Here is what you need to know.
Moody’s downgraded US growth. The credit rating agency trimmed its 2016 US growth forecast to 2% from 2.3%, according to an emailed statement obtained by Bloomberg. The statement suggested the slowing of the Chinese economy could have a “significant” impact on financial markets. Additionally, Moody’s believes the US Federal Reserve will raise rates at most twice this year. As for 2017, the rating agency thinks US growth will reach 2.3%, according to Bloomberg.
Fed rate hike probabilities have been pulled forward. On Wednesday, the April FOMC minutes were released, and suggested if conditions are right, the Fed could raise rates in June. While none of this was really anything new, it sent shivers through the fed fund futures market. Traders had been pricing in a minimal chance of a June rate hike, and a just better than 50% chance the next hike would occur in December. However, after the minutes, the market sees a 32% chance of a June rate hike and a better than 60% chance of the next increase happens in September.
Gold is under pressure. At the start of 2016, the yellow metal booked its best quarter in in almost three decades, climbing 18%. However, things have started to take a turn south. Gold trades at $1255 per ounce, down 1.6% since the release of the April FOMC minutes, and off 3.2% from its May high near $1296.
Bayer is making a play for Monsanto. The German drug and chemicals maker has made an undisclosed takeover offer for Monsanto. According to Reuters, Monsanto’s current market cap is around $42 billion, and the bid is likely to top the $43 billion that ChemChina paid for rival Syngenta in February. There is some concern a deal, if reached, could be blocked dude to antitrust laws as both companies have a large presence in the seeds business.
Tesla announced a massive share offering. The electric automaker will sell $2 billion worth of stock. According to a statement released Wednesday by the automaker, “Tesla is offering about $1.4 billion of shares with the remaining shares to be sold by Elon Musk to cover tax obligations associated with his concurrent exercise of more than 5.5 million stock options.” The capital raise is being done to “accelerate the ramp” of its Model 3 vehicle. Shares were down about 4% in after-hours trade.
Cisco beats. The company announced earnings of $0.57 per share on revenue of $12 billion. Both numbers were slightly ahead of estimates. Cisco expects Q4 EPS of $0.59 to $0.61 per share, which is ahead of the $0.58 that Wall Street was anticipating. “I’m pleased with our performance today as well as the progress we’re making in transitioning our business to a more software and subscription focus, which we’ll continue to apply across our entire portfolio,” CEO Chuck Robbins said in the earnings release. Cisco shares were up about 5% in after-hours trade.
Mark Zuckerberg met with conservatives. Facebook’s CEO met with a group of conservative commentators, including Glenn Beck, to discuss allegations the company has a bias against conservative views. After the meeting, the commentators said Facebook executives admitted the company has trouble reaching conservatives.”I wanted to hear their concerns personally and have an open conversation about how we can build trust. I want to do everything I can to make sure our teams uphold the integrity of our products,” Mark Zuckerberg wrote in a Facebook post following the meeting.
Stock markets everywhere are lower. Britain’s FTSE (-1.4%) trails in Europe after Hong Kong’s Hang Seng (-0.7%) lagged in Asia. S&P 500 futures are down 6.50 points at 2035.00.
Earnings season nears its end. Dick’s Sporting Goods and Walmart are among the names reporting ahead of the opening bell. Applied Materials, Gap, and Ross Stores will release their quarterly results after markets close.
US economic data flows. Initial and continuing claims and the Philadelphia Fed will all be released at 8:30 a.m. ET before leading indicators crosses the wires at 10 a.m. ET. Data concludes for the day with the 10:30 a.m. ET release of natural gas inventories. The US 10-year yield is up two basis points at 1.87%.
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