After losing nearly 1% yesterday, stocks recovered across the board today, getting a boost from favorable comments in the minutes of the Federal Reserve's latest monetary policy meeting. As a result, the Dow Jones Industrial Average (^DJI +0.11%) finished up 1% or 159 points, while the S&P 500 moved up 0.8% and the Nasdaq gained 0.9%.
In the minutes from the Fed meeting three weeks ago, the central bankers "discussed issues associated with the eventual normalization of monetary policy," but the discussion "did not imply that normalization will begin soon." Investors have been concerned in recent months that the Fed could tighten monetary policy too quickly in response to the strengthening economy. In its last meeting, the central bankers considered several options for raising interest rates, and the board members believed it was prudent to begin those discussions as it would aid decision-making when the time comes to act and help with communicating plans to the public. Investors seemed to interpret that as evidence the Fed was not planning to increase rates too soon.
Among stocks moving late today was Lorillard (LO +0.00%), which jumped 10%, after a Reuters report said the tobacco company was in advanced talks to be acquired by Reynolds American (RAI +0.00%), whose shares also jumped 4% on the news. A deal would bring the parents of major brands such as Newport and Camel together, and could be announced within weeks. Since the two companies are the second and third largest sellers of cigarettes in the country, a deal would have to overcome antitrust obstacles, though the companies have planned to divest certain brands if asked to do so. Lorillard also owns the leading e-cigarette brand blu, which adds to its appeal as a partner for Reynolds, whose e-cigarette, Vuse, is currently sold in only two states. Oddly, even Altria, the nation's leading cigarette maker, gained 1.5%, an indication that investors seem to think consolidation and merger activity benefits the industry as a whole.
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After hours, Williams-Sonoma (WSM +0.88%) shares were riding higher, up 6% on another strong earnings report. The home-products maker posted a per-share profit of $0.48 in its quarter, ahead of expectations of $0.44, as revenues increased 9.7% to $974.3 million, easily outpacing the consensus at $941.3 million. Comparable brand revenue was up 10% in the quarter, led by West Elm, whose sales increased 18.8%. CEO Laura Alber said the company was "executing all of our growth strategies, investing in our business while improving profitability, and returning capital to our shareholders," and shares approached a record high on the report. Despite the strong quarter, guidance came in under expectations as Williams-Sonoma sees a per-share profit of $0.49-$0.52 for the current quarter against estimates of $0.55. The company raised its full-year guidance, but that was still below expectations. Investors may think that its guidance is conservative after a string of several earnings beats. With Williams-Sonoma's strong brand family, solid execution, and steady growth, I'd look past the weak guidance also.
