Here is what you need to know.
The zero interest rate policy era is over. On Wednesday, the Fed hiked its benchmark interest rate for the first time since June 2006. As expected, the US central bank raised its fed funds target to between 0.25% and 0.50%, suggesting, “…economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” Currently, the market sees a 46% chance of the next 25 basis point rate hike coming in March, and just a 4% chance the Fed will have to cut back to zero at the meeting.
German business sentiment fell. The Ifo Business Climate Index slipped to 108.7 in December, missing the 109.2 that was forecast. The fall from November’s 109.0, which was the highest reading in since June 2014, came as the assessment of current conditions declined, and optimism regarding the future remained unchanged. “The economic situation could hardly be better in the run-up to Christmas,” Ifo’s statement said. The euro is lower by 0.6% at 1.0847.
Norway unexpectedly kept policy on hold. The Norges Bank held its benchmark interest rate at 0.75%, surprising economists as most were expecting a 25 basis point cut to 0.50%. The central bank took note of the pronounced impact of the drop in oil prices, and suggested unemployment is expected to tick higher. However, the recent depreciation of Norway’s currency, the krone, has led to an uptick in inflation. “Uncertainty as to the effects of the monetary policy stance suggests a cautious approach to interest rate setting,” the central bank’s statement said. Norway’s krone is stronger by 0.5% at 8.7165 per dollar.
FedEx crushed estimates. The world’s second largest shipping company earned $2.58 per share, easily beating the $2.50 Bloomberg consensus. Revenue climbed 5% to $12.43 billion, edging out the $12.42 billion that was expected. FedEx expects to earn between $10.40 and $10.90 for fiscal year 2016 as long as there is “moderate economic growth.” CFO Alan Graf, Jr. said in the earnings release, “We expect our solid earnings growth to continue in the second half of our fiscal year despite weakness in industrial production.”
Oracle’s cloud is growing. The enterprise software giant announced earnings of $0.63 per share, topping the Wall Street estimate by three cents. Revenue fell 6.4% to $9 billion, which was shy of the $9.06 billion consensus. Oracle says it signed up 612 new customers for Software-as-a-Service, its higher margin software subscription cloud-computing business.
AIG is buying back more stock. The insurer announced it’s buying back $3 billion more worth stock. The company has already purchased $9.7 billion of its own stock so far this year, but has faced increased pressure from activist investors Carl Icahn and John Paulson to cut costs and break up the company into three separate parts. “This additional authorization will enable AIG to continue returning excess capital to shareholders, while finalising authorization plans for 2016,” Douglas Steenland, AIG’s Chairman of the Board of Directors said in a statement. “The timely return of excess capital to shareholders is one of AIG’s strategic priorities.”
Boeing got a big order from China. The aerospace giant announced it has received a $10 billion order from China Southern Airlines. According to Bloomberg, Boeing will deliver 80 planes to China Southern, China’s largest carrier, and an additional 30 planes to China Southern’s Xiamen unit. The planes will be delivered between 2017 and 2021.
Two IPOs are expected to price. Pu lte Acquisition is expected to price its 7 million share offering at $10 per share, and will trade under the ticker “PLTEU.” Additionally, Yirendai’s 7.5 million share offering is expected to price at between $9 and $11 per share. The stock will trade under the ticker “YRD.”
Stock markets around the world are going nuts. China’s Shanghai Composite (+1.8%) paced the gains in Asia and Germany’s DAX (+3.3%) leads in Europe. S&P 500 futures are higher by 6.25 points at 2070.00.
US economic data continues to flow. Initial and continuing claims, Philadelphia Fed and current account balance are all due out at 8:30 a.m. ET before leading indicators and natural gas inventories cross the wires at 10 a.m. ET. The US 10-year yield is down 5 basis points at 2.25%.