Good morning! Here’s what you need to know.
— We actually have a budget. Top congressional negotiators released a $US1.1 trillion bipartisan spending bill that would fund the government through October. “Democrats got funding for Head Start fully restored, along with sequester-easing funds for job training and NIH, plus a modest raise for federal workers,” Potomac Research Group’s Greg Valliere wrote clients. “The GOP prevailed with no funding for the IMF or additional expenditures for Obamacare, plus $US20 billion in restored funds for the Pentagon. The bottom line is that discretionary spending will be roughly equal to the level in George W. Bush’s last budget; in inflation-adjusted terms, it’s down by 10% in the past six years.”
— The FBI suspects that Wall Street traders may be “
manipulating a key derivatives market and front running Fannie Mae and Freddie Mac, hurting the US-owned mortgage giants in the process,” Reuters’ Richard Leong reports. “Current and former employees at [a] U.S. bank said that swap traders at the bank programmed their phones with different ring tones to identify when certain customers were calling, alerting traders that a large order was about to be placed,” according to FBI documents reviewed by Reuters. Banks encouraged this behaviour because it resulted in huge profits, according to the report.
— Google announced that it is buying Nest Labs for a cool $US3.2 billion. The company makes Internet-connected thermostats and smoke detectors and is founded by Tony Fadell, famous for innovating the iPod alongside Steve Jobs. Nest sells smart thermostats for $US250 that can be remotely controlled from your smartphone.
— At 8:30 a.m. ET, we get retail sales numbers for December. Economists expect sales climbed 0.1% in December and 0.3% excluding autos and gas. “Some of the large gains in November’s auto sales will be bought back in December, a trend that was evident in the most recent release of vehicle sales data,” Wells Fargo’s John Silvia wrote clients ahead of the report. “With inflation so low and only a modest uptick in gasoline prices, retail sales will not get much of a boost from rising prices in the month. To make matters worse, fierce competition led to heavy discounting among retailers, which likely kept a lid on growth in December. On the plus side, consumer confidence picked up considerably, and chain store sales posted strong growth.”
— In the U.K., the inflation rate fell to 2% in December, down from 2.1% the month prior. It’s the first time since November 2009 that inflation is at our below the government target of 2%, the BBC reports. “Economists said the fall would ease pressure on the Bank of England to raise interest rates following the recent recovery in the economy,” according to the BBC.
— Eurozone industrial production jumped 1.8% month-over-month in November, the fastest pace in three and a half years, reports the Wall Street Journal’s Paul Hannon. “The surprisingly strong rise in output from the euro zone’s factories removes some doubts about the sustainability of the economic recovery,” the Journal reports. “While business surveys have been positive during the three months through December, hard data had been weak, with industrial production, construction output and retail sales having fallen in October.”
— Asia got slammed in overnight trading, with Japan’s Nikkei falling 3.08%, Hong Kong’s Hang Seng down 0.43%, and Korea’s KOSPI 0.15% lower. Europe’s session started lower too, but U.S. futures were pointing slightly higher.
— U.S. bank earnings kick off today with J.P. Morgan and Wells Fargo. For Morgan, “Naturally the question on everyone’s mind is how the company will fair given the mountain of legal fees it has paid out to the government for variety of transgressions — from mortgage fraud dating back to the financial crisis, to its failure to report account irregularities with its former client Bernie Madoff, to the London Whale trading loss,” writes our Linette Lopez.
— 24% of the nearly 2.2 million people that have signed up for a plan on the new Obamacare exchanges are between the ages of 18 and 35, according to new figures released by the Department of Health and Human Services. The White House had wanted 39% of enrollees to fall within that demographic. But after the website debacle, enrollment has steadily increased week by week.
— Apparel giant Lululemon cratered 17% yesterday after the company cut its earnings forecast. “Lululemon enjoyed several years of extremely strong growth,” Buckingham Research’s John Zolidis wrote clients. “Those days are now behind the company.” Between the see-through pants recall, founder Chip Wilson’s gaffe that some women’s bodies “just don’t actually work” for his product, and now its earnings cut, it’s been a particularly poor few months for Lululemon.