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News From the Fed Surprises Investors

Yesterday's market moves:
Dow Jones Industrial Average
(DJINDICES: ^DJI  ) : 15,618, -62 (-0.39%)
S&P 500: 1,763,
 -9 (-0.49%)

Still trying to figure out whether it would be funny or disturbing to go as "A Sexy ____" for Halloween? We've all been there. But instead of costumes, you should be a tad more concerned about what sent stocks down Wednesday -- the Dow dropped 62 points after the Federal Reserve surprised Wall Street like an 18-year-old trick-or-treater.

1. When will Fed end stimulus? Who knows
The biggest news on Wall Street on Wednesday was the Fed's policy statement after its eight-time-a-year two-day meeting. The nation's central bank will continue purchasing long-term U.S. Treasury and mortgage-backed bonds at a rate of $85 billion per month to encourage investment, hiring, and spending. The Fed keeps nurturing its precious little economy by pushing down interest rates to give it a boost. Chairman Ben Bernanke's role as a protective mama-bear lives on.

More "quantitative easing" came as no surprise to investors. What was surprising was the downplay of the 16-day government shutdown in October. Reading the Fed's statement, you would think October was a walk in the park. Estimates are that $25 billion of economic activity was lost during the shutdown, so investors expected the Fed to downgrade their assessment of the economy and pledge longer-term stimulus. But the Fed's economic reading was unchanged at "growing at a moderate pace."
2. Facebook earnings impress, then unimpress
We'll spare you the "likes" puns; investors loved Facebook's  (NASDAQ: FB  )  earnings. The 'Book announced after yesterday's market close that revenue popped to $2.02 billion last quarter, up 60% from a year ago. Analyst earnings expectations of $0.19 per share were smashed by a handsome $0.25 per share. Facebook stock jumped more than 15% in after-hours trading right after the news broke. Then things changed as quickly as your hyper-sensitive roommate's relationship status.

During the actual earnings call, Facebook's after-hours stock gains disappeared as the company's CFO revealed two things investors aggressively disliked. First, Facebook admitted that it won't add any more ads in newsfeeds, which had been propelling revenues. And second, Facebook admitted that daily usage among teens has dropped. Apparently writing on virtual walls isn't as fun as fantasy football and other things that occupy most teenagers' time.

The takeaway is that the share price of Zuck's baby has still nearly doubled over the last quarter. As mentioned during the earnings call, Facebook is crushing competitors Pinterest, Twitter, and Tumblr in terms of time spent on the website. Plus, the company has managed to add mobile ads that investors worried about a year ago.

3. General Motors earnings fall on special charges but still beat estimates
Yes, Detroit is bankrupt, and yes, General Motors (NYSE: GM  )  used to be bankrupt, too. But GM has emerged from "Bankruptcy City" with a fraction of the debt and a much slimmer cost structure, and it's actually making good cars again. Since exiting bankruptcy in '09, GM has turned profits of $6 billion-plus each year, and it already has $4 billion in the bag through the third quarter of 2013. Take that, city of Detroit!

It's trucking season, and GM's loving every minute of it. The ultra-profitable Silverado truck just got remodeled for the first time since '06, and other high-margin hybrids and SUVs are rolling through the streets like occupational armies. GM's most profitable region was North America (by far), followed by China. South America and Europe continue to create losses.

A quarterly profit of $698 million is down 53% from last year, but it still beat analyst estimates. Revenue was up 4% for the quarter, though, and excluding special charges, profit was $0.96 per share compared to $0.89 per share last year. One special charge was $800 million to purchase shares owned by the United Auto Workers Union, and the U.S. government ownership is down to just 7.3%. GM stock cruised 3.2% higher Wednesday -- the most since early September -- and reached heights not seen since early 2011.

  • Weekly jobless claims
  • Third-quarter earnings from Clorox, The New York Times, Hugo Boss
  • Hopefully some good Halloween pranks

Originally published on

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Related Tickers

9/30/2016 5:01 PM
^DJI $18308.15 Up +164.70 +0.91%
FB $128.27 Up +0.18 +0.14%
Facebook CAPS Rating: ***
GM $31.77 Up +0.29 +0.92%
General Motors CAPS Rating: ***