- The markets cheered dovish comments revealed by the FOMC minutes, sending major indices higher.
- Netflix was among the top gainers, as confident investors cheered the latest price hike for the streaming service in the US.
- GoPro stock nosedived on Morgan Stanley's price cut while Alcoa slipped on a weak earnings report.
- Will the momentum from the FOMC minutes spillover into the markets today?
The markets inched higher on Thursday, catalyzed by the hesitation of Fed officials to hike interest rates, which came to light from the Fed minutes released through the day. After nervous trading through the first half of the day, Major US indices made strong gains following the release of the dovish Fed minutes. The Dow Jones Industrial Average (INDEX:INDU) ended 0.82% higher, making it the fifth consecutive advance, which saw the index close at 17050.75, well above the key level of 17000. The broader S&P 500 (INDEX:SPAL) gained 0.88% on the day, up 17.6 points to close at 2013.43. The Nasdaq Composite (INDEX:COMPX) index overcame the recent biotech headwinds, closing at 4810.79, for a daily gain of 0.41%.
So What Cheered The Markets? - Dovish FOMC comments
As pointed in our earlier post, all eyes were fixed on the FOMC minutes, which surprised on the dovish side. The Fed cited weak global economic outlook and below target inflation levels to hold the interest rates at their current levels. Some members outlined lower confidence on achieving the target inflation rate over the medium term, which will have to change to effect the much talked about hike in interest rates.
Quoting from the FOMC minutes:
"In assessing whether economic conditions had improved sufficiently to initiate a firming in the stance of policy, many members said that the improvement in labor market conditions met or would soon meet one of the Committee's criteria for beginning policy normalization. But some indicated that their confidence that inflation would gradually return to the Committee's 2 percent objective over the medium term had not increased, in large part because recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term. Most members agreed that their confidence that inflation would move to the Committee's inflation objective would increase if, as expected, economic activity continued to expand at a moderate rate and labor market conditions improved further. Many expected those conditions to be met later this year, although several members were concerned about downside risks to the outlook for real activity and inflation."
The markets cheered the fact that the Interest rate hike will, in all likelihood, be held off for the remainder of this year compared to earlier expectations of a review in October.
Netflix Stock Soars on Pricing Increase
Netflix (NASDAQ:NFLX), the online TV streaming service announced yet another pricing increase on its standard plan, the most popular of its many plans. The company will continue to grandfather its 42 million existing US subscribers at their current subscription prices, learning from its mistake in 2011, when the company saw an exodus of 800,000 subscribers in response to a price increase. For a stock largely driven by subscriber growth, the 2011 exodus meant a 80% drop in the stock price. The company responded with a price freeze policy, which kept the subscriber growth on track through the previous price increase in 2014.
In an industry where good variety in content can be a key differentiator, the pricing increase will hold the company in good stead as content costs are expected to register a 100% increase, hitting $6 billion annually by 2020. This was acknowledged by investors, who cheered the price hike by awarding Netflix stock with a 6.8% gain through the regular trading session.
'Handmade at Amazon' Sends Etsy and Ebay Stocks on a Downhill Ride
Other big Tech movers for the included eBay (NASDAQ:EBAY) and Etsy (NASDAQ:ETSY), both of which registered significant drops, against the broader market movements. The slide was largely triggered by the launch of Amazon's 'Handmade at Amazon' service, which will be a direct competitor to Etsy, the handicrafts store and eBay's handmade crafts page. Etsy lost 4.3% through the session while Ebay declined by a steeper 6%, both the moves backed by strong volumes.
Alcoa Earnings: A Big Miss
Alcoa (NYSE:AA) stock price saw a 5% decline in after hours trade, driven by a huge miss in the latest earnings report. The company reported earnings of 7 cents a share, missing the analyst consensus estimate of 13 cents, by a huge 45%. The topline beat was overlooked by investors, who sold the stock to a decline in after hours trade. The Alcoa stock pared back some of the gains, and was trading 4.27% lower than the October 8th close, in pre-market trade at the time of writing.
GoPro Stock Price Nosedives as MorganStanley Cuts Price Target
GoPro (NASDAQ:GPRO) registered its lowest close in its 15 month history as a publicly traded company. The stock nosedived by 5.9% through the regular trading session, driven by a target price cut at investment firm Morgan Stanley. The firm cited lack of any significant improvement to its video editing sharing software while nearly halving its price target, from $62 to $35. The firm’s projection is the lowest by $10 among 15 analysts who have issued target prices in the past three months, according to data compiled by Bloomberg.
What to Expect in the Markets Today?
With no major reports or earnings scheduled for Friday, markets today should be calmer as compared to the last few trading days. Maybe, and we say maybe, the bulls could even continue the momentum, started by the FOMC minutes, into yet another day. Will the bulls win in the markets today? While we would say yes, one can never be too sure. For, The markets have a mind of their own and surprises are always lurking around the corner.
For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.