Europe Stimulates Economy but Global Stocks Stick to Cautious Stance

A choppy stock trading day may follow closely watched news from across the Atlantic, where the European Central Bank cut a deposit rate and took other measures but may not have gone as far as some market watchers expected (more from the ECB below). Emphasis in recent trading days has obsessed over the gap in interest rate policy between the ECB and the Federal Reserve—which holds implications for an already strong dollar.

No surprise if trading thins in the afternoon as many traders may adopt defensive precaution ahead of what’s likely to be a market-moving U.S. jobs report issued Friday morning. It will be the final big-picture employment release ahead of the Fed’s December 15-16 policy meeting.

That’s a meeting that most on Wall Street expect to end in action. In a Wednesday speech, Fed Chair Janet Yellen sounded more hawkish toward upcoming interest rate policy decisions than Wall Street was prepared for, according to several analyst notes. Her remarks accompanied a softer-than-expected manufacturing report. Yellen will make another appearance on Thursday, giving testimony to the Joint Economic Committee of Congress at 10 a.m. Eastern. Short-term Fed funds futures market traders have priced in a 75% chance that the Fed activates the first interest rate hike since 2006 when it wraps that two-day session on December 16, according to pricing calculations provided on the CME Group’s FedWatch Tool. Now, traders are trying to speculate on how aggressively the Fed could move in its pledged efforts to return policy to “normal” after extreme measures were put in place during the last recession.

The Dow Jones Industrial Average ($DJI) dipped into negative territory for the year in Wednesday’s downbeat session across the major averages. Stocks fell in part after oil prices tumbled below $40 a barrel following a surprise rise in crude supplies and ahead of late-week OPEC meetings. The S&P 500 (SPX) shed over 20 points (figure 1).

Dollar General Warns. Dollar General DG on Thursday reported profit that just topped Wall Street expectations as its traffic improved, though the company trimmed sales guidance for the year. For the fiscal year ending in January, Dollar General said it’s now expecting comparable sales growth of 2.5% to 2.8%, down from its prior guidance for growth of 3% to 3.5%.

Yahoo Still in the Spotlight. Yahoo YHOO remains among the morning’s leading headlines as The Wall Street Journal reports several potential suitors have emerged for YHOO’s core Internet business. Verizon Communications VZ and Barry Diller’s IAC/InterActive IACI are among the companies interested, the WSJ says, citing people familiar with the matter.