US shares were dragged lower on Wednesday as expectations of a Fed rate hike this year grew.
Although the Federal Open Market Committee meeting left rates unchanged at a target 0.25%-0.5% range the central bank added that near-term risks had diminished in what was seen as a thinly veiled reference to the presumed global market impact of Britain’s European Union referendum result last month.
Nevertheless, the prospects of a hike at meetings in September, November and December were still relatively tame, as far as market pricing was concerned.
“The Fed last mentioned “risks” in its March Policy Statement when it said that “global economic and financial developments continue to pose risks,” said Mike Levy at Berenberg Capital Markets.
Earlier, Rob Carnell, Chief International Economist at ING, said that the last time the Fed had remarked risks were diminishing was last October – the meeting before it hiked rates for the first time in a decade. Read more here.
The S&P 500 market bellwether closed down 0.12% at 2,166, while the S&P Midcap 400 index ended down 0.4% at 1,548. Meanwhile, the S&P Smallcap 600 managed to close 0.2% higher at 745 thanks to a 20% advance to $83.62 by remote PC access provider LogMeIn Inc (NASDAQ:LOGM).
Analysts had expected the popular service provider’s shares to ease back from more than 20% gains on Tuesday when the company reported positive second quarter earnings. Revenue was $83.3mln, representing 28% growth compared with the second quarter of 2015. The company closed the quarter with cash, cash equivalents, and short-term investments of $225.4mln.
It may be earnings season but that does not mean investor took their eye off the state of oil prices.
On Wednesday, the US oil benchmark West Texas Intermediate ended down 2.4% at $41.88 – its lowest levels since late April. That depressed the bourse.
But at few stocks were setting the market up for a good Thursday. After-hours earnings from social network behemoth Facebook (NASDAQ:FB) delighted investors as advertising business surged in the latest quarter thanks to mobile messages, pushing its earnings well above expectations.
Investors and analysts had been expecting a mild deceleration in the social networking company’s ads business after a red-hot start to the year. Instead, Facebook said its revenues from advertising, after adjusting for the effects of foreign currencies, had risen by 63% from a year before, matching the first quarter.
Facebook shares were 6.6% higher at $131.30 after-hours.
Initially, GoPro’s shares leapt after-hours as it said it would launch a new generation of its Hero action cameras as well as its long-delayed Karma drone before the holidays.
However, the stock quickly gave up most of those gains despite a promise by founder Nick Woodman that the beleaguered camera company would return to profitability by the end of the year.
Revenues for the three months to June fell by 47% to $220.7mln but nonetheless comfortably exceeded Wall Street expectations of around $194mln. The drop completes 12 months of contracting sales for GoPro.
US stocks screamed red at midsession on Wednesday after the Federal Reserve cleared the path to a possible rate hike this year.
The Federal Open Market Committee concluded its two-day meeting in Washington saying that risks had diminished, winking that the global impact of Britain’s decision last month to quit the European Union could be accommodated.
The Fed next meets on September 20-21.
The S&P 500 index was down 0.25% at 2,163, while the S&P Midcap 400 lost 0.6% to 1,544. The mid-caps were led by Knowles Corp (NYSE:KN) down 14.5% to $13.85.
The S&P Smallcap 600 was down 0.2% to 742, and led by Unifi Inc (NYSE:UFI), one of the world's leading synthetic recycled yarn producers, down 12.53% to $25.35 after it announced less-than-stellar fourth quarter results.
Oil didn’t help support the bourse, as the West Texas Intermediate was off 2.6% to $41.82 – its lowest level since late April.
US shares showed a mixed open as the tech sector did well and the market waits for a Fed announcement.
The Dow Jones was flat at around 18,473, while the Nasdaq added 0.4% to 5,130 and the broader-based S&P500 was down 0.21% to stand at 2,164.
After Apple results yesterday, shares in the tech behemoth continued north at the open and are now up over 6% to US$102.85.
The group reported earnings that beat revenue and profits estimates, but iPhone sales showed a slow-down.
Elsewhere, another good riser was Sequenom Inc (NASDAQ:SQNM), which gained over 178% after the patient management information company said it agreed to be bought by Laboratory Corp. of America Holdings.
The outcome of the Fed's meeting is not a given, but the general mood is no rate rise as yet but traders will be keen to latch on to any clue of when there may be a change in that.
Apple shares are racing up almost 7% in pre-market as third quarter results actually came in better than expected, and sales of the famous iPhones fell by less than the market had anticipated.
The company sold 40.4 million of the devices in the period, down 15% from the same quarter a year ago but still more than a market consensus of 40.02 million.
Yesterday, sales of newly-built US homes rose more than Wall Street expected last month to the highest rate since 2008 in the latest sign that the economy is growing – feeding into this week’s expectations that the Federal Reserve may hike rates before year end.
On Wall Street, the Dow Jones closed 19 down at 18,473; the Nasdaq shed 12 to 5,110 and the S&P500 added 0.7 to 2,169.
Today, Dow futures are 33 ahead; the Nasdaq is 32 ahead and the S&P 500 is up three.
Also in focus will be the Fed meeting, where there will be an annoucement later on interest rates and the state of the world's largest economy.