While you were sleeping: Stocks take a breather

Tuesday 27th October 2015

Equities moved lower with the price of oil as investors eyed the outcome of this week’s US Federal Reserve meeting and a flurry of corporate earnings including from Apple.

In New York trading at about 1.33pm, the Dow Jones industrial average slipped 0.07 percent, while the Standard & Poor’s 500 Index fell 0.12 percent. The Nasdaq Composite Index rose 0.20 percent.

Declines in shares of Apple and those of Chevron as well as Exxon Mobil, down 3 percent, 2.2 percent and 1.5 percent respectively, led the Dow lower. Apple is set to report its latest earnings after the market close on Tuesday. Chevron and Exxon Mobil, to report on Friday, fell with oil amid renewed concern about the global glut.

"The theme today is kind of wait and hold,” Katrina Lamb, head of investment strategy and research at MV Financial, told Reuters. "You've got a couple of key numbers and a pretty crowded calendar coming up this week. If you're taking positions, you're probably just going to want to keep yourself hedged.”

The Federal Open Market Committee, which starts its two-day meeting on Tuesday, is not expected to announce an interest rate hike on Wednesday, with traders pricing in a 6 percent chance. They are currently seeing a 39 percent chance of a December hike, according to CME Group's FedWatch.

Fed policy makers gather days after the People’s Bank of China cut interest rates and banks’ reserve requirements, and the European Central Bank announced its willingness to add fresh stimulus.

“After last week’s big rally, the market is taking a breather and assessing the outlook for monetary policy on the back of [European Central Bank President Mario] Draghi’s speech and more easing in China,” Alessandro Bee, a strategist at Bank J Safra Sarasin in Zurich, told Bloomberg. “It will be interesting to see if [the Fed’s] outlook on the economy has changed.”

A Commerce Department report showed US new home sales sank 11.5 percent to a 468,000 annualised pace in September, while both the months of August and July were revised lower. It was an unexpectedly weak showing in an industry that has recently offered signs of recovery.

"The September report does little to alter our view that the housing market is continuing to recover,” Daniel Silver, an economist at JPMorgan, told Reuters. “We view the new home sales data as unreliable and many other more reliable housing indicators have been sending upbeat signals lately.”

US Treasuries rose on the back of expectations the Fed will hold off on a rate hike amid concern about worldwide economic growth, pushing yields on the 10-year note two basis points lower to 2.07 percent.

“We’re facing a global economy with a slower growth profile, we’re seeing concerns about earnings, all of which suggests that the Fed will continue delaying the liftoff,” Ian Lyngen, a government bond strategist at CRT Capital Group in Stamford, Connecticut. “That’s generally considered supportive for the Treasury market.”

In Europe, the Stoxx 600 Index finished the day with a 0.4 percent decrease from the previous close. The UK’s FTSE 100 Index fell 0.4 percent, while France’s CAC 40 Index declined 0.5 percent. Germany’s DAX Index added 0.1 percent.

BusinessDesk.co.nz

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