Here is what you need to know.
It’s Fed Day. Expectations are low for a Fed rate hike at Wednesday’s meeting with the market pricing in just a 4% probability of such a move. The meeting remains important as the Fed has the opportunity to lay the groundwork for a December hike. However, Deutsche Bank’s Joe LaVorgna expects the Fed to be dovish, stating, “…the economy likely grew under 2% last quarter, and growth prospects for the current quarter are dimming in light of the sharp slowdown in the index of leading economic indicators.” There is no accompanying Janet Yellen press conference at today’s meeting.
Sweden’s central bank upped its QE program. In a surprise move, Sweden’s central bank, the Sverges Riksbank, increased its asset purchase program by 65 billion Swedish krona ($US7.64 billion) to 200 billion krona ($US23.50 billion) by the end of June 2016. The increase in asset purchases comes at a time when the central bank sees a weakening outlook for inflation as a result of “poorer inflation prospects abroad as well as on a new assessment that demand needs to be stronger in Sweden in order to stabilise inflation around 2 per cent…” In addition, the Riksbank held its benchmark interest rate at -0.35%, as expected. The Swedish krona is stronger by 0.4% at 8.4653 per dollar.
Consumer sentiment in China is at an all-time low. China’s Westpac-MNI consumer sentiment index fell 7.2% to 109.7 in October, making for the lowest reading since record keeping began in 2007. “This result openly questions the resilience of the Chinese consumer to the discouraging state of the real economy,” noted Huw McKay, senior international economist at Westpac. Those aged 35 to 54 saw the biggest drop in confidence with sentiment plunging 11.2% during the reporting period. Things weren’t as bad for those aged 18 to 34 and 55 to 64 as confidence for those groups slid 3.3% and 3.2%, respectively, according to McKay.
Walgreens is buying Rite Aid. The $US9.4 billion dollar deal, $US17.2 billion including debt, amounts to $US9 per share, a 48% premium to Monday’s closing price. “Our complementary retail-pharmacy footprints in the US will create an even better network, with more health and wellness solutions available in stores and online,” Walgreens CEO Stefano Pessina said in a statement. Following the combination, Walgreens sees “synergies over time” and expects to cut $US1 billion in expenses.
Apple beat on the top and bottom lines. The tech giant announced earnings of $US1.96 per share on revenue of $US51.5 billion. Both numbers beat analyst expectations, which were at $US1.96 per share and $US51.04 billion, respectively. While iPhone sales were up 22% compared to last year, the 48.05 million units sold was below the Wall Street estimate of 48.5 million units. Additionally, iPad sales came in at 9.88 million units, a 20% year-over-year decline, missing the 10.2 million units that were anticipated. On the conference call, CFO Luca Maestri said revenue from China was up 99% from a year ago. The stock was little changed in after-hours action.
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Twitter is getting smoked after reporting weak user growth. The social media outlet earned $US0.10 per share, outpacing analyst expectations by a nickel. Revenue surged 57.6% versus last year to $US569 million, which was ahead of the $US559.6 million that was forecasted. However, the top and bottom line beats weren’t enough to boost the stock as monthly active users came in at 320 million, missing the 324 million that Wall Street expected. Twitter posted a net loss of $US132 million. The stock was down about 13% in after-hours trade.
Volkswagen posted its first quarterly loss in 15 years. The German automaker announced a quarterly loss of €3.48 billion ($US3.84 billion), its first since 1990. The loss was worse than the €3.26 billion ($US3.60 billion) decline that was expected. Volkswagen took a €6.7 billion charge “for forthcoming measures relating to the diesel issue.” According to Reuters, The company says full year profits will be “significantly below” last year’s levels.
Stock markets around the world are mixed. China’s Shanghai Composite (-1.7%) led the weakness in Asia and Germany’s DAX (+0.7%) paces the gains in Europe. S&P 500 futures are up 4.00 points at 2064.50.
Economic data is light. Crude oil inventories will be released at 10:30 a.m. ET. Treasury will auction $US35 billion 5-year notes at 1 p.m. ET. The US 10-year yield is little changed at 2.04%.
Earnings reporting is heavy. Anthem, AutoNation, Fiat Chrysler, Hershey Foods, Hess, Hilton Hotels, International Paper, Nomura Holdings, Norfolk Southern, Northrop Grumman and Walgreens Boot Alliance highlight the names reporting ahead of the opening bell. Barrick Gold, Buffalo Wild Wings, GoPro, Marriott, Suncor Energy, Tesoro, Western Digital and Yelp are among the names releasing their quarterly results after markets close.