Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Earnings were once again a big story for the broad-based S&P 500 (^GSPC 1.20%), but they didn't stand nearly as tall the Federal Reserve which put the kibosh on any chance the market had of striking another new all-time high.
Earlier today the Federal Open Market Committee decided to yet again leave its record-low federal funds target rate unchanged at 0.25%. Furthermore, the committee also left in place the long-term Treasury and mortgage-backed securities purchases that add up to $85 billion monthly. Known as quantitative easing, or QE3, the FOMC views this tool as crucial to buoying the housing industry and overall U.S. economy which is still considered to be fragile. Today's market reaction lower seems to be due to the belief from investors that the FOMC should begin lifting its monthly easing and allow the marketplace to adjust on its own.
By day's end, the S&P 500 had retraced by 8.64 points (-0.49%) to close at 1,763.31, just the index's third loss over the trailing three-week period.
Leading all S&P 500 gainers today was video game developer Electronic Arts (EA 0.02%) which added 7.8% after delivering better-than-expected second-quarter earnings results and boosting its full-year earnings-per-share forecast. For the quarter, EA reported total revenue of $1.08 billion, a drop of 8% from last year, and total EPS of $0.33. However, thanks to the debut of Battlefield 4, EA was able to crush Wall Street's estimates on both accords; the Street had been looking for just $975.7 million in sales and $0.12 in EPS. Looking ahead, EA also raised its full-year EPS forecast from $1.20 to to $1.25, which is slightly ahead of the current consensus. The debut of new gaming systems is bound to help EA's sales over the near term but I remain a bit concerned about what will happen to sales once the euphoria of these console debuts fades in six months to a year.
Keeping with the theme of earnings-driven moves, Sealed Air (SEE -0.57%) advanced 6.4% after it, too, delivered market-beating results. For the quarter, the food safety and security solutions provider reported a 2% increase in sales (including negative currency effects) to $1.9 billion, helped largely by international growth, and an adjusted profit of $0.39 which is 39% higher than the year-ago period and $0.06 more than the Street anticipated. Sealed Air, like EA, also updated its full-year forecast ahead of expectations. It issued EPS guidance of $1.25-$1.30, which is handily ahead of the $1.20 the Street was projecting, although some of the boost looks as if it'll come from a lower corporate tax rate rather than organic growth. However, without a major push into foreign markets, I'm not certain I see a way for Sealed Air's share price to inch much higher from its current level.
Finally, storage solutions and networking semiconductor manufacturer LSI (NASDAQ: LSI) popped 5.6% after being upgraded by Morgan Stanley from equal weight to overweight. Morgan Stanley set a price target of $10 on shares, implying 25% upside based on yesterday's closing price, and pointed to the company's growing hard-disk drive portfolio of products as a driving force that should propel its business forward. Given the push toward the cloud, it's difficult to not see how solid-state drive and hard-disk drive manufacturers and related component suppliers won't thrive over the coming decade. However, never underestimate the cyclicality and commoditization of this industry which is known for driving down margins.
