With the Fed’s latest rate announce expected this afternoon, here’s what you need to know before the opening bell.
Wednesday is a Fed day. The Federal Reserve will complete its two-day meeting, and announce its latest policy decision at 2 p.m. ET. Currently the market sees no chance of a rate hike and just a 2% chance of a rate cut. Traders will be parsing the statement for clues as to how the recent turmoil in markets may impact the path of presumed Fed rate hikes. Since this is an “off-cycle” meeting there won’t be an accompanying press conference nor an update of economic projections.
A late-day rally trimmed the losses in China. China’s Shanghai Composite fell to a loss of more than 4% at the midpoint of Wednesday’s session, touching its lowest level since November 2014. However, a sudden and dramatic rebound, paced by large cap stocks, lifted the index to a loss of just 0.5% by the close. According to BI Australia, the late-day bid had the hallmarks of buying by China’s “National Team.”
Ray Dalio says the 75-year debt supercycle is ending. Ray Dalio, the founder of Bridgewater Associates, says pretty soon central banks won’t be able to stimulate growth using cheap debt. In an op-ed for Financial Times, Dalio said debt super cycles typically last 50 to 75 years, and that the end of the current cycle is near. Dalio pointed to 1935 as an example, saying this scenario was referred to as “pushing on a string.”
Russia is worried the US is after its natural resources. According to Nikolai Patrushev, head of Russia’s Security Council, the US wants to weaken Russia to “open access to the richest resources for the United States, which believes that Russia possesses them undeservingly.” BP data obtained by Reuters shows Russia has the world’s sixth largest crude oil holdings and second largest natural gas reserves.
Apple’s iPhone business may have finally peaked. Apple earned $3.28 per share on revenue of $75.9 billion. While EPS beat the Bloomberg consensus estimate of $3.23, revenue was shy of the $76.6 billion that was expected. The company sold 74.8 million iPhones during the holiday quarter, which was a slight improvement from the 74.5 number from a year ago, but missed the 75 million that was anticipated. iPad sales tumbled 21% to 16.12 million while Mac sales slid 3%. Apple’s revenue guidance for the first three months of 2016 was between $50 billion and $53 billion, which at the midpoint is an 11% year-over-year decline. Wall Street was looking for revenue guidance of $55.7 billion. Apple is down more than 4% in pre-market trade.
RBS issued a warning. The Royal Bank of Scotland warned it would take a $3.6 billion (£2.5 billion) hit as a result of legal bills, misselling, writedowns on its private bank and changes to its pension system. However, the warning didn’t include anything related to a settlement with US authorities, so there might be another charge in the near future. “I am determined to put the issues of the past behind us, and make sure RBS is a stronger, safer bank,” said CEO Ross McEwan on the call.
TSYS is buying TransFirst. The credit card and payments processor is buying privately owned TransFirst for $2.35 billion in cash. According to the Ledger-Enquirer, the takeover makes TSYS the sixth largest US merchant acquirer in the US based on net revenue. TSYS Chairman, President and CEO Troy Woods says the acquisition will “enhance its merchant business in order to remain competitive in the rapidly changing acquiring landscape.”
Stock markets around the globe are mixed. Japan’s Nikkei (+2.7%) led a mixed session in Asia, and Germany’s DAX (-0.8%) paces the declines in Europe. S&P 500 futures are down 13.50 points at 1882.25.
Earnings reporting picks up. Biogen, Boeing, EMC, Fiat Chrysler, Norfolk Southern and United Technologies are among the names reporting ahead of the opening bell. EBay, Facebook, Las Vegas Sands, Qualcomm and Texas Instruments highlight the names releasing their quarterly results after markets close.
US economic data is light. New home sales will be released at 10 a.m. ET and crude oil inventories will cross the wires at 10:30 a.m. ET. The US 10-year yield is up 1 basis point at 2.00%.