Futures higher after Fed minutes spark selloff
The minutes from the central bank's latest policy meeting offer little guidance.
The Federal Reserve's most recent policy meeting minutes provided little guidance as to when the central bank will begin to wind down its stimulus program. However, the minutes confirmed that all agreed the tapering should begin sometime this year.
The minutes revealed a discussion about removing excess cash from the financial system using a new tool to sell securities to the market overnight. Using the tool, the Fed would have an overnight reverse repurchase agreement.
In other news, a Reuters poll of manufacturers in Japan showed optimism had risen to the highest level in three years for all but cars and electronics manufacturers. The survey's index rose 3 points in August and is expected to rise 2 more in November. The results are strongly correlated to the BOJ's quarterly tankan survey.
Chinese HSBC Flash PMI data showed the nation may be on the mend, with a reading of 50.1, which barely scraped above the 50 point level that indicates growth.
After Goldman Sachs issued a wave of erroneous trades that hit the markets on Tuesday, U.S. option-exchange officials have decided to cancel most of the trades, which were caused by a glitch in the Goldman trading system. The decision will limit losses for Goldman, but will likely impact all of the trading firms on the other side of the transactions.
UK regulators reached an agreement with 13 banks that improperly sold identity theft protection. The banks could be forced to pay up to 1.3 billion pounds to compensate the 7 million customers affected.
The Jackson Hole economic policy symposium opens Thursday without several key players, including Fed Chairman Ben Bernanke, Bank of England Governor Mark Carney, European Central Bank President Mario Draghi and Central Bank of Brazil President Alexandre Tombini.
Asian markets were down across the board after the Fed minutes left investors thinking a September beginning of the tapering is not off base. Improved Chinese PMI data provided temporary relief, but many indexes ended in the red. In China, the Shenzehen composite and Hong Kong's Heng Seng index ended flat with 0.08% and 0.06% gains respectively; but the Shanghai composite was down 0.24%. The Japanese Nikkei index lost 0.44% and New Zealand's NZ50 was down 0.48%.
European markets began the morning on a high note, especially in Germany where PMI data boosted investor confidence. Early on, the German DAX was up 0.96%. The eurozone's Stoxx 600 index followed suit with 0.79% gains and the UK's FTSE index gained 0.72%. Spain's IBEX saw the largest gains with a 1.57% jump.
Despite the looming Fed tapering, energy prices remained buoyant as positive economic data added to hopes of growing demand. Brent futures were flat with only 0.09% gains but WTI futures for October were up almost half a%age point at a price of $104.32. Precious metals didn't fare quite so well with gold losing 0.57% and silver down 0.90%. Copper started the morning off with a 0.89% gain.
The dollar was on the rise this morning as more positive economic data is expected today. The euro to dollar ratio was little changed at $1.3352, but the British pound lost ground against the greenback with a 0.37% loss. The yen also lost to the dollar with rising Treasury yields and strong Chinese data on the greenback's side. Early on, the dollar was at 98.23 yens, near a one week high.
Earnings reported Wednesday
Notable companies that reported earnings on Wednesday included:
Hewlett-Packard (HPQ) reported third quarter earnings per share of $0.86 on revenue of $27.20 billion, which was mostly in line with expectations.
Lowe's Companies (LOW) reported second quarter earnings per share of $0.88 on $15.70 billion in revenue, compared to last year's earnings per share of $0.65 on revenue of $14.25 billion.
Staples (SPLS) reported second quarter earnings per share of $0.16, below expectations of $0.18. Revenue also came in below expectations at $5.31 billion.
Target (TGT) reported second quarter earnings per share of $1.19, above expectations of $0.99. Revenue was $17.12 billion, compared to last year's $16.78 billion.
Stocks moving in the premarket included:
Hewlett-Packard (HPQ) was down 7.49% in premarket trade after the company reported an 8% sales drop in its third quarter earnings report.
Ford Motor (F) lost 0.49% in premarket trade after a Ford Australia spokeswoman admitted that changes to Australia's Fringe Benefits Tax has impacted sales.
General Motors (GM) gained 0.49% after the company's Chevrolet Silverado and GMC Sierra were awarded the highest possible safety rating.
Notable companies expected to report earnings on Thursday include:
Aeropostale (ARO) is expected to report a second quarter loss of $0.16 on $461.22 worth of revenue.
Abercrombie & Fitch (ANF) is expected to report second quarter earnings per share of $0.31 compared to last year's $0.20 on revenue of $1.01 billion.
Dollar Tree (DLTR) is expected to report second quarter earnings per share of $0.57 on revenue of $1.86 billion compared to last year's earnings per share of $0.51 on $1.70 billion.
Hormel Foods (HRL) is expected to report third quarter revenue of 2.12 billion compared to last year's $2.01 billion and earnings per share of $0.45 vs. last year's $0.41.
Sears Holdings (SHLD) is expected to report second quarter revenue of $9.01 billion with a loss of $1.10 compared to last year's loss of $0.86 on revenue of $9.47 billion.
Ross Stores (ROST) is expected to report second quarter earnings per share of $0.93 on revenue of $2.52 billion, compared to last year's earnings per share of $0.81 on $2.34 billion worth of revenue.
Thursday is a busy day for U.S. data, with the CB leading index, consumer confidence data, manufacturing PMI, house price index data, initial and continuing jobless claims, and natural gas storage data all coming out. The eurozone is also set to release a host of PMI data, including eurozone services and manufacturing PMI as well as German and French services and manufacturing PMI. Also notable will be the release of the Chinese trade balance, Canadian retail sales data, and the Brazilian unemployment rate.
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