Futures slip after Fed extends stimulus
Investors await several economic reports due out this morning.
U.S. equity futures slipped in early Thursday trade after the Federal Reserve decided to increase the size of QE3 to $85 billion of monthly purchases, up from $40 billion originally. In addition, the Fed dropped its target date guidance for interest rates and adopted a threshold-based methodology, where it will not raise rates until employment improves further and inflation remains tepid.
In other news, eurozone finance ministers reached a deal to create a banking union and house a banking regulator within the ECB.
Despite recent moves in the bond markets, Moody's says that the increased political turmoil in Italy is not credit negative, so long as Italy can construct a government quickly in elections in April.
Germany's IFO, the economic think tank, forecasts that German GDP contracted 0.3% in the fourth quarter, showing that even Europe's healthiest nation cannot escape the debt crisis and the recession driven by austerity.
- S&P 500 futures fell 2.8 points to 1,424.4.
- The EUR/USD was lower at 1.3042.
- Spanish 10-year government bond yields rose to 5.396%.
- Italian 10-year government bond yields rose to 4.649%.
- Gold fell 1.25% to $1,696.50.
Commodities were weaker in overnight trade, reversing the run-up seen in commodities markets before the FOMC decision. WTI crude futures fell 0.62% to $86.23 per barrel and Brent crude futures fell 0.29% to $109.18 per barrel. Copper futures fell 1.04%, following the weakness in Australia and fears over the RBA being unwilling to devalue the Aussie dollar to boost exports. Gold was lower and silver futures fell 2.97% to $32.78.
Currency markets were in clear risk-off mode as the dollar reigned and most other currencies slipped, including the yen. The EUR/USD was lower at 1.3042 and the dollar rose against the yen to 83.39. Overall, the Dollar Index rose 0.21% on strength against the pound, the euro, the yen and the Swedish krone. Also, the Aussie dollar slipped and the Swiss franc was rather flat as the Swiss National Bank did not change its current policy overnight.
Stocks moving in the premarket included:
- Yum Brands (YUM) shares rose 1.05% ahead of key data late Thursday out of China.
- Berkshire Hathaway (BRK.B) shares rose 0.07% premarket after gaining 2.35% Wednesday following the company's announcement that a large, long-time owner had sold back class A shares to the company for slightly more than $1.2 billion. Also, the company increased the amount it is willing to pay per share in its existing buyback.
- Time Warner (TWX) shares fell 0.34% premarket as the company launched its iOS streaming app and also as the stock retreated from a new 52-week high.
- Dendreon (DNDN) shares fell 0.39% after rising over 4% Wednesday on takeover chatter.
Notable companies expected to report earnings Thursday include:
- Adobe Systems (ADBE) is expected to report fourth quarter earnings per share of $0.57 vs. $0.67 a year ago.
- Pier 1 Imports (PIR) is expected to report third quarter earnings per share of $0.24 vs. $0.21 a year ago.
On the economics calendar Thursday, weekly jobless claims, PPI inflation, and retail sales are due out at 8:30 a.m. ET. Also, business inventories data is expected. In addition, the Treasury is set to auction 30-year bonds. Overnight, the Preliminary HSBC Chinese Manufacturing PMI is due out and the Preliminary Eurozone Manufacturing PMI for December is expected as well.
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