STOCKS CLIMB AFTER FED SIGNALS END OF QE: Here’s What You Need To Know

MYLES UDLAND MARKETS

 JUL. 10, 2014

REUTERS/Eloy Alonso

Stocks finished higher after two straight losing sessions, as the minutes from the latest FOMC meeting indicated the Fed sees a potential end to its QE program coming in October. 

First, the scoreboard:

• Dow: 16,974.89, +68.3, (+0.4%)
• S&P 500: 1,971.71, +8, (+0.4%)
• Nasdaq: 4,415.83, +24.4, (+0.6%)

And now, the top stories of the day:

1) The minutes from the latest Federal Reserve’s latest Federal Open Market Committee meeting were released at 2:00 pm EST, and for the first time indicated a potential end to the Fed’s monthly asset purchase program, or Quantitative Easing (QE). The Fed has been reducing QE by $10 billion at each meeting since December 2013, and the latest minutes indicated that if the economy continues as the FOMC’s members expect, QE could end with a single $15 billion reduction at its October meeting. The minutes also showed that the Fed plans to clearly indicate to the market when it plans to begin raising rates.

2) The FOMC minutes indicated that the Fed is concerned about investors growing too complacent given the current market environment. Following the minutes release, Joe Brusuelas and Josh Wright, economists at Bloomberg LP, said, “Of special note, some on the committee observed that results from the primary dealer survey suggested that low realized volatility, generally favorable economic news and less uncertainty for the path of monetary policy might have generated complacency on the part of market participants about potential risks. Given that one purpose of the Fed’s quantitative easing policy is to encourage risk taking in order to suppress yields at the longer end of the curve, investors will probably now look closely at the Fed’s intentions regarding macroprudential measures going forward.” 

3) In its earnings release yesterday afternoon, Kip Tindell, CEO ofThe Container Store, gave an ominous warnings about the state of retail activity. “Consistent with so many of our fellow retailer, we are experiencing a retail ‘funk,’” Tindell said. Shares of The Container Store fell 9%. as the company also reported same store sales that fell 0.8% and reported a loss of $0.07 per share.

4) Shares of Gigamon cratered, losing more than 30% after the company warned investors that its revenue would be way below forecasts. BI’s Julie Bort noted that this is the second straight quarter the enterprise tech company has reduced its revenue outlook, and since topping out at $41.81, the stock is down more than 70%.  

5) Next Monday, July 14, will begin a three-week period in which 72% of the S&P 500 reports quarterly earnings. In a research note earlier today, Goldman Sachs’ Amanda Sneider highlighted 22 companies that the firm expects to beat expectations. Among the notable companies Goldman is currently forecasting to beat earnings expectations are healthcare giant McKesson and energy company CONSOL Energy.