Day Traders Diary

11/3/21

The major averages rebounded in the afternoon to new records on Wednesday after the Federal Reserve made its long-anticipated announcement to slow the monthly bond purchases implemented during the pandemic. The Dow Jones Industrial Average rose 104 points, after being down more than 160 points earlier in the session and closed at a new record. The S&P 500 traded up 29 points or 0.65% to a new all-time high. The Nasdaq Composite added 161 points or 1% and closed at a record. This is the fourth session in a row that all three major averages closed at new highs.

The Russell 2000 rose 1.8% and notched a record close. The small-cap benchmark is up 4.7% this week.

The Fed announced Wednesday that it will start to taper its bond-buying program that was put in place to prop up the economy during the pandemic.

The central bank also subtly reframed its stance on inflation, acknowledging that price increases have been more rapid and persistent than central bankers had expected. However, the Fed's statement still characterized the rising prices as "transitory," which could push the timeline for interest rates hikes further into the future.

Tapering of bond purchases will start "later this month" and will reduce purchases by $15 billion a month, putting it on track to end the quantitative easing by the middle of next year. This amount was in line with expectations. However, the Fed said it is prepared to alter the pace of purchases if warranted by changes in the economic outlook.

Powell said the central bank is changing monetary policy appropriately. "I don't think that we're behind the curve. I actually believe that policy is well-positioned to address the range of plausible outcomes, and that's what we need to do," Powell said.

A slew of corporate earnings jolted certain equities on Wednesday. Lyft jumped 8.2% on strong third-quarter results and CVS Health rose 5.7% on better-than-expected earnings.

Zillow fell 24.8% after announcing it will close its home buying and flipping business. Shares of Bed Bath & Beyond rose on a partnership announcement with Kroger but the 15.2% surge that followed was likely fueled by a short squeeze.

Activision shares tumbled, falling about 14.1% after it said the launch of two games would be delayed. The company also issued a weaker holiday outlook though it did beat profit estimates for the quarter.

Of the S&P 500 companies that have reported so far this earnings season, 80.9% of them have beat consensus expectations, according to FactSet. That's despite ongoing supply chain disruptions, labor challenges, commodity inflation, central bank policy and Covid risk.

All three major averages closed at records for the third session in a row on Tuesday. Those highs are making a potential year-end rally more conceivable to investors.

Wednesday's ADP report showed that private job creation rose in October, thanks to a burst in hiring in the hospitality sector. Companies added 571,000 for the month, beating the 395,000 Dow Jones estimate and just ahead of September's downwardly revised 523,000. It was the best month for jobs since June.

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.