Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 10 Jul 2020, 7:55 AM

 

Wall Street Breakfast: Forecast From The Fed

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No major policy decisions are expected from the Fed today, but any hint of taking the foot off the pedal could hammer risk sentiment, while more dovishness could have the opposite effect. Keep a lookout for comments on yield curve control, forward guidance and how long the Fed will keep current policies in place after investors stopped pricing in the possibility of negative rates following last week's blowout jobs report. Chairman Jerome Powell skipped the last quarterly forecast in March - as the pandemic forced a shutdown of the economy - so today's projections will likely suggest whether the central bank believes the worst part of the coronavirus crisis has passed.

On pause

Futures were mixed overnight ahead of the Fed's first economic projections of 2020 - due out at 2 p.m. ET. Nasdaq futures climbed 0.3%, while the Dow and S&P fell as much as 0.4%, reflecting a similar trade on Tuesday that saw a shift back into Big Tech. Other concerns abound as Dr. Anthony Fauci warned the pandemic has further to run, while the rate of new COVID-19 infections go under the microscope as counties lift additional stay-at-home restrictions.

Worst peacetime slump in a century

In its latest report on the global outlook, the OECD said it expects the world economy to contract by 6% this year if a second wave of infections and containment measures can be avoided. "Economic impacts are dire everywhere. The recovery will be slow and the crisis will have long-lasting effects, disproportionately affecting the most vulnerable people." In the U.S., the OECD sees GDP contracting 7.3% in 2020 and at an 8.5% rate if a second outbreak occurs.

Weak demand remains a risk

Soft inflation figures put Chinese shares under pressure overnight, marking the latest data to show the reach of the coronavirus pandemic. Industrial prices fell deeper into deflation in May, declining 3.7% Y/Y, while consumer inflation eased due to softening food prices, slowing to 2.4%. "Concerns on unemployment and salary cuts may keep consumers from spending. Small companies and export-oriented companies may continue to see headwinds," said Bruce Pang of China Renaissance Securities.

'Bad bank'

ECB President Christine Lagarde has consulted banks and EU officials about a "bad bank" scheme in recent weeks as the COVID-19 outbreak squeezes borrowers and hinders new lending. One blueprint would involve the European Stability Mechanism as a guarantor for the bad bank, which would issue bonds that commercial banks would buy - in exchange for portfolios of unpaid loans - and use as collateral for ECB funding. The project would also require the blessing of Germany, which has long opposed shared responsibility for eurozone debts, though it did recently agree to pool EU borrowing for a coronavirus recovery fund.

Movies, TV shows under review

Entertainment companies are reassessing the content they offer in the wake of George Floyd's death amid nationwide protests for racial justice and against police brutality. Gone with the Wind has been pulled from HBO Max (NYSE:T), though the streamer plans to return the movie to the platform "with a discussion of its historical context and a denouncement of ethnic and racial prejudices." Long-running TV show Cops has been canceled outright by the Paramount Network (NASDAQ:VIAC), while Live PD has been pulled from the schedule of the A&E Network (NYSE:DIS).

More corporate action

"The events of the past two weeks have caused all of us to reflect on what we can do to confront the cultural and systemic forces that sustain racism," Adidas (OTCQX:ADDYY) CEO Kasper Rorsted said in a statement. A minimum of 30% of all new positions in the U.S. at Adidas and Reebok will now be designated for blacks and Latinos, while the company will finance 50 university scholarships for black students each year over five years. It's also investing $20M in black communities after some U.S. employees complained Adidas was profiting off black culture without doing enough to help them.

CrossFit CEO resigns

The fitness industry is watching as CrossFit CEO Greg Glassman stepped down from the company he co-founded and was replaced by Dave Castro, the director of the CrossFit Games. "I created a rift in the CrossFit community and unintentionally hurt many of its members," Glassman declared, following a series of tweets about the BLM protests and the death of George Floyd that many criticized as racist, offensive and tone-deaf. CrossFit is the world's largest fitness chain with more than 15,000 locations.

Juneteenth

"Both Twitter (NYSE:TWTR) and Square (NYSE:SQ) are making #Juneteenth (June 19th) a company holiday in the US, forevermore. A day for celebration, education, and connection," reads a tweet from CEO Jack Dorsey. The holiday commemorates the end of slavery in America. On that day in 1865, Union General Gordon Granger read the Emancipation Proclamation to the public in Galveston, Texas, two and a half years after it was issued by Abraham Lincoln.

Tuesday's Key Earnings

AMC Entertainment (NYSE:AMC) +4.8% AH adding details to reopening plans.
Chewy (NYSE:CHWY) -2.2% AH despite strong sales growth.
GameStop (NYSE:GME) -6.9% AH as global comparable sales fell 17%.
Tiffany (NYSE:TIF) +2% noting compliance with its leverage ratio.

Today's Markets

In Asia, Japan +0.2%. Hong Kong flat. China -0.4%. India +0.9%.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.6%.
Futures at 6:20, Dow -0.4%. S&P -0.2%. Nasdaq +0.3%. Crude -2.8% to $37.86. Gold +0.2% to $1725.30. Bitcoin +0.9% to $9746.
Ten-year Treasury Yield -3 bps to 0.8%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM Treasury Budget
2:30 PM Chairman Press Conference

 

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