Wall Street Breakfast: Fed Minutes In The Spotlight

by: Wall Street Breakfast
Wall Street Breakfast
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The Federal Reserve is in the spotlight with the central bank due to release minutes from its meeting in September this afternoon. The text will be closely analyzed to see how close the three dissenting Fed members from the last FOMC meeting were from reeling in more support for a 25 basis point increase. Though the market is pricing in a ~60% likelihood of a rate hike at the December 14th meeting, economists note that there is plenty of data to be released yet, which could push a rate hike into 2017. It's a foregone conclusion that the Fed will skip any rate action at the November meeting with the wildcard presidential election only a week later.


Asian markets fell again today as investors stayed edgy after a disappointing start to the U.S earnings season and fears of a Federal Reserve interest rate hike. Japan's benchmark Nikkei 225 was down 1.1% and the Shanghai Composite tracked 0.5% lower. South Korea's Kospi managed a 0.1% gain, despite a 1% decline in Samsung (OTC:SSNLF, OTC:SSNNF). The bruised electronics multinational accounts for about 18% of the Kospi.

Europe showed only a fractional gain in business investment during Q2, according to data from Eurostat. The business investment rate was 22.2% in Europe during Q2, compared with 22.1% in the previous quarter. Stocks in Europe are seesawing back and forth amid cautious trading. The Stoxx Europe 600 Index is down 0.06% to 339.98 at last check.

The British pound recovered a bit more today as it continues to claw back from last week's panic over a hard Brexit. The sterling jumped back over $1.23 after U.K. Prime Minister Theresa May agreed to "full and transparent" debate over Britain's exit from the EU. The FTSE 100 Index is down 0.38%.

Oil prices are holding the $50 level in early trading, despite uncertainty over the willingness of Russia to cut down on production levels. President Vladimir Putin is on record supporting a coordinated cut with OPEC, but it's unclear to some market watchers if Rosneft (OTCPK:RNFTF) will cooperate. Brent crude is up 0.67% to $52.76, while WTI crude futures are 0.40% higher at $50.97.

Industrial production in the eurozone increased 1.6% in August to top the forecast from economists for a 1.1% gain. On a year-over-year comparison, industrial production for the 19-member Euro block was up 1.8%.

Consumer prices in France increased 0.5% in September compared to last year to match the expectation of analysts. CPI was down 0.2% from the level recorded in August, also in line with forecasts. Prices of food products fell during the month, while clothing and shoe prices were higher.


The growing product safety crisis at Samsung prompted the company to cut its Q3 operating guidance by 33% to 5.2T won ($4.66B). Analysts estimate the total cost of the Galaxy Note 7 issue could reach as high as $4B. The South Korean company is also contending with a new report on an exploding washing machine in the U.S.

The Q3 earnings season began yesterday in ceremonial fashion with Alcoa's (NYSE:AA) report, but the earnings season really starts to heat up with CSX Corporation (NYSE:CSX) due to spill numbers today and Delta Air Lines (NYSE:DAL), Winnebago Industries (NYSE:WGO), JPMorgan (NYSE:JPM) and Infosys (NASDAQ:INFY) on tap to give investors some sector-wide data points later this week. Analysts expect companies in the S&P 500 Index to report a 1% drop in quarterly EPS, led by profit weakness in the energy sector. If the energy sector is backed out, EPS growth of 3% is forecast off of revenue growth of 5%.

A stark profit warning from Ericsson (NASDAQ:ERIC) sent shares plummeting in Stockholm. The Swedish company said sales fell 14% in Q3 due to weak broadband demand and further deterioration is anticipated. Last week, Ericsson slashed 20% of its workforce.

Jack Ma has ambitions plans to create a group trading platform for small businesses and farmers. The Alibaba (NYSE:BABA) chairman envisions an open e-commerce system that would include cross-nation agricultural trading. Ma says the long-term goal for Alibaba is to quintuple its user base to 2 billion by 2036.

The Fremont Planning Commission meets on Thursday to consider a proposal by Tesla Motors (NASDAQ:TSLA) to add 4.5M square feet of buildings to its plant in the region. The expansion is key to the EV automaker's goal of hitting 500K in annual output by the end of 2018. Tesla closed yesterday just above the $200 level and hasn't been above $220 since late in August.

Former BP CEO Tony Hayward is reportedly working with Carlyle Group (NASDAQ:CG) to find and acquire Latin American oil assets. He is believed to have lined up a team of executives to run an oil business under Carlyle's ownership. Hayward stepped down from BP after the 2010 Gulf of Mexico oil spill disaster.

The first offshore wind farm in the U.S. received financing from General Electric (NYSE:GE) and Citigroup (NYSE:C). The 30 MW project was recently completed off the coast of Rhode Island. A separate GE unit, GE Renewable Energy, supplied the five wind turbines for the $300M project and will provide long-term maintenance service.

Cybersecurity stocks are on watch after Fortinet (NASDAQ:FTNT) preannounced Q3 results below the company's prior guidance on a lower level of total billings. Keep an eye on FireEye (NASDAQ:FEYE), Palo Alto Networks (NYSE:PANW), CyberArk Software (NASDAQ:CYBR), Check Point Software Technologies (NASDAQ:CHKP) and Proofpoint (NASDAQ:PFPT) for any signs of related weakness. It could also be a rough day for the PureFunds ISE Cyber Security ETF (NYSEARCA:HACK).

Today's Markets

In Asia, Japan -1.1% to 16840. Hong Kong -0.6% to 23407. China -0.3% to 9680. India +0.1% to 28082.
In Europe, at midday, London -0.4%. Paris -0.2%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq -0.2%. Crude +0.4% to $50.97. Gold +0.1% to $1257.40.
Ten-year Treasury Yield Flat at 1.78%

Today's Economic Calendar

MBA Mortgage Applications
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $24B, 3-Year Note Auction
1:00 PM Results of $20B, 10-Year Note Auction
2:00 PM FOMC minutes

Companies reporting earnings today »