With today being a day for “Trick or Treating”, The Shareplanner Team was able to be treated to an incredible earnings report from Mastercard which sent the stock soaring over $32/share to close at $189.91. The Federal Reserve also announced a quarter-point cut in the Fed Funds Rate and to the Discount Rate. Like we said in yesterday’s summary, if you try to play the immediate reaction to the FOMC statement, you’re likely to get it wrong, and today was no different. Initially the market went from being up 80 points to break even. By the end of the day, investors made sense of the FOMC Statement and the market rallied 138 points. To read the FOMC Statement in its entirety then click here.
In its remarks, the Fed stated that, “the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.” Furthermore, they also acknowledged that with the hike in energy prices, inflationary pressures have increased likewise creating further strain on the economy and concluded by saying that “the upside risks to inflation roughly balance the downside risks to growth” which basically means that in the near term they are done with lowering rates. We believe this is the right action long-term by the Fed, for the health of the economy. If we do go into a market downturn, you want the Fed to have enough bullets in its chamber to combat the woes. Overall, the Fed report was good for the general market.
Mastercard blew out its 3rd quarter earnings report, exceeding revenue expectations with sales at $1.08B versus analyst expectations of 1.03B. But the biggest blowout came with the earnings per share (EPS) of $2.31 versus the expected $1.42, beating expectations by a whopping 63%. All very good news for the Shareplanner Team. Our approach from here is to continue holding. We do not intend to sell in the near term at all. We are likely to see some analysts come out tomorrow and upgrade the stock, which would likely send it even higher. In these types of situations analysts can’t help themselves but to jump on the bandwagon. It’s a herd mentality with them.