After the Fed's Surprise, Dow Appears to Be Out of Tricks

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.

Wall Street had a tough time delivering an encore performance after yesterday's surprise announcement from the Fed, despite a raft of strong economic data today. With stocks back at record highs again, investors seem to have trouble justifying further gains without any fundamental driver, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) finished down 40 points, or 0.3%, as a result.

Initial claims were surprisingly low for the second week in a row though last week's data was altered by computer errors from two states. Today, the Department of Labor accurately reported just 309,000 new unemployment claims from last week, much better than estimates of 340,000. Continuing claims were also down sharply to 2.787 million, well ahead of expectations of 2.880 million, indicating that fewer Americans are getting laid off and that more are finding work.

Elsewhere, existing home sales rose last month to 5.48 million from 5.39 million, beating expectations of 5.3 million. The slight increase seems to convey that the housing market continues to improve despite recent rises in mortgage rates. Finally, the Philadelphia Fed's manufacturing index jumped to a two-year high of 22.3, topping estimates of 9.0 and indicating a strong expansion of activity in the mid-Atlantic region. Oddly enough, a day after the Fed said the economy was still too weak to warrant a taper, there seemed to be plenty of data stating the opposite.

On the Dow today, UnitedHealth (NYSE: UNH  ) was the worst performer for the second day in a row, falling 3% as investors continue to flee health insurance stocks ahead of the Obamacare kickoff on October 1. A number of companies have signaled that they'll be sending employees off company plans and over to exchanges, and with stocks at record highs and the sector already having made substantial gains -- UnitedHealth is still up 30% for the year -- it seems understandable that investors would be pulling their money out with the uncertainty ahead.

At the other end of the spectrum, Home Depot (NYSE: HD  ) was the biggest gainer, moving up 1.7% as the home-improvement retailer seemed to benefit from the strong existing home sales report and the Fed's announcement yesterday. While Treasury yields edged up slightly today, the sharp drop yesterday signaled that mortgage rates probably won't increase significantly for at least the next couple of months, meaning the housing recovery should continue. The company also said it would stop providing health coverage for 20,000 part-time employees and instead send them to the Obamacare exchanges.

Finally, JPMorgan Chase (NYSE: JPM  ) shares finished down 1.2% as the bank was slapped with a $920 million fine in response to the London whale trading fiasco. JPMorgan also notably admitted fault in the matter, a rare occurrence in the financial sector, and that could leave the bank vulnerable to millions of dollars in private lawsuits. The fine is one of the biggest ever paid in this sector. JPMorgan and peers like Bank of America have been the target of many federal lawsuits recently, though it's seemed to have little effect on their share prices. I wouldn't expect the consequences of today's news to be any bigger than today's drop.


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