US Stock Market Overview – Fed Stands Pat, Stocks Drop on Hawkish Interpretation

Stock prices whipsawed initially moving higher but losing ground late in the trading session, with all major indices closing in the red. The Nasdaq was the best performer as Apple shares remain buoyed following better than expected financial results and guidance released on Tuesday after the closing bell. Apple said they would make more money next quarter than was expected and also announced at 75-billion dollar stock buy back. The Fed kept rates unchanged as widely expected. They did say that inflation was running at a lower level than anticipated but believed that it was transitory. ADP reported that private payrolls came in stronger than expected, but Mark Zandy said that there were technical issues with the report, that generated volatility in the index. All sectors were lower, led down by energy which dropped more than 2.2%. Industrials were the best performers in a down market.

 

The Fed Says Inflation is Transatory

Federal Reserve kept interest-rates unchanged with the benchmark rate in a target between 2.25% and 2.5%, meeting market expectations. The committee did offer another language tweak reflecting the lackluster inflation picture. The decision comes following a much stronger economic performance in the first quarter than virtually all economists had anticipated. GDP rose 3.2%, defying forecasts that had called for little if any growth. Core inflaton, the PCE deflator came in at 1.6% in March, down from nearly 2% earlier in the year. This is somewhat of an issue as the Fed is expected to keep inflation near the target.

Crude Oil Inventories Rise

Crude oil prices moved lower but rebounded from session lows weighing on the energy space. According to the EIAm, crude oil inventories increased by 9.9 million barrels from the previous week. Gasoline inventories increased by 0.9 million barrels last week and are about 2% below the five year average for this time of year. Distillate fuel inventories decreased by 1.3 million barrels last week. Total commercial petroleum inventories increased last week by 12.7 million barrels last week. Demand was mixed. The EIA reported that total products demand the last four-week period averaged 20.2 million barrels per day, up by 0.5% from the same period last year. During the last month, gasoline demand averaged 9.5 million barrels per day, up by 1.5% from the same period last year. Distillate fuel demand averaged 3.8 million barrels per day over the past four weeks, down by 9.6% from the same period last year.

ADP Private Payrols Come in Stronger Than Expected

ADP reported that private payrolls surged 275,000 in April, just about 100,000 more than expected. What was interesting, was the Mark Zandi who generates the report said that technical factors may have inflated the number. Zandy said that with the volatility in the number the government number would likely comes in near consensus at 175,000.