Before markets open on Wednesday, here’s what you need to know.
Janet Yellen’s Humphrey-Hawkins testimony begins. On Wednesday, Fed Chair Janet Yellen will appear before the House Financial Services Committee as part of her semi-annual Humphrey-Hawkins testimony on Capitol Hill. Yellen’s prepared remarks will be released at 8:30 a.m. ET and Yellen’s session before Congress will kick off at 10 a.m. ET. At the testimony, Yellen will give her thoughts on the US economy and explain the rationale for the Fed’s rate hike in December. On Thursday, Yellen will appear before the Senate Banking Committee.
The US dollar is near a 3.5-month low. The US Dollar Index is holding just above 96.00, its lowest level since late-October. Recent volatility in global markets has pushed back expectations of additional Fed rate hikes, taking the steam out of the US Dollar Index that which have climbed 6% from mid-October until the end of January. Currently, there’s less than a 50% probability of a Fed rate hike at any meetings through at least February 2017.
$6 trillion worth of government debt has a negative yield. Two years ago, none of the global sovereign debt market had a negative yield. Today, more than $6 trillion worth of sovereign debt has a negative yield, according to data from JPMorgan that tracks 27 major issuers. Amazingly, the total amount of sovereign debt yielding less than zero has doubled in just more than a month.
Wall Street’s had a tough time trading in the first quarter. Speaking at the Credit Suisse Financial Services forum, Ted Pick, the global head of sales and trading at Morgan Stanley, admitted trading has gotten more difficult following an “ok” start to the year. While trading volumes are up for both stocks and bonds, Pick believes it’s not the right kind of volume. As for the market, it feels “oversold as a technical matter, but it is hard to have conviction, and for that reason managers are playing close to shore,” he said.
Disney crushed estimates thanks to ‘Star Wars,’ but is lower because of ESPN. The entertainment giant reported its best quarterly results ever thanks to the success of “Star Wars: The Force Awakens.” Disney earned an adjusted $1.63 per share, easily beating the $1.45 expected by the Bloomberg consensus. Revenue of $15.2 billion topped the consensus estimate of $14.73 billion. The quarter was highlighted by an 86% surge to $1 billion of operating income for Disney’s entertainment segment thanks to the box office hit “Star Wars: The Force Awakens.” However, investors have been more focused on the 5% drop in earnings at ESPN. Shares of Disney are down 2.5% in early trade.
Elon Musk’s SolarCity is getting destroyed on weak guidance. SolarCity announced an adjusted loss of $2.37 per share on revenue of $115.48 million. While both numbers topped estimates, it’s the company’s weak guidance that has everyone talking. According to SolarCity’s release, the company expects a “Non-GAAP Loss Per Share (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests)* between ($2.55) – ($2.65)…” Shares of SolarCity are getting destroyed, down 29% in pre-market action.
There might be another acquisition in the beer industry. Japanese brewer Asahi has offered 400 billion yen ($3.5 billion) for SABMiller’s Peroni and Grolsch labels, according to Nikkei. A deal would give Asahi two top European lagers and would make for its largest overseas acquisition ever. While Asahi wouldn’t confirm the report it said it’s “studying a variety of possibilities for a capital and business tie-up, including this case.”
Stock markets around the world are mixed. European markets are higher for the first time in eight days, led by Spain’s IBEX (+3.5%). Overnight, Japan’s Nikkei (-2.3%) paced the decline. S&P 500 futures are higher by 17.50 points at 1865.75.
Earnings reports continue to flow. Time Warner is the most notable name to report ahead of the opening bell. Cisco Systems, Tesla Motors, Twitter and Whole Foods top the list of companies releasing their quarterly results after markets close.
US economic data remains light. Crude oil inventories will be released at 10:30 a.m. ET and the Treasury budget will cross the wires at 2 p.m. ET. Treasury will hold a $23 billion 10-year note auction at 1 p.m. ET. The US 10-year yield is up 3 basis points at 1.75%.
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