YAHOO [BRIEFING.COM]: Action
was muted ahead of the latest FOMC policy statement, which spurred buying and
sent stocks to their best levels of the year. However, the new highs proved
unsustainable as stocks rolled over and closed at session lows with their worst
loss since the first of the month.
The tone to premarket trading
had been mildly positive, but stocks lost their way after the opening bell and
spent most of the morning drifting in mixed fashion. As such, gains and losses
in the broader market were relatively contained.
However, telecom steadily
outperformed for the entire session. It finished 1.6% higher as the only major
sector to post a gain. However, its lack of relative size limited its
leadership.
Energy stocks traded with
considerable weakness for the entire session. It finished 1.9% lower, hampered
by bearish oil inventory data, which showed a build of 2.86 million barrels
when a draw of 1.40 million had been expected. Crude prices to finish 3.9%
lower at $68.99 per barrel.
Despite the drop in oil prices,
airline stocks slumped. In turn, the Amex Airline Index shed 4.3%. US Airways (LCC 4.52, -0.71) disappointed by
announcing the sale of 26 million shares of common stock. Meanwhile, AMR Corp (AMR 7.78, -0.66) priced its 48 million common
share offering at $8.25 per share, which is slightly below the previous
session's closing price.
Financials were the worst
performing major sector in the S&P 500, despite trading quietly in the
early going. Late pressure sent the sector 2.1% lower.
Materials stocks finished not
far behind financials, however. The sector dropped 2.0% amid weakness in
commodities stocks and commodities prices. Softer commodities prices sent the
CRB Commodity Index down 1.0%.
Weakness among commodities was
exacerbated by a stronger dollar, which fell to new 2009 lows immediately after
the release of the latest Fed policy statement. However, it was able to rebound
to a 0.3% gain. Despite its strong finish, many currency traders continue to
bet against the greenback.
The latest FOMC policy
statement, which indicated that economic activity has picked up since its
severe downturn. Neither that, nor the Fed's belief that economic conditions
are likely to warrant exceptionally low levels of the fed funds rate (left
unchanged at 0.00% to 0.25%, as expected) for an extended period came as much
of a surprise. The FOMC went on to say that it will purchase $1.25 trillion of
agency mortgage backed securities and $200 billion agency debt, but it will
gradually slow the pace of purchases to promote a smooth transition in markets.
Stocks in the broader market
attracted support with the statement's midafternoon release. That drove the
S&P 500 to session highs and a gain of 0.8%. Ford (F 7.36, +0.35) and General Mills (GIS 63.80, +2.83) were primary gainers.
Ford benefited from its view that the U.S. auto market is looking good and
vehicle sales are expected to increase, while General Mills posted
better-than-expected earnings for its latest quarter and issued upside
guidance.
Still, their strength wasn't
enough to stop some late-session selling, which culminated in a 1.0% loss for
the S&P 500. This is only the second time this month that the S&P 500
lost at least 1%, though.
Treasuries responded favorably
to the Fed's announcement, but were able to hold their gains. The benchmark
10-year Note finished roughly 10 ticks higher, which put its yield back near
3.40%. Prior to the announcement they had been showing weakness, uninspired by
news that a $40 billion auction of 5-year Treasuries produced a high yield of
2.47% and a bid-to-cover ratio of 2.4. DJ30 -81.32 NASDAQ -14.88 NQ100 -0.6%
R2K -1.2% SP400 -1.5% SP500 -10.79 NASDAQ Adv/Vol/Dec 1023/2.70 bln/1668 NYSE
Adv/Vol/Dec 1063/1.32 bln/1958