It was a very interesting session in the stock market today. While the indices were not all that volatile, tech stocks took a hit on several bearish analyst calls and worries over growth. Of course, the action comes as earnings reports continue to hit the tape too.
Ultimately the SPDR S&P 500 ETF (NYSEARCA:SPY) fell 0.14% and the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) slipped 0.06% on Wednesday.
The PowerShares QQQ ETF (NASDAQ:QQQ) performed the worst, falling 0.25%. The iShares Russell 2000 ETF (NYSEARCA:IWM) actually finished higher on the day, up 0.11%.
But it was comments regarding the Federal Reserve that struck many investors as most interesting. It brings into question what the Fed’s current policy is and whether we’ll see a rate cut later this month.
Cut or No Cut From the Fed?
Many investors have been under the impression that the Fed is in an accommodative state. It’s stepping in to support the repo market, while also cutting interest rates to buoy the economy and to keep things running as smoothly as possible for as long as possible.
As it stands, the market is pricing in an 89.3% chance the Fed cuts rates by 25 basis points at this month’s meeting. The other 10.7% probability rests with the Fed leaving rates unchanged. By the way, that meeting is scheduled for Oct. 30, two weeks from now.
Those odds may dip in the days and weeks leading up to the meeting though. That’s after Chicago Fed President Charles Evans said that, “policy probably is in a good place right now.” Does Evans mean that, as it stands, we don’t need a rate cut? That everything is fine and the Fed should hold steady?
He seems to imply as much, although he hedged his stance by saying:
“That said, there is some risk that the economy will have more difficulty navigating all the uncertainties out there or that unexpected downside shocks might hit. So there is an argument for more accommodation now to provide some further risk-management buffer against these potential events.”
At the very least, the commentary has investors talking.
Software Stocks Fall Hard
Several software stocks took the brunt of the selling on Wednesday.
RBC analysts downgraded Workday (NASDAQ:WDAY), which fell 12% at one point. Morgan Stanley hit ServiceNow (NYSE:NOW) and Slack (NYSE:WORK), while Citi analysts turned cautious on Adobe (NASDAQ:ADBE).
It didn’t help matters that high-growth tech stocks also pumped the brakes. The Trade Desk (NASDAQ:TTD), Shopify (NYSE:SHOP), Alteryx (NASDAQ:AYX), Twilio (NYSE:TWLO) and others bit the dust pretty hard Wednesday. These names fell between 5% and 8%, forcing investors to ask if the recent lows really are the lows in this selloff.
Adding insult to injury, Workday didn’t suffer a double-digit percentage decline just because of an analyst. Instead, a disappointing Analyst Day presentation fueled worries about its growth. It hit others as a result, like Splunk (NASDAQ:SPLK), Okta (NASDAQ:OKTA) and Salesforce (NYSE:CRM).
So even though the Nasdaq Composite held up pretty well on the day, cloud, high-growth and software stocks really took it on the chin. Several of these names were covered in InvestorPlace’s Top Stock Trades column on Wednesday.
Movers in the Stock Market Today
On Tuesday, we noted that the UAW and General Motors (NYSE:GM) reached a deal for temp workers. It increased confidence that a full deal would get done between the two parties. Just a day later on Wednesday, the two sides reportedly have a deal. GM rallied more than 1%, even as the details of the deal are not yet known. If there’s a deal in place, it will mark the end of a strike that lasted for over a month.
Bank of America (NYSE:BAC) stock rallied about 1.5% on the day. The rally comes after better-than-expected third-quarter results. BAC beat on earnings and revenue estimates, and Warren Buffett’s firm filed a request with the Fed to up its stake in the bank beyond the 10% threshold. Good earnings and the Oracle of Omaha wanting more stock? Sounds like good news.
New Age Beverages (NASDAQ:NBEV) erupted more than 20% at one point and ended higher by 12% after the company tweeted, “The countdown is on. Big news coming from #Nestea.” Nestea is owned by Coca-Cola (NYSE:KO), and the tweet has many investors speculating on what the news is. However, remember that NBEV now owns Brands Within Reach, which is a market, sales and distribution company. It has the “licensing or distribution rights” to certain brands, including Nestea. So the announcement, what ever it may be, may or may not be able to live up to some investors expectations.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long BAC and TTD.