY) gained 1.2%, the
highest among the S&P 500 sectors. Key stocks from the sector
such as The Walt Disney Company (
), Comcast Corporation (
), Amazon.com Inc. (
) and McDonald's Corp. (
) advanced 1.6%, 2.7%, 1.9% and 0.9%, respectively.
The Energy Select Sector SPDR (XLE) gained 0.7%, the second highest
among the S&P 500 sectors. Key energy stocks such as Exxon
Mobil Corporation (
), Chevron Corporation (
), Schlumberger Limited (
), Halliburton Company (
) and Transocean Ltd. (
) increased 0.7%, 1.2%, 0.2%, 1.5% and 0.8%, respectively.
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