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Wall Street mixed as Microsoft climbs and Apple dips

Microsoft gains on $40bn share buyback plan.

Wall Street ended mixed on Thursday, with a gain in Microsoft offsetting a dip in Apple, a day after the Federal Reserve cut interest rates as expected and left the door open for further monetary easing.

Microsoft rose 1.8% after unveiling a $40 billion stock buyback plan, while Apple declined 0.8% and the S&P 500 ended virtually unchanged.

The S&P 500 was than less than 1% below its closing record high hit in July as investors became more optimistic about the resumption of talks between the United States and China aimed at laying the groundwork for high-level trade negotiations in early October. A recent easing in trade tensions has helped the three main indexes recover from losses from August.

“There has been slightly more constructiveness lately, but if there is any sort of agreement it will be a very light, mini-deal, because the US and China are still very far apart on the main issues,” warned Ben Phillips, chief investment officer at EventShares.

The S&P 500 healthcare index climbed 0.5% after US House of Representatives Speaker Nancy Pelosi released a proposal on drug pricing policy.

While the plan is a “big negative” for drugmakers, the stock reaction has already been priced in to some degree, said Thomas Martin, senior portfolio manager at GLOBALT Investments.

Of 11 sector indexes, healthcare is the worst performer so far in 2019, with a gain of 6%.

Expectations of another rate cut by the Fed, following the US central bank’s 25-basis-point reduction on Wednesday, also drove sentiment. The Fed, in announcing its second quarter-percentage-point cut this year, said future reductions would be “largely data-dependent.”

Traders see a nearly 50% chance for another 25 basis point rate cut in October, according to CME Group’s FedWatch tool.

“The market just continues to believe the Fed is going to be accommodative,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth in New York.

The Fed injected another $75 billion into the US banking system on Wednesday, restoring a measure of order after the central bank’s benchmark interest rate rose above its targeted range for the first time since the financial crisis.

The Dow Jones Industrial Average declined 0.19% to end at 27 094.79 points, while the Nasdaq Composite crept up 0.07% to 8 182.88. The S&P 500 stood at 3 006.79 points, up less than one point from Wednesday

With the S&P 500 up nearly 20% in 2019, the benchmark index is trading at about 17 times expected earnings, up from about 15 at the end of last year, according to Refinitiv’s Datastream.

“Corporate earnings continue to expand, albeit at a slower pace, and we expect that to continue into 2020,” said Bill Northey, senior investment director for US Bank Wealth Management. “We view valuations as high but not extreme at this point. It’s not something that’s causing us to wring our hands.”

Shares of Target rose 0.8% after the retailer announced a $5 billion share buyback plan.

Advancing issues outnumbered declining ones on the NYSE by a 1.19-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favoured decliners.

The S&P 500 posted 25 new 52-week highs and one new low; the Nasdaq Composite recorded 66 new highs and 44 new lows.

Volume on US exchanges was 6.1 billion shares, compared with a 6.9 billion-share average over the last 20 trading days. 

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