With the US Federal Reserve's policy meeting due to finish up on Wednesday afternoon, investors are chomping at the bit for any clues about the bank's future plans for raising interest rates.
The bank is widely expected to stay the course with its tapering schedule and reduce its monthly asset purchases by a further $10 billion, but apart from that, no major policy changes are expected.
Instead, the focus will be on the bank's economic forecast and any forward guidance about when the bank is planning to raise its main interest rate.
The US job market is at the center of the interest rate debate as the nation's improving unemployment figures may not be telling the whole story.
Data from the Labor Department showed that many who were jobless at the height of the US' economic crisis haven't found long term work, but instead have been working in part-time or temporary positions.
For that reason, some Fed officials believe that maintaining a low interest rate will strengthen the economy and in turn help this group return to lasting employment. However others argue that the smaller number of available workers could spark wage growth and trigger inflationary pressure.
- The Japanese economy suffered a major blow on Wednesday after reports showed that the nation's exports to Asia and the US declined, pulling the overall figure down to its lowest level in 15 months. Japanese exports were down 2.7 percent annually in May, or 1.2 percent from April. The poor performance was especially disappointing as the nation is relying on exports since its April sales tax increase has depressed domestic demand.
- After fighting in the eastern Ukrainian city of Luhansk resulted in the deaths of two Russian journalists, Russian President Vladimir Putin and Ukraine's newly elected leader Petro Poroshenko are discussing the possibility of a ceasefire. News that the two were working to end the violence in eastern Ukraine was a massive step in the right direction as tension between the two nations recently reached new highs after Russian gas company Gazprom cut its supplies to Ukraine over unpaid debts.
- With Sunni insurgents pressing closer to Baghdad and threatening to catapult Iraq into a civil war, the While House is planning to respond to Iraqi requests for assistance with what President Obama calls a “comprehensive approach." The president said he has ruled out airstrikes for the time being as the US military would be unable to define specific targets that would have the most impact. Instead, the US will try to assist in resolving the underlying political divide and provide the Iraqi military with intelligence. On Wednesday, the President will meet with members of the Senate and the House of Representatives to outline his plans.
- Amazon is planning to step out into the smartphone space on Wednesday and unveil its first smartphone. The phone is expected to showcase the latest technology including three dimensional imagery and a new display that can detect the user's eye movements. Reuters reported that AT&T is rumored to be behind the launch as the exclusive carrier for the new phone.
Asian markets were mostly lower with the exception of the NIKKEI which gained 0.93 percent and the Hang Seng index, which rose 0.35 percent. The Shanghai composite was down 0.51 percent, the Shenzhen composite lost 0.54 percent and the KOSPI fell 0.60 percent.
European Markets
European markets were higher across the board; the UK's FTSE gained 0.42 percent, the eurozone STOXX 600 rose 0.13 percent, the German DAX was up 0.28 percent, the Spanish IBEX gained 0.46 percent and Italy's MIB rose 0.24 percent.
Energy futures were supported by concerns about a supply interruption in Iraq, but Brent prices lost 0.14 percent while WTI gained 0.19 percent. Gold and silver lost 0.28 percent and 0.24 percent respectively, while industrial metals were mixed. Copper was down 0.13 percent and aluminum lost 0.05 percent, but zinc gained 0.97 percent and tin was up 0.45 percent.
Currency markets were quiet on Wednesday morning; the euro was flat against the dollar at $1.3545 and lost 0.06 percent against the pound. The dollar gained 0.11 percent against the yen and 0.04 percent against the franc, but lost 0.03 percent against the pound.
Earnings
Notable earnings released on Tuesday included:
- Adobe Systems ADBE reported second quarter EPS of $0.37 on revenue of $1.07 billion, compared to last year’s EPS of $0.36 on revenue of $1.01 billion.
- Yingli Green Energy YGE reported a first quarter loss of $0.35 on revenue of $432.20 million, compared to last year’s loss of $0.63 on revenue of $431.39 million.
- La-Z-Boy LZB reported fourth quarter EPS of $0.33 on revenue of $353.00 million, compared to last year’s EPS of $0.30 on revenue of $359.54 million.
Stocks moving in the Premarket included:
- Cisco Systems CSCO was up 0.78 percent in premarket trade after falling 2.00 percent over the past five days.
- Tyson Foods TSN gained 0.70 percent in premarket trade after rising 0.91 percent on Tuesday.
- Carnival Corp CCL lost 0.90 percent in premarket trade after falling 3.63 percent over the past week.
- Transocean Ltd RIG was down 0.75 percent in premarket trade after rising 5.87 percent over the past five days.
Notable earnings expected on Wednesday include:
- FedEx FDX is expected to report fourth quarter EPS of $2.36 on revenue of $11.67 billion, compared to last year’s EPS of $2.13 on revenue of $11.44 billion.
- Red Hat RHT is expected to report first quarter EPS of $0.33 on revenue of $413.97 million, compared to last year’s EPS of $0.32 on revenue of $363.26 million.
- Jabil Circuit JBL is expected to report a third quarter loss of $0.09 on revenue of $3.60 billion, compared to last year’s EPS of $0.56 on revenue of $4.47 billion.
- Actuant ATU is expected to report third quarter EPS of $0.63 on revenue of $376.93 million, compared to last year’s EPS of $0.62 on revenue of $344.20 million.
Economics
The star of Wednesday's economic calendar will be the closing of the Federal Reserve's policy meeting. The bank is expected to give investors some hints about its time line for increasing its interest rate and revise its economic forecast. Other notable economic releases include US oil inventory data, and the US current account.
For a recap of Tuesday’s market action, click here.
Tune into Benzinga’s #PreMarket Prep today to hear Michael Lamothe, Andrew Keene and Paul Theron by clicking here!
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