Apple (NASDAQ:AAPL)'s quarterly report struck out completely last night with the company coming in below estimates on sales, earnings and guidance. This news has hit the NASDAQ hard with futures trading down 1.1% overnight. Apple could come under more pressure today with a number of brokerages cutting their target prices on the smartphone maker this morning.
There had been concern in some quarters heading in to the report about the iPhone's life cycle having peaked, so Apple's big disappointment has not had as big an impact on broader markets. Dow and SPX futures are trading down about 0.2% while European indices are mixed with the FTSE down 0.4% and the Dax up 0.2%.
Other companies that could be active on news today include Boeing (NYSE:BA) who had a mixed report, missing on earnings but beating the street on sales. Garmin (NASDAQ:GRMN) beat the street on sales and earnings. Twitter (NYSE:TWTR) also had a mixed report (missed on sales but beat the street on earnings and active users), while Chipotle (NYSE:CMG) reported dismal results as generally expected but perhaps in some areas not as terrible as feared.
The main event of the day for traders is the Fed announcement this afternoon. It's pretty much a done deal that the Fed won't change rates this month, having cut its plans from 4 rate hikes this year to two. Although the markets have recovered from the pounding they took earlier this year, China’s economy has stabilized, and some FOMC members favour a hike, the majority of Fed members don't appear ready to rock the boat too much yet.
It is possible though that the Fed may signal the potential for a June hike. Although bond prices suggest expectations of a dovish Fed, the two more dovish regional voters this year (Bullard and Rosengren) have suggested the street may be too pessimistic about the economy and underestimating the number of potential rate hikes this year. Recall that the fed went more dovish after crude oil fell to $26 and deflation/recession fears increased with WTI back up at $45 this morning and the potential inflation pressures could pick up as the year means pressure on the Fed to take a more hawkish turn may grow.
A June hike would keep the Fed clear of the election campaign and on course for 2 increases this year. Ways the Fed could signal it's considering a June move could include more hawkish dissenters, a more upbeat economic assessment, or talk of rising price pressures. A dovish tone could boost stocks and send USD lower while a hawkish tone could knock stocks back briefly and boost USD a bit (but not too much as the currency still appears to be pricing in 2 hikes this year unlike bonds).
Crude oil is soaring overnight, with WTI and Brent rallying 2.2% and WTI challenging $45.00. A surprise 1.1 mbbl drop in API oil inventories sent oil sharply higher. Oil could be active through the morning around the DOE inventory reports with traders looking for confirmation or rejection.
In currency trading, AUD has been slammed for a huge 1.75% loss after Australian consumer prices fell 0.2% from the previous quarter sparking speculation that the RBA may need to cut interest rates later this year. This news also pushed NZD down 0.5% ahead of today's RBNZ meeting.
The RBNZ is due to report its latest OCR decision 3 hours after the Fed. While no cut is widely expected, some have speculated a New Zealand cut could be coming soon. Don't be surprised if Governor Wheeler tries to talk down the dollar in a bid to put a lid on recent gains and keep it under 70 cents. He could do this through threatening intervention again or signaling the potential for another rate cut.