Dow Drops Ahead of Fed Minutes Release
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Today at 2 p.m. EDT the Federal Reserve's most recent meeting minutes will be released. As investors wait to see what the central bank's policymakers discussed in detail at the last meeting -- particularly regarding the fate of the Fed's $85 billion-per-month bond-buying program -- the major U.S. indexes are all lower. As of 12:55 p.m. EDT the Dow Jones Industrial Average is down by 56 points, or 0.37%, while the S&P 500 is down 0.33% and the Nasdaq has lost 0.27%.
Today's stock market losses could be either compounded or reversed by the Federal Open Market Committee's minutes. If they suggest that the Fed will begin to pare back its "quantitative easing" program within 2013, investors will likely sell off stocks at a much faster clip. In addition, bond yields, which have seen a healthy rise in the past two weeks, will surely jump. The Fed is scheduled to meet three more times this year, with the next meeting taking place from Sept. 17 to Sept. 19.
As I've noted, the Dow's major moves so far this year nearly all correlate to Fed meetings and rising interest rates. Fed members have hinted recently during interviews that "tapering" will begin this year, which may indicate that the subject was discussed at the FOMC's most recent meeting.
Stocks leading the downward charge
Shares of Hewlett-Packard are down 1.2% today, even after BMO Capital bumped its price target on HP to $30 per share this morning, reasoning that management continues to find ways to improve operational performance. Although the firm raised its price target, it left the stock's "market perform" rating unchanged. But today's decline also precedes HP's earnings report, scheduled to be released after the closing bell. While analysts estimate that revenue and profit will fall compared to the prior-year quarter, that's not likely the cause for today's move. Many investors are likely more concerned about how the company's turnaround is progressing and when it expects to start growing revenue and profit again.
After receiving an upgrade yesterday and watching its shares rise more than 1%, Intel is down 1.6% today. The move may be related to investors' -- rather, traders' -- fear of Fed "tapering." The stock currently boosts a dividend yield of more than 4%, and as the Fed begins to draw down its stimulative asset purchases, investors chasing yield will likely move back to bonds as Treasury yields creep higher. Additionally, with interests rates likely to rise down the road, it will cost businesses more to borrow cash. This will result in a slowdown in corporate spending and thus cuts in IT budgets. That means fewer PC refreshes by major corporations, which Intel and yesterday's upgrade are counting on.
Shares of Disney are down 0.9% today, even though its ESPN unit's newest competition, Fox Sports 1, experienced weak viewership for what it had expected to be a big-time show. Fox's premiere episode of Crowd Goes Wild received 74,000 viewers in a time slot during which ESPN typically draws 600,000 sets of eyes with Around the Horn and Pardon the Interruption. The news should be encouraging for Disney shareholders: ESPN's competition is not yet making a big impact, and Disney's most profitable network shouldn't see any dramatic revenue declines if Fox can't do much better.
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Fool contributor Matt Thalman owns shares of Walt Disney. The Motley Fool recommends Intel and Walt Disney. The Motley Fool owns shares of Intel and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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