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Author: skywalker   |   Latest post: Fri, 26 May 2017, 07:29 AM

 

Wall Street Breakfast: Holiday Greetings From Janet Yellen

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'Tis the season for rate hikes. At 2 p.m. ET the Federal Reserve is expected to announce its first interest rate increase since last December and only the second since the financial crisis. But what's less widely known is how fast the FOMC will tighten after that. Looking for clarity, investors will tune in to the central bank's statement and economic forecasts on how it views Donald Trump's election affecting the outlook for growth and inflation.

Economy

The FOMC meeting isn't the only show in town today. Producer prices and industrial production warrant attention, but the retail-sales report, which will capture activity at the beginning of the all-important holiday season, is the one that really matters. It could give further proof that the economy is doing well enough to support a more hawkish Fed next year.

Italy's Paolo Gentiloni has won his first vote of confidence in the lower house of Italy's Parliament, but the new prime minister will still need to win another vote in the upper house today. In his maiden speech to Parliament, Gentiloni vowed "to intervene in order to guarantee the stability of banks," as Moody's downgraded the sector to 'Negative' from 'Stable, amid the looming crisis over capital needs.

Optimism at Japanese companies is on the rise for the first time in 18 months, thanks to a rebound in exports on a weakened yen. The election of Donald Trump brought a big slide in the currency, breathing new life into the country's drive to escape deflation and boosting the BOJ's Tankan survey. Sentiment at large manufacturers rose from +6 to +10 in December, while the index for all companies increased from +5 to +7.

China may have the final say on who becomes Hong Kong's next leader, but candidates will still have to pass a tough popularity test at home. Five contenders have emerged to take on the city's top government post following news that current Chief Executive CY Leung will not be seeking re-election in March. But before getting Beijing's final tick of approval, they must first gain support among a public fraught by contrasting attitudes towards the mainland and issues of independence.

Iran has told its scientists to start developing a nuclear propulsion system for shipping, in what it says is a response to the extension of sanctions against Tehran. The U.S. Senate voted this month to extend the president's authority to impose financial penalties on the Islamic Republic for a further 10 years, but the White House has described the bill as unnecessary and said it didn't violate the 2015 nuclear deal.

A dozen or so members of Silicon Valley's elite are heading to Trump Tower this afternoon to meet with the President-elect. There is no firm agenda for the tech summit, but the general topic will be jobs and the economy and how it's being impacted by digital technologies. According to Oracle (NASDAQ:ORCL) CEO Safra Catz, if Trump "can reform the tax code, reduce regulation, and negotiate better trade deals, the U.S. technology community will be stronger and more competitive than ever."

Stocks

Ahead of the closely-watched gathering, IBM Chief Executive Ginni Rometty pledged to invest $1B in training and development for American employees. "We have thousands of open positions at any given moment, and we intend to hire about 25,000 professionals in the next four years in the U.S.," she wrote in USA Today. IBM had nearly 378,000 employees at the end of 2015, according to the company's annual report.

Facebook's virtual reality business is looking for a new leader. Oculus (NASDAQ:FB) said it's creating two divisions - one focused on mobile, the other on PCs - and that CEO Brendan Iribe is stepping down to run the latter. Jon Thomason, who joined Oculus this summer as its head of software, will manage the new mobile VR group.

Nokia-branded handsets are returning to the market following the company's licensing deal with HMD Global. The Nokia 150 (NYSE:NOK) and Nokia 150 Dual SIM will cost $26 each and bring back memories with the classic "Snake" mobile game. While the "dumb phones" won't have internet connectivity, their battery life is nothing to laugh about - 22 hours of talk time and 31 days on standby.

Expect Star Wars to dominate the rest of the year at the box office. The franchise's first standalone movie opens in select international regions today and in the U.S. on Friday, and it's looking to be a big earner for Disney's (NYSE:DIS) run to collecting a record $7B at the global box office in 2016. Analysts forecast Rogue One to make close to $150M domestically during its opening weekend and over $300M worldwide.

Nearly five months after Roger Ailes was ousted from his position as chairman of Fox News (FOX, FOXA), the sexual harassment accusations against him continue. Lidia Curanaj, now a Fox 5 reporter whose legal name is Lidija Ujkic, has filed a 28-page discrimination and hostile work environment suit against the network's parent company, in which she said Ailes harassed her when she was applying for a job.

Google's self-driving car program is becoming an independent company called Waymo. It will sit under the Alphabet umbrella and signals a drive by the company to monetize the extensive research conducted within the project. Google (GOOG, GOOGL) has recently expanded its seven-year-old scheme amid stiffer competition from rivals.

Switching gears! Shares of Hertz (NYSE:HTZ) fell almost 4% in extended trade after John Tague said he will step down as head of the company, with Kathryn Marinello becoming new CEO, effective Jan. 3. Carl Icahn, the company's largest shareholder with a 35.3% stake, praised the move. "Kathy has a history as a proven CEO and I believe she is the right person to lead Hertz as we move forward."

General Motors has delivered its first Chevrolet Bolts to three customers in Fremont, California, home to rival Tesla's (NASDAQ:TSLA) assembly plant. The move allows GM to claim first place in the race to deliver an electric car that can run for more than 200 miles on a charge and has a starting price below $40,000. Tesla CEO Elon Musk has promised its entry in the new segment, the Model 3, to go into production in July.

More ignition switch drama? General Motors (NYSE:GM) has appealed to the Supreme Court to maintain its bankruptcy shield, WSJ reports. The petition marks a last-ditch effort by GM to block hundreds of customer lawsuits over faulty ignition switches on grounds that they were barred by the automaker's 2009 bankruptcy sale to a new corporate entity. The cases in question could run into the billions of dollars in claims.

Volvo Car Group, which is owned by China's Geely (OTCPK:GELYY), said it has no immediate plans for an IPO after Dagens Industri reported that the automaker was considering a listing next year. Rising sales and profits at Volvo Cars has led to speculation of a stock market listing, although 2017 would be earlier than many have thought. Geely bought the company from Ford Motors (NYSE:F) in 2010.

After several years and a few setbacks, America's first offshore wind farm has begun generating power. GE and Deepwater Wind partnered to build five massive wind turbines - twice as tall as the Statue of Liberty - to create the Block Island Wind Farm, located off the coast of Rhode Island. At least ten other U.S. offshore wind projects are already poised to move forward.

Sanofi is in talks for a deal with Actelion (OTCPK:ALIOY), WSJ reports, while Johnson & Johnson (NYSE:JNJ) has abandoned its pursuit of the Swiss drug company. It's not clear what price Sanofi (NYSE:SNY) is discussing or what structure is envisioned, but people familiar with the matter said a deal could value Actelion at as much as $30B. J&J was reportedly not willing to meet the necessary price tag.

Canada's government is studying a federal task force's recommendations on how it could legalize marijuana, making good on Prime Minister Justin Trudeau's 2015 election campaign promise. The proposals include a minimum purchase age of 18, federal oversight on production, provincial governments charged with retail distribution and maintaining criminal offenses for illicit production and trafficking.

More trouble for Wells Fargo... The embattled lender has failed its "living wills" test for a second time, a requirement to ensure no bank's failure can create systemic collapses elsewhere. That means sanctions. The bank will be prohibited from expanding internationally and from buying any nonbanking subsidiaries. WFC -0.6% premarket.

With president and COO Gary Cohn leaving for the Trump administration, Goldman Sachs (NYSE:GS) plans to elevate David Solomon, co-head of investment banking, and CFO Harvey Schwartz, to the No. 2 spot at the Wall Street powerhouse. Technology head R. Martin Chavez will likely take over as finance chief, sources told WSJ. An announcement on the promotions could be made as soon as today.

Credit Suisse has become the latest institution to shutter one of its "light pools," as increasing regulatory scrutiny makes it harder to justify the costs of running the private U.S. stock trading venues. Credit Suisse (NYSE:CS) still intends to keep its popular "dark pool" - called Crossfinder - open, which is the No. 2 U.S. alternative trading system.

Shareholders of gun maker Smith & Wesson (NASDAQ:SWHC) have "overwhelmingly" voted to change the company name to American Outdoor Brands. The new name will go into effect on or about Jan. 1, after which the company will be traded under the ticker "AOBC." "We believe that American Outdoor Brands Corp. is a name that truly represents our broad and growing array of brands and businesses," CEO James Debney said in a statement.

Today's Markets

In Asia, Japan flat. Hong Kong flat. China -0.5%. India -0.4%.
In Europe, at midday, London -0.2%. Paris -0.6%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq flat. Crude -1.4% to $52.22. Gold +0.5% to $1164.20.
Ten-year Treasury Yield -4 bps to 2.44%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
9:15 Industrial Production
10:00 Business Inventories
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast
2:00 PM Chairman Press Conference

 

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