Fed Chair Janet Yellen is set to deliver her semi-annual monetary policy testimony in Washington today in what will be her first major appearance of the year and since the Fed's controversial rate hike last December. The meeting will give the best insight to date on whether the central bank feels it can proceed with a rate tightening cycle or will be waylaid by problems, including financial market volatility, the oil rout, slumping Chinese growth and weakness in the global economy.
Japanese stocks extended a heavy selloff today, closing in the red for six of the past seven sessions, despite a festive atmosphere across East Asia for the Lunar New Year holiday. With many now questioning the Bank of Japan's recent move into negative interest rates, Japanese Prime Minister Shinzo Abe defended BOJ Governor Haruhiko Kuroda's handling of the economy, and said it was up to the central bank to decide what policy instruments to use. Nikkei -2.3%.
Republican Donald Trump and Democrat Bernie Sanders swept to convincing victories in the New Hampshire primaries on Tuesday night, providing them momentum for future contests and sending shock waves through both parties. With voters putting their faith in anti-establishment politics, New Hampshire's verdict sets up a tough fight for Republicans in South Carolina on Feb. 20 and for Democrats there on Feb. 27.
A divided Supreme Court agreed yesterday to halt enforcement of President Obama's sweeping plan to address climate change until legal challenges surrounding the regulation are resolved. The justices heeded calls from utilities, coal miners and more than two dozen states to halt the EPA rule while court challenges go forward. A final ruling in 2017 would leave it up to Obama's successor to decide how to respond. ETFs: XLE, XLU, VDE, ERX, OIH, UTG, IDU, VPU, ERY, DIG, DUG, BGR, IYE, GUT, BUI, FENY, PXJ, FIF, RYE, FUTY, RYU, UPW, FXN, FXU, DDG, PUI, SDP
Meanwhile, President Obama's proposed $4.1T budget for fiscal year 2017 calls for "a broad legal framework" to allow Puerto Rico to restructure debt, as well as fiscal oversight for the island's finances. The budget would also provide the U.S. territory with an earned income tax credit, and improve healthcare funding by expanding Medicaid eligibility and increasing federal support.
European finance ministers will call on the world's biggest economies at the end of February to boost global economic growth at a time when slowdown fears are reverberating throughout the financial markets. G20 finance ministers are scheduled to meet at the end of the month in Shanghai, which holds the rotating presidency of the group. In January, the IMF cut its world economic growth forecast for 2016 and 2017, citing the slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some large emerging market economies.
China has confirmed its first case of the Zika virus in a man who recently traveled to Venezuela, Xinhua News Agency reports. The World Health Organization declared Zika a public health threat on Feb. 1, and raised the possibility that there could be up to 4M cases of the virus in the Americas alone. It was the first time the WHO had declared the emergency status since the Ebola outbreak in West Africa in 2014.
Oil prices are pushing higher after Iran proclaimed it was open to cooperation with Saudi Arabia, partly recovering from a 6% fall in the previous session on oversupply worries and weak equities. "We support any form of dialogue and cooperation with OPEC member states including Saudi Arabia," Iranian oil minister Bijan Zangeneh told Press TV. Traders will also turn to EIA's weekly inventory data this morning, following yesterday's API figures that reported a build of 2.4M barrels in U.S. crude stockpiles. Crude futures +2.4% to $28.60/bbl.
The first six weeks of 2016 have been largely devoid of big initial public offerings, but U.S. Foods is planning to change that. The food distributor has filed for a $100M IPO on the New York Stock Exchange, less than a year after its planned merger with rival Sysco (NYSE:SYY) collapsed due to opposition from government regulators. U.S. Foods reported sales of $17.192B for the nine months ending Sept. 30, 2015.
Asahi Group Holdings has agreed to buy SABMiller's (OTCPK:SBMRY) Peroni and Grolsch beer brands, which are seen as necessary "Megabrew deal" casualties because of Anheuser-Busch's (NYSE:BUD) deep penetration in Europe. Asahi (OTCPK:ASBRF), Japan's biggest brewer with 38% market share, is likely to pay over ¥400B ($3.5B) for the two labels. An earlier line-up of bidders for Peroni and Grolsch included several private equity firms, conglomerates and other brewers.
Amid growing concerns about the bank's financial health and broader rout of financial stocks, Deutsche Bank (NYSE:DB) is "considering buying back several billion euros of its debt," FT reports. UBS has also reacted to the sharp falls in bank share prices by freezing salaries for its investment bankers until at least mid year. Like several of its peers, UBS's investment banking operations have been hit by trading conditions which CFO Kirt Gardner described last week as "treacherous." DB +9%; UBS +6.4% premarket.
HSBC has been sued by the families of U.S. citizens murdered by drug gangs in Mexico, claiming the bank let cartels launder billions of dollars to operate their business. HSBC already paid nearly $2B in penalties in December 2012 to resolve charges that it failed to stop hundreds of millions of dollars in drug money from flowing through the bank from Mexico, and promised to fix the problems.
More trouble for daily fantasy sports... ESPN (NYSE:DIS) and DraftKings (Private:DRAFT) have unwound their exclusive advertising relationship - a deal worth $250M - that will allow ESPN to sell ad time to the site's competitors. Separately, 21st Century Fox (FOX, FOXA) has disclosed a write-down on 59% of its investment in DraftKings. During the latter half of 2015, Fox had invested about $160M for a minority stake in the company.
Nokia has failed to get its hands on 100% of shares in newly-acquired rival Alcatel-Lucent (ALU), after winning nearly 80% of the French-American company last month. Following a second round of bidding, Nokia (NYSE:NOK) was still left with only 91.25% in Alcatel-Lucent, thus failing to reach the 95% threshold that would have allowed it to make a clean sweep by delisting all remaining shares from the Paris stock exchange. Nokia now has the option of buying those shares in the open market, but probably at a higher price than its original offer. NOK +1.7%; ALU -3.3% premarket.
A 2013 report to Amazon's leadership "envisioned a global delivery network that controls the flow of goods from factories in China and India to customer doorsteps in Atlanta, New York and London," Bloomberg reports. Sources now say the project, codenamed Dragon Boat, is "proceeding." The initiative will provide competition for Alibaba (NYSE:BABA) and various cargo middlemen, as well as logistics partners UPS and FedEx (NYSE:FDX). AMZN +2.1% premarket.
Daimler says it will take a €340M charge against its 2015 profit to fix about 840K U.S. vehicles with potentially defective Takata (OTCPK:TKTDY) air bags. The cost of replacing the devices, already the largest consumer-safety recall in U.S. history, will reduce Daimler's (OTCPK:DDAIF) net income to €8.7B. Takata's air bag inflators can deploy with too much force, spraying fragments at vehicle passengers.
Tesla Motors has confirmed it will take orders for the Model 3 next month at $35K (but buyers will likely pay less on a net basis due to federal and state tax incentives). The latest word from Palo Alto is that the Model 3 is still on schedule, although CEO Elon Musk will face some Q&A later today following the EV automaker's earnings. TSLA +1.8% premarket.
A significant barrier to Google's plan to put driverless cars on the roads has been removed, after the NHTSA supported its interpretation that a robot could meet the legal definition of a driver. Google (GOOG, GOOGL) has also filed for another potential use of its artificial intelligence system in a patent award that described an "autonomous delivery platform" for trucks. The driverless transport vehicle would carry several lockers that could only be opened by the recipient of a package, using a PIN code or credit card.
Coca-Cola (NYSE:KO) +1.6% increasing global volumes, cost-cutting.
CVS Health (NYSE:CVS) +1% after meeting expectations.
Disney (DIS) -2.1% AH on perceived weakness at ESPN.
Panera Bread (NASDAQ:PNRA) +3.4% following strong same-store sales.
SolarCity (NASDAQ:SCTY) -29.8% AH after missing installation targets, guiding light.
Viacom (NASDAQ:VIAB) -21.5% as ad sales, movie revenues declined.
In Asia, Japan -2.3% to 15713. Hong Kong closed. China closed. India -1.1% to 23759.
In Europe, at midday, London +1%. Paris +2.3%. Frankfurt +2.4%.
Futures at 6:20, Dow +0.7%. S&P +0.9%. Nasdaq +1.3%. Crude +2.4% to $28.60. Gold -1.1% to $1184.90.
Ten-year Treasury Yield -2 bps to 1.75%
Companies reporting earnings today