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Top 5 Things to Know in the Market on Wednesday

Investing.com - Here are the top five things you need to know in financial markets on Wednesday, Feb. 20: 1. Fed

Investing.com - Here are the top five things you need to know in financial markets on Wednesday, Feb. 20:

1. Fed minutes expected to cement dovish about face, U.S. dollar on hold

The Federal Reserve will release the minutes from its Jan. 30 policy meeting at 2:00 PM ET (19:00 GMT) Wednesday. Markets are expecting the details to cement the central bank’s promise to be patient with further interest rate hikes.

More interesting for the market may be what the minutes reveal about the Fed's plans for reducing its balance sheet further.

“Quantitative tightening, which Federal Reserve chair Jerome Powell likes to refer to as ‘balance sheet runoff’, is no longer on autopilot,” Investing.com analyst Darrell Delamaide said.

The minutes are expected to confirm the dovish outlook, and that's keeping a lid on the U.S. dollar ahead of the release. At 5:54 AM ET (11:54 GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell ovenight and was largely unchanged 0.03% at 96.38.

2. Global stocks show mixed trade as U.S.-China talks persist

Global stocks were mixed on Wednesday with U.S. futures leaning towards caution as U.S.-China trade talks continued in Washington.

U.S. President Donald Trump said Tuesday that discussions were going well and suggested he was open to pushing off the deadline to complete negotiations, saying March 1 was not a "magical" date.

March 1 is the current deadline for the U.S. to push tariffs on about $200 billion worth of Chinese imports to 25% from the current 10% if a deal is not reached. A renewed round of talks began on Tuesday in Washington with higher-level discussion scheduled for later this week.

“The overall feeling is that it is one step forward, three-quarters of a step back at the moment. So positive momentum but still fragile,” Deutsche Bank (DE:DBKGn)'s chief strategist Jim Reid said.

Trump’s comments, coupled with positive results from retail giant Walmart (NYSE:WMT), were enough to push Wall Street higher on Tuesday and send Asian shares to a four-month high overnight.

European stocks also joined in with the pan-European Stoxx 600 up 0.2%.

After Tuesday’s positive close, Wall Street adopted a more cautious stance with U.S. futures largely flat. At 5:55 AM ET (10:55 GMT), the blue-chip Dow futures slipped 21 points, or 0.08%, S&P 500 futures edged down 2 points, or 0.07%, while the Nasdaq 100 futures were unchanged.

3. Earnings focus on consumers

With nearly 400 of the S&P 500 firms having released earnings for the fourth-quarter reporting period, the focus for Wednesday will shift to consumer-oriented stocks.

Following a strong beat by Walmart a day earlier, some of the companies stepping up to bat are:

CVS Health (NYSE:CVS). The consensus estimate of analysts polled by Investing.com is for a profit of $2.09 a share on revenue of $54.6 billion. Shares fell 21% between their summer peak and December and are up 11% since.

Car-rental company Avis Budget Group (NASDAQ:CAR) is seen reporting earnings of 38 cents a share on revenue of $2.05 billion, according to estimates compiled by Investing.com. The shares lost half their value between March and December. They're up a third from the December bottom.

The Cheesecake Factory (NASDAQ:CAKE). The restaurant chain is expected to report a profit of 62 cents a share on revenue of $592.9 million. The shares fell 31% between a July peak to December and are up 11% since.

4. Oil drops from 2019 highs as U.S. output rears its head

Oil prices dropped on Wednesday, pulling back from 2019 highs, as attention shifted from OPEC-led production cuts to worries over the surge in U.S. output.

U.S. crude oil futures fell 15 cents, or 0.27%, to $56.30 by 5:56 AM ET (10:56 GMT), while Brent oil traded down 29 cents, or 0.44%, to $66.16.

U.S. crude output, which soared by more than 2 million barrels per day (bpd) in 2018 to a record 11.9 million bpd, is set to keep rising thanks to booming shale oil production, the Energy Information Administration said on Tuesday.

After oil hit its highest level since last November this week, traders have taken a breather amid fears that surging shale output could stop the market rebalancing.

Read more: OPEC’s Nemesis, Shale Oil, Is Back, Setting New Production Records - Barani Krishnan

Attention is set to turn to weekly data on U.S. crude inventories. The American Petroleum Institute will release its report later on Wednesday with official government data out a day later amid expectations for a build of 3.1 million barrels. Both reports come out one day later than normal due to Monday's holiday.

Thursday’s report will also include the latest reading on U.S. production.

5. U.K. and EU to meet as Brexit impasse drags on

Not to be forgotten on the other side of the Atlantic, negotiations over the U.K.’s pending departure from the European Union drag on with few hopes for progress amid the current political impasse.

U.K. Prime Minister Theresa May is scheduled to meet with EU Commission President Jean-Claude Juncker later on Wednesday. Recent talks have yielded little progress since the British Parliament resoundingly defeated a divorce deal she had agreed to with the bloc back in November.

May’s spokesperson dubbed the meeting to be a “significant” part of the process although Juncker remained skeptical when speaking of the planned encounter:

“There is not enough movement for me to be able to assume that it will be a productive discussion,” he told reporters on Tuesday.

At 5:57 AM ET (10:57 GMT), the British pound was down 0.21% at 1.3033.