Wall Street Put Off By Fed's Rate Hike Rhetoric
Washington (May 19) Wall Street stocks look set to persist with negativity as commodities sink deeper amid the dollar strength. With the Fed sounding out a potential June rate hike, the markets are unnerved about the impact a widening interest rate differential can have on investments. After Asia closed mostly lower, the European markets are seeing an across-the-board sell-off. The domestic markets may stay tuned to two Fed speeches for further clarity on interest rates, economic data on jobless claims and a regional manufacturing activity data and earnings from Wal-Mart (WMT).
As of 6:15 am ET , the Dow futures are moving down 53 points, the S&P 500 futures are slipping 5.50 points and the Nasdaq 100 futures are dipping 11.75 points.
US stocks closed mixed on Wednesday amid the release of some disappointing retail earnings, the hawkish undertone of the FOMC minutes and the pullback in commodity prices.
On the economic front, the Labor Department is scheduled to release its jobless claims report for the week ended May 14th at 8:30 am ET . Economists expect claims to have declined to 275,000 from 294,000 in the previous week. Also at 8:30 am ET , the Philadelphia Federal Reserve is set to release the results of its manufacturing survey for May. The consensus estimate calls for an improvement in the index to 3 from -1.6 in March
Federal Reserve Vice Chairman Stanley Fischer is scheduled to speak at the New York Fed and Columbia University sponsored conference in honor of Michael Woodford's contributions to economics, in New York at 9:15 am ET .
The Conference Board will release its US leading economic indicators index for April at 10 am ET . Economists expect the index to rise 0.4% month-over-month. New York Federal Reserve Bank President William Dudley will speak on trends at a NY Fed event followed by Q&A session in New York at 10:30 am ET .
In major corporate news, Cisco Systems (CSCO) reported better than expected third adjusted earnings per share and revenues and its guidance for the fourth quarter is positive.
Monsanto (MON) confirmed it has received an offer from Bayer for acquiring the company and that its board is reviewing the offer.
American Eagle (AEO) reported above-consensus results for its first quarter and issued in line earnings per share guidance for the second quarter. Urban Outfitters (URBN) also reported better than expected first quarter results. However, L Brands (LB) reported first quarter bottom line results that beat estimates but its revenues missed expectations. The company also trimmed its earnings forecast for the year and warned of a sales decline.
Salesforce.com (CRM) reported strong first quarter results and raised its revenue guidance for the full year. Take-two (TTWO) reported better than expected fourth quarter results but its first quarter guidance is weak. Tesla (TSLA) announced a USD2 billion common stock offering, as it ramps up production of its Model 3 vehicle.
Brocade (BRCD), Autodesk (ADSK), Gap (GPS), Marvell (MRVL), Mentor Graphics (MENT), New York & Co. (NWY), Ross Stores (ROST) and Shoe Carnival (SCVL) are among the notable companies due to release their quarterly results after the close of trading.
The Asian markets ended mostly lower, dragged lower by the negative close on Wall Street overnight. The New Zealand and Singaporean markets witnessed steep losses even as the Japanese market ended little changed with a slight positive bias.
The Japanese market had a nervous outing. After staying above the unchanged line till the mid-session, Japan's Nikkei 225 average began moving back and forth across the unchanged line in a narrow range before ending up 1.97 points or 0.01% at 16,647. Australia's All Ordinaries saw some strength in early trading but declined steadily in the morning and then went about a consolidation move at lower levels in the afternoon. The index ended down 34.90 points or 0.64% at 5,386, its lowest level since May 6th .
Hong Kong's Hang Seng Index ended at 19,694, down 132.08 points or 0.67%, and China's Shanghai Composite Index ended at 2,807, down 0.61 points or 0.67%.
On the economic front, a report released by Japan's Cabinet Office showed that core machinery orders rose 5.5% month-over-month in March, belying forecasts for a 2% drop. In February, orders slid 9.2%. Annually, core machinery orders surged up 3.2%, ahead of the 0.8% increase expected by economists.
The Australian Bureau of Statistics reported that the unemployment rate in Australia was unchanged at 5.7% in April, although smaller than the 5.8% rate expected by economists. The economy added 10,800 jobs in April compared to the 12,000 job gains expected by economists. Volatile part time jobs surged up by 20,200 but 9,300 full time jobs were lost.
European stocks opened notably lower and are trading with steep losses ahead of the a meeting of G20 finance ministers and central bank governors at Tokyo . The US Fed rhetoric of a June rate hike has not gone down well with investors.
In major corporate news, Merck KgaA reported higher profits and revenues for the first quarter, helped by acquisitions. The company also gave a positive outlook for the full year. German personal care product company Henkel also reported higher first quarter earnings and confirmed the outlook for the year.
Mitchells & Butlers' pre-tax profits for the 28-week period rose despite a decline in revenues. Utility National Grid also reported strong profit growth for the full year.
On the economic front, a report released by the UK Office for National Statistics showed that retail sales in the UK Rose 1.3% month-over-month in April, reversing the 0.5% drop in March. Excluding auto fuel, sales were up 1.5%.
Eurostat reported that construction output in the eurozone fell 0.5% year-over-year and was down 0.9% compared to the previous month. French statistical office INSEE reported that the unemployment rate in France remained unchanged at 10.2% in the first quarter, in line with expectations. This represents a slowdown from the 10.3% rate in the fourth quarter of 2015.