#PreMarket Primer: Thursday, October 9: Fed Worries That Waning Global Economy Could Hurt US Progress
The Federal Open Market Committee minutes released on Wednesday surprised investors with a dovish tone and an indication that the bank was not planning to raise interest rates any time soon despite improving U.S. economic data.
Instead, the U.S. central bank discussed the potential for weak growth in Europe, China and Japan to hurt U.S. exports and set back the U.S. economy. Fed officials are also concerned that the cost of imports will decline, which, in addition to a strong dollar, will hold down interest rates.
The meeting minutes took the dollar lower and helped boost share markets as most saw it as a sign that the bank will maintain low interest rates well into 2015. Improving economic data, especially in the job market, had caused many to revise their estimates for a rate hike in early- or mid-2015, but the FOMC minutes have pushed those projections to later in the year.
In other news around the markets:
Islamic State Militants Push Toward Turkey
Airstrikes led by the U.S. and its allies near Syria’s border with Turkey did little to prevent Islamic State fighters from continuing their push to overtake Kobani, a Kurdish border town. On Thursday, more than a third of the town had been taken by ISIS as militants moved in from three sides. If the group gains control of the town, it will give them direct access to the border, which has many worried that the growing conflict will expand into Turkey.
German Data Could Indicate Coming Recession For The Eurozone
German data showed that the nation’s exports fell 5.8 percent in August, a massive dip that suggests Europe’s growth engine is faltering. The data followed other German releases like industrial output that suggested the nation has fallen off track. With its largest economy seemingly sputtering, many believe that the eurozone is headed for a technical recession in the coming quarter.
Gap CEO To Resign
After several quarters of declining sales and a failed attempt to renew the company’s image, The Gap Inc.’s (NYSE: GPS) CEO Glenn Murphy has decided that he will step aside next year. On Wednesday, the company announced the transition, saying that his replacement, division head Art Peck, will replace Murphy on February 1.
JPMorgan Hackers May Have Targeted Other Financial Firms
An investigation into the hacking attack on JPMorgan Chase & Co. (NYSE: JPM) revealed that more than 12 other financial services firms may have also been targeted. Data suggested that the same group of hackers also attempted to break into Citigroup Inc (NYSE: C), HSBC Holdings plc (NYSE: HSBC) and Automatic Data Processing (NASDAQ: ADP) among others. However, no customer data appears to have been breached in those cases.
Asian markets were mostly higher with the exception of the NIKKEI and the KOSPI, which lost 0.75 percent and 0.39 percent, respectively. The Shanghai composite was up 0.27 percent, the Shenzhen composite gained 0.36 percent and the Hang Seng index rose 1.17 percent.
European markets opened on a bright note; the FTSE was up 0.75 percent, the STOXX 600 gained 0.99 percent, the DAX rose 1.37 percent and the CAC 40 was up 0.81 percent.
Energy futures were higher; Brent futures gained 0.23 percent and WTI futures were up 0.49 percent. Gold and silver gained 1.93 percent and 3.02 percent, respectively, and industrial metals were mostly lower with the exception of copper, which gained 1.27 percent.
The dollar lost momentum after the release of the Fed’s meeting minutes, down 0.27 percent against the euro, 0.22 percent against the yen, 0.17 percent against the pound and 0.36 percent against the Australian dollar. The euro made modest gains, rising 0.05 percent against the yen and 0.11 percent against the pound.
Notable earnings released on Wednesday included:
- Costco Wholesale Corporation (NASDAQ: COST) reported fourth quarter EPS of $1.58 on revenue of $35.52 billion, compared to last year’s EPS of $1.40 on revenue of $32.49 billion.
- Alcoa Inc (NYSE: AA) reported third quarter EPS of $0.31 on revenue of $6.24 billion, compared to last year’s EPS of $0.11 on revenue of $5.76 billion.
- Monsanto Company (NYSE: MON) reported a fourth quarter loss of $0.27 on revenue of $2.63 billion, compared to last year’s loss of $0.47 on revenue of $2.20 billion.
Stocks moving in the #PreMarket included:
- Alcoa Inc (NYSE: AA) was up 3.61 percent in premarket trade after rising 2.36 percent over the past week.
- Starbucks Corporation (NASDAQ: SBUX) was down 0.61 percent in premarket trade after rising 1.63 percent on Wednesday.
- Yahoo! Inc. (NASDAQ: YHOO) was down 0.32 percent in premarket trade after gaining 1.88 percent over the past five days.
- First Solar, Inc. (NASDAQ: FSLR) lost 0.31 percent in premarket trade after rising 2.93 percent on Wednesday.
Notable earnings releases expected on Thursday include:
- PepsiCo, Inc. (NYSE: PEP) is expected to report third quarter EPS of $1.29 on revenue of $17.16 billion, compared to last year’s EPS of $1.24 on revenue of $16.91 billion.
- Safeway Inc. (NYSE: SWY) is expected to report third quarter EPS of $0.13 on revenue of $8.46, compared to last year’s EPS of $0.10 on revenue of $8.60 billion.
- Lindsay Corporation (NYSE: LNN) is expected to report fourth quarter EPS of $0.57 on revenue of $129.16 million, compared to last year’s EPS of $0.81 on revenue of $148.40 million.
- VOXX International Corp (NASDAQ: VOXX) is expected to report second quarter EPS of $0.06 on revenue of $185.20 million, compared to last year’s EPS of $0.20 on revenue of $183.82 million.
On Thursday, investors will be watching FOMC member James Bullard closely as he speaks following the release of the Fed’s meeting minutes. Investors will also be anticipating U.S. initial and continuing jobless claims, Germany’s trade balance and the Bank of England’s interest rate decision.
For a recap of Wednesday’s market action, click here.
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