Top 5 Things to Know in the Market on Wednesday
1. U.S. bond yields, dollar supported as markets digest Yellen
U.S. bond yields and the dollar moved higher on Wednesday as markets continued to digest remarks a day earlier from Federal Reserve chair Janet Yellen.
Yellen backed the Fed’s call to forge ahead with at least one rate hike this year despite the fact that she admitted Tuesday that policymakers may have “misjudged” their readings of the labor market and inflation.
She once again insisted that the low levels of inflation would fade over time and that, despite uncertainties, it “would be imprudent to keep monetary policy on hold until inflation is back to 2%.”
Following the speech, an auction of U.S. 2-year notes sold at a yield of 1.462%, the highest level at a two-year auction since October 2008.
Yields on both the 2-year and 10-year Treasury continued to rise on Wednesday with the Treasury briefly breaking above 2.3%.
Additionally, the dollar was hovering at a one-month high against other major currencies on Wednesday after Yellen’s comments with greenback strength pushing gold to 5-week lows.
On Wednesday’s data front, markets will digest August durable goods orders at 8:30AM ET (12:30GMT) and pending home sales for the same month at 10:00AM ET (14:00GMT).
2. Markets await U.S. tax reform proposal
The so-called “Big 6” -formed by National Economic Council Director Gary Cohn, U.S. Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, Senate Finance Chair Orrin Hatch, and Ways & Means Committee Chair Kevin Brady- are expected to unveil the details of their tax reform proposal later on Wednesday.
Reports have suggested that the White House and Republican leaders will propose slashing the corporate tax rate from 35% to 20% and call for lowering the rate many high-income businesses pay through the individual income tax code to 25%.
“We’ll be releasing a very comprehensive report,” U.S. President Donald Trump said Tuesday.
“And it will be a very, very powerful document,” he added.
Trump is expected to give the details of the plan at 3:00PM ET (19:00GMT).
3. Global stocks mostly higher on U.S. tax reform hopes
Global shares rose on Wednesday as investors hoped for progress on major tax reform stateside.
U.S. futures pointed to timid gains at the open on Wall Street while waiting for the news. At 6:12AM ET (10:12GMT), the blue-chip Dow futures rose by 3 points, or 0.01%, S&P 500 futures inched up 2 points, or 0.08%, while the Nasdaq 100 futures advanced 9 points, or 0.15%.
Elsewhere, European stocks climbed to a 10-week high on Wednesday led by banks ahead of the update on U.S. tax reform, while Alstom (PA:ALSO) shares surged after its rail merger with Siemens.
Asian equities also mostly benefited Wednesday on hopes that Trump and Republicans will be able to push forward their new fiscal plan, though Japan’s Nikkei was an outlier, ending with losses of 0.2%.
4. Oil slip while waiting for inventory data
Crude oil prices edged lower on Wednesday, but remained in sight of their strongest level in months amid speculation weekly supply data due later in the session will show U.S. crude stockpiles declined for the first time in four weeks.
The U.S. Energy Information Administration will release its official weekly oil supplies reportat 10:30AM ET (1430GMT).
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories unexpectedly declined by 761,000 barrels in the week ended September 22 as refiners raised output.
U.S. crude oil futures dropped 0.15% to $51.80 at 6:14AM ET (10:14GMT), while Brent oillost 0.55% to $57.60.
5. Nike slumps 3.5% as earnings season revs engines
Shares in Nike (NYSE:NKE) slumped 3.5% in pre-market trade Wednesday despite reporting better-than-expected earnings after the market close a day earlier as the sports apparel company gave a bleak outlook on U.S. demand.
The world’s biggest sportswear maker expects North American sales to decline again this quarter, following a 3% dip in the region last quarter.