What to Watch This Week: Trump Addresses Congress, Costco Reports Earnings

For the week of February 27, investors await President Donald Trump's congressional address, which takes place on Tuesday evening -- along with a host of major earnings reports. On Monday, EOG Resources (EOG) and Hertz (HTZ) release earnings. On Tuesday, Ambarella (AMBA) , Domino's Pizza (DPZ) and Etsy (ETSY) report quarterly results. Best Buy (BBY) , American Eagle Outfitters (AEO) and Lowe's Companies (LOW) unveil earnings Wednesday.




On Thursday, the markets await quarterly results from Abercrombie & Fitch (ANF) , Kroger (KR) and Costco (COST) . As for economic data, on Tuesday, an estimate for fourth quarter gross domestic product is released. On Wednesday, the Federal Reserve's favorite inflation gauge, the personal consumption expenditure price index is released for January. On Thursday, the markets await weekly jobless claims. On Friday, Federal Reserve Vice Chair Stanley Fischer is speaking, as is Chair Janet Yellen. 

By Scott Gamm

Source: https://www.thestreet.com/video/14015870/what-to-watch-this-week-trump-addresses-congress-costco-reports-earnings.htm

Wall Street Breakfast: Snap IPO On The Horizon

Includes: ABX, AMAT, BA, CBS, CSCO, ETSY, FOX, FOXA, FXCOF, GRPN,

Snap Inc. sees its upcoming initial public offering priced at between $14 and $16 per share, according to new regulatory filings. That could value the owner of ephemeral messaging app Snapchat at $19.5B-$22.2B, near the low end of what the company had earlier targeted. The stock could get a final price as soon as March 1 and begin trading the following day on the NYSE under the ticker "SNAP."

Economy

Two days of testimony from a more hawkish Janet Yellen has cemented the idea that the U.S. central bank will raise interest rates by midyear if not sooner. Yellen also said she opposes an intrusion on the Fed's independence after House Financial Services Committee Chairman Jeb Hensarling announced a plan to include congressional audits of interest rate policy. "It would result in poor economic performance," she said during the hearing.

With his confirmation looking increasingly imperiled, Labor Secretary nominee Andy Puzder has taken his hat out of the cabinet ring. The CEO of CKE Restaurants was at the center of a swirl of controversies, complaints and potential conflicts. Reports also suggest President Trump has offered his vacant national security adviser post to Vice Adm. Robert Harward, a former Navy SEAL and deputy commander of U.S. Central Command.

President Trump hosted Israeli Prime Minister Benjamin Netanyahu at the White House yesterday, in their first talks since he took office. At a joint press conference, Trump asked Netanyahu to "hold back on settlements for a little bit," but stopped short of committing to a two-state solution, declaring his support for a peace agreement that both sides "like the best."

A three-week-old scandal may have cost conservative Francois Fillon his status as favorite to win the French presidency. The country's financial prosecutor announced today that a case involving €830K in taxpayers' money - brought against his wife for a "fake job" as her husband's parliamentary assistant - will remain open. The first round of the election is less than 10 weeks away.

Free trade deal resurrection? The European Parliament has approved a landmark global trade pact with Canada, backing the Comprehensive Economic and Trade Agreement by a vote of 408-254. Parts of the deal, such as tariff reduction, will come into force immediately, while more controversial aspects, such as the investor court system, will require ratification by EU member states.

Stocks

A South Korean judge questioned Samsung Group (OTC:SSNLF) leader Jay Y. Lee and another executive behind closed doors today to decide whether they should be arrested over their roles in a corruption scandal that has engulfed President Park Geun-hye. The same Seoul court rejected a request for a warrant in January, but a spokesman said it had since expanded the charges to include hiding the proceeds of a criminal act.

According to CNBC, Toshiba (OTCPK:TOSYY) may delay the sale of its prized flash-memory chip unit after the conglomerate said it would consider selling most, even all, of the marquee business. Loosening the deadline would ease concerns about trying to hurry any antitrust reviews, increasing the number of potential buyers and improved offers. Among the possible bidders: MU, WDC, OTC:FXCOF, OTC:HXSCF and Bain Capital.

Production workers at Boeing's South Carolina plant have overwhelmingly voted not to join the Machinists, maintaining southern reluctance toward unionization. It was a high-profile test for organized labor in the nation's most anti-union state. The plant will get additional attention this week as President Trump visits the facility on Friday to mark the completion of the first 787-10, Boeing's (NYSE:BA) newest version of the Dreamliner.

"In most states and cities, there are no rules about driverless cars," said UBER's Emil Michael, explaining why the company doesn't always know who's going to be welcoming until after it puts test vehicles on the road. "Relationships are hard sometimes, so you have to invest in a lot of them," he added, citing the need to find more "friendly cities" and get more "real road miles to make the thing work."

Organic growth of 3.2% for 2016 was at the high end of the industry, but "there is no beating around the bush - it came in lower than we expected," said Nestle's (OTCPK:NSRGY) new CEO Ulf Mark Schneider. It was the fourth straight year Nestle had missed its 5-6% growth objective, known as the "Nestle Model." As a result, the company is stepping up "restructuring" and cutting its sales growth target to 2-4% for 2017.

Kombucha drinkers (or brewers) rejoice! Colorado lawmakers have introduced the KOMBUCHA Act in Congress, which would increase the tax limit on drinks from 0.5% ABV to 1.25%, making it exempt from federal alcohol tax and regulation. The trendy fermented tea is a growing industry, with an economic impact of $600M expected to be worth $1.8B by 2020. Related tickers: PEP, HAIN, SBUX, WFM, OTC:PUSH

Twitter's jump into live events has largely been about sports, but Sunday night's Grammy Awards attracted more viewers than any NFL game. Some 5.1M people tuned into the event, a number topped only by the presidential election and Donald Trump's inauguration. Twitter (NYSE:TWTR) plans to double the amount of live programming it shows in 2017, as it attempts to boost engagement in a highly competitive online media world.

Shareholders of Time Warner have approved the company's $86B takeover by AT&T (NYSE:T). The OK came with 78% of outstanding shares in favor, and 99% of shares voted, but tough regulatory aprovals are seen ahead. The mega-merger would pair entertainment creators such as HBO, CNN and Warner Bros. (NYSE:TWX) with AT&T's wired and wireless networks and DirecTV.

Verizon's discount on its $4.8B deal to acquire Yahoo (NASDAQ:YHOO) may amount to as much as $300M, WSJ reports. It follows weeks of tense talks after a pair of massive data breaches were revealed by Yahoo, affecting 500M and 1B users respectively. If the revision is quickly agreed to, Verizon's (NYSE:VZ) deal could close in April - though an SEC probe into the breaches could still slow that timeline.

Fed raises rates for the second time in a decade

Federal Reserve officials, amid signs that the U.S. economy soon could shed its long period of stagnation, approved the first interest rate hike in a year Wednesday and said it foresees three more increases next year.

The stock market reacted calmly, while bond yields and the dollar rose. The yield on 2-year Treasury's hit its highest level in since August 2009.

The Federal Open Market Committee raised its target range from a range of 0.25 percent to 0.5 percent to 0.5 percent to 0.75 percent. The overnight funds rate currently sits at 0.41 percent.

The committee also approved a quarter-point increase in the discount, or primary credit, rate, from 1 percent to 1.25 percent.

The decision was unanimous. Previous meetings had featured dissents from as many as three members who felt the Fed should resume a rate-hiking cycle it began in December 2015.

In addition to approving the much-expected increase, the FOMC also indicated a higher rate than projected back in September when it last released the quarterly look ahead. The committee now expects three rate hikes in 2017, two or three in 2018 and three in 2019.

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In effect, the Fed added one more hike during the entire period, with the longer-run target up to 3 percent from 2.9 percent.

"What they did was highly anticipated. There was a slight surprise in next year, looking at an additional rate hike," said Myles Clouston, senior director of Nasdaq Advisory Services. "Overall, the Fed remains pretty steady overall, looking at gradual raises in interest runs in the long run."

The closely watched dot-plot also indicated a somewhat more ambitious future for hikes.

However, the committee continued to emphasize in its post-meeting statements that the path higher will be "gradual." It also stuck with language indicating that risks to the Fed's forecasts remain "roughly balanced," and emphasized that future moves will be data-dependent rather than subject to a set schedule.

Lucas Jackson | Reuters

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the announcement that the U.S. Federal Reserve had hiked interest rates for the first time in nearly a decade in New York, December 16, 2015.

The increase came with projections that economic conditions are changing.

On inflation, the committee said market-based measures remain low but have moved up "considerably," a word that was omitted from the November statement.

On the jobs market, Fed officials indicated that full employment is getting closer.

"The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation," the statement said.

That differed from November, when they included the more definitive "supporting further improvement in labor market conditions" language. There has been considerable discussion within the Fed about how close the labor market is to full employment, and this week's developments indicate that officials believe that condition is getting closer.

The move came with an incrementally more upbeat look at the economy. This week's statement said "economic activity has been expanding at a moderate pace since mid-year," an upgrade from November's assessment that growth had "picked up from the modest pace seen in the first half of this year."

Committee members lifted their expectations for GDP growth from 1.8 percent in 2016 to 1.9 percent, and 2.1 percent in 2017 against the previous estimate of 2.0 percent. However, 2018 remained at 2.0 percent while 2019 also was bumped up a notch, from 1.8 percent to 1.9 percent. The longer-run GDP projection remained at 1.8 percent.

Headline inflation expectations were little changed overall, with 2016 moved up from 1.3 percent in September to 1.5 percent in Wednesday's projections, but the longer-run outlook remained at 2.0 percent.

The Fed last hiked rates almost a year ago to the day — Dec. 16, 2015, to be exact — during a decidedly different time for the economy. GDP growth for the fourth quarter of 2015 was just 0.9 percent, and it was far from certain that inflation was heading toward the central bank's 2 percent target.

Markets initially welcomed the news then but then nose-dived, sending major stock averages just short of bear market territory in what would become a topsy-turvy year for geopolitics and growth.

A year later, things have changed significantly.

The economy has continued to trek toward full employment, with the jobless rate currently at 4.6 percent. Most inflation measures show the trend much closer to the Fed's benchmark as well.

Fed Leaves Rates Unchanged, Ducks Criticism About Confusing Guidance

Three of the 10 voting members of the Fed's monetary policy committee wanted to raise the target range for short-term interest rates by a quarter of a point.

The Federal Reserve, as expected, didn't raise interest rates today -- but the central bank sent mixed messages about whether the economy is strengthening that sparked fresh criticism of a central bank increasingly seen as indecisive.

The action leaves the target range for the closely-watched Federal Funds Rate at 0.25% to 0.5%. But the language in the post-meeting statement issued by the Fed's Open Market Committee and the economic projections of the committee's members pointed in different directions.

The language suggested the economy is gaining steam, while the projections pointed to weaker medium-term growth and a slower upward path to rates than the Fed has seen as likely until now, while continuing to predict that the central bank will boost rates at least once this year, probably in December.

Committee members said that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. In a notably more upbeat summation of the economy than the committee made in its July statement, the Fed said "the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid."

"We're generally pleased with how the U.S. economy is doing," Fed Chair Janet Yellen said at a news conference. But, she added, the recent jump in workforce participation and other measures indicate the economy still has enough slack that inflation isn't a major risk. "The economy has a little bit more room to run than we thought, which is good.''

Indeed, three of the 10 voting members of the committee wanted to raise the target range for short-term interest rates by a quarter of a point.

"I think they are laying the groundwork for a December rate hike, but after two disappointing prints on gross domestic product growth they want to wait and see if growth has actually recovered in the third quarter," said Brian Coulton, chief economist at Fitch Ratings. "The labor-market data seems less of a reason to wait now, but the recent weakness in non-oil business investment is likely giving them grounds to hold off a bit longer."

Economic projections released along with the statement show that the members of the committee reduced their median estimate of this year's growth in the economy to 1.8% from a projection of 2% in June, and trimmed their projections for how quickly rates will be likely to rise over the next two or more years.

The inaction, regardless of the members' seemingly growing support for a rate hike, didn't sit well with some economists.

 "If you want to consider this a 'hawkish hold,' knock yourself out, but saying the case for a rate hike has strengthened but opting to wait simply means there are now three more months for something to go wrong and fend off a December rate hike," Regions Financial Chief Economist Richard Moody said in an e-mail. "This statement doesn't do much for their credibility."

Brian Sozzi, a columnist for TheStreet's subscription-based premium site Real Money, added in his analysis of the Fed's move that the central bank is "talking out of both sides of its mouth. The market loves it, so why not ride out the bullishness for now?"

See full coverage of the Federal Reserve's monetary policy here.

By Tim Mullaney

Source : https://www.thestreet.com/story/13747749/1/fed-walks-tightrope-on-guidance-after-leaving-rates-unchanged.html

Stock Futures Set for Bounce in Whiplash End to Week

Stock futures were setting up for a bounce on Friday in a hard left turn to the selloff that punished Wall Street a day earlier. 

S&P 500 futures were up 0.54%, Dow Jones Industrial Average futures added 0.46%, and Nasdaq futures gained 0.56%.

Stocks have had a rocky week, rallying on Wednesday on signs of a dovish Federal Reserve and selling off on Thursday alongside crude oil. Investors have shown weariness ahead of the kickoff to first-quarter earnings season next week. The Dow suffered its worst loss in six weeks on Thursday, plummeting 174 points or 1%. 

Fed Chair Janet Yellen and former Fed chiefs Alan Greenspan, Ben Bernanke and Paul Volcker inspired good vibes on Wall Street after assuring that the U.S. economy wasn't heading back into recession despite presidential front runner Donald Trump's claims that we are in a bubble. 

The "economy has made tremendous progress in recovering from the damage from the financial crisis," Yellen said at a panel discussion at the International House of New York on Thursday night. "Slowly but surely, the labor market is healing. For well over a year, we've averaged about 225,000 jobs a month, the unemployment rate now stands at 5%, and we're coming close to our assigned congressional goal of maximum employment."

Crude oil prices bounced above $38 a barrel again on Friday after another dip a day earlier. Investors hope a weekly read on active U.S. oil rigs out later in the day will show a decline, a relief to a current supply glut. Commodity traders were also on high alert ahead of next week's meeting between Organization of Petroleum Exporting Countries members which will hopefully result in a production freeze. West Texas Intermediate was up 4% to $38.73 a barrel. 

The first-quarter earnings season will kick off in earnest on Monday afternoon when unofficial bell-ringer Alcoa (AA - Get Report) reports. Uncertainty over how major companies fared over the quarter kept bulls on the sidelines and pushed bears to sell.

"As we start to kick in to earnings season there's going to be anxiety," Matt Kaufler, portfolio manager at Federated Investors, told TheStreet. "There's a general skepticism that [earnings] are perhaps steady but they'll be unenthusiastic. Steady but uninspiring."

The early prognosis on companies' quarterly performances doesn't look good. S&P 500 earnings are expected to fall 7.9% in the first quarter, their third straight quarter in decline and their losing streak worst since mid-2009. Excluding the energy sector, earnings are forecast to fall 3.6%.

Gap (GPS) plummeted 8.6% in premarket trading after reporting a 6% slump in same-store sales in March to $1.43 billion. The retailer had reported a 2% increase over the same period a year earlier. Banana Republic was the worst performer, tumbling 14% compared to a 3% decrease in March last year. 

Yahoo! (YHOO - Get Report) added more than 1% before the bell on reports Verizon (VZ - Get Report) will move forward with a bid for its core business. AOL CEO Tim Armstrong would likely head Yahoo! if it became a Verizon property.  

Alliance Fiber Optic Products (AFOP - Get Report) surged 17.7% after Corning (GLW - Get Report) agreed to purchase the optical tech manufacturer. The all-cash deal for $18.50 a share represents a total value of around $305 million. 

Anavex Life Sciences (AVXL) jumped more than 14% after announcing its Alzheimer treatment had received orphan drug designation from the Food and Drug Administration. The designation provides the drugmaker with development and commercial incentives, including seven years of market exclusivity in the U.S. and certain exemptions from or reductions in regulatory fees.

DepoMed (DEPO) added 12.3% after activist investor Starboard Value disclosed a 9.8% stake. The firm, now the pharmaceutical company's third-largest shareholder, said it intends to nominate board members and also questioned DepMed's "serious corporate governance deficiencies [and] questionable capital allocation decisions."

By Keris Alison Lahiff

Source:http://www.thestreet.com/story/13522986/1/stock-futures-set-for-bounce-in-whiplash-end-to-week.html