Stock Market News For September 18, 2014

By Zacks Equity Research of Zacks.com

Thursday, September 18, 2014 11:28 AM EDT

Benchmarks eked out small gains on Wednesday following Fed’s decision to continue with low rates for a “considerable time”. Meanwhile, strong home builder confidence along with better-than-expected quarterly results of Lennar helped housing stocks outperform the broader markets.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article

The Dow Jones Industrial Average (DJI) had hit an intraday record high of 17,221, but closed at 17,156.85, still up 0.2%. The Standard & Poor 500 (S&P 500) increased 0.1% to close at 2,001.57. The tech-laden Nasdaq Composite Index closed at 4,562.19; gaining 0.2%. The fear-gauge CBOE Volatility Index (VIX) went down 0.6% to settle at 12.65. A total of 6.06 billion shares were traded on Wednesday, higher than this month’s average of 5.65 billion. Advancers outpaced declining stocks on the NYSE. For 50% stocks that advanced, 47% declined.

Benchmarks extended their gains from Tuesday after Federal Reserve decided to keep short-term interest rates near zero for a “considerable time”. Fed pledged not to hike rates immediately after the end of the quantitative easing program. Separately, economic projections that were released on Wednesday showed Fed believes federal funds rate will be at 1.375% by the end of 2015.

The central bank trimmed its bond buyback plan by $10 billion. It was the seventh consecutive month that the central bank reduced its asset purchase plan. The quantum of asset purchases was thus reduced to $15 billion a month.

In the press conference that followed, Fed Chairwoman Janet Yellen said that the pledge to keep low interest rates depends on the state of the economy. She said: “The labor market has yet to fully recover.”

She added: “There are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work, and too many who are not searching for a job but would be if the labor market were stronger.” She also said: “Inflation has been running below the committee's 2 percent objective.” Earlier in July, Fed said inflation rate was “somewhat closer” to its desired level.

Economic data was encouraging on Wednesday. The US Bureau of Labor Statistics came out with consumer price data; wherein it reported Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2% in August. The decrease was in contrast to the consensus estimate expecting no changes. Consumer prices declined for the first time in 16 months due to drop in gasoline prices.

Separately, the U.S. Department of Commerce reported that second quarter current account deficit decreased to $98.5 billion while the consensus estimate expected the deficit to be at $113.2 billion.

Meanwhile, the National Association of Home Builders/Wells Fargo said the U.S. homebuilders’ sentiment touched the highest level since Nov 2005. The sentiment gauge went up to 59 in September from August’s reading of 55.

Upbeat homebuilder confidence helped housing stocks outpace the broader markets. Lennar Corp.’s (LEN - Analyst Report) upbeat third quarter results also had a positive impact on housing stocks. Lennar’s third-quarter fiscal 2014 adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 67 cents. Earnings jumped 44.4% year over year, driven by double-digit growth in homebuilding revenues and solid margins. The homebuilder gained 5.8%.

Other key housing stocks from the sector such as DR Horton Inc. (DHI - Analyst Report), Toll Brothers Inc. (TOL - Analyst Report), Beazer Homes USA Inc. (BZH - Snapshot Report) and PulteGroup, Inc. (PHM - Analyst Report) increased 2.9%, 1.9%, 2.9% and 2.5%, respectively. The SPDR S&P Homebuilders (XHB) gained almost 1.3%, the highest among the S&P 500 sectors.

The Materials Select Sector SPDR (XLB) gained 0.6%. Key stocks from the sector such as E. I. du Pont de Nemours and Company (DD - Analyst Report), The Dow Chemical Company (DOW -Analyst Report), Praxair Inc. (PX - Analyst Report), Ecolab Inc. (ECL - Analyst Report) and PPG Industries Inc. (PPG - Analyst Report) increased 5.2%, 1.3%, 0.2%, 0.5% and 0.7%, respectively.

Separately, Apple Inc. (AAPL - Analyst Report), Yahoo! Inc. (YHOO - Analyst Report) and Microsoft Corporation (MSFT) were among the most actively traded stocks in the tech-laden Nasdaq. While shares of Yahoo and Microsoft went down 0.3% and 0.5%, respectively, shares of Apple gained 0.7%.

General Electric Company (GE), Bank of America Corporation (BAC) and Petroleo Brasileiro Petrobras SA (PBR) were among the most actively traded stocks in the NYSE. Shares of General Electric, Bank of America and Petrobras increased 0.2%, 0.4% and 0.6%, respectively.