The market thinks a Fed rate hike could happen in December. Wednesday’s testimony by Federal Reserve chair Janet Yellen in front of the House Financial Services Committee has the market believing, at least temporarily, there is a better chance than not that the Fed will raise interest rates in December. After beginning the day at a 50-50 coin flip, the probability of a rate hike jumped to 58%, the highest level for any Fed meeting since 2007, according to CMT’s Charlie Bilello. Yellen suggested December was a “live meeting” and the decision to raise rates would hang on improvement in the labor market and the Fed’s belief whether inflation could reach its 2% target. Yellen also, however, suggested that negative interest rates were possible if the outlook worsened.
The Bank of England kept policy on hold. In an 8-to-1 vote, the Bank of England kept its benchmark interest rate unchanged at 0.50% for an 80th straight month. In addition, members voted 9 to 0 to hold the central bank’s asset-purchase program at £375 billion ($573 billion). All outcomes were expected. As for inflation, the BOE sees a CPI of less than 1% into the second half of 2016. The British pound is weaker after the decision, down 0.7% at 1.5281.
The Bank of Japan is worried about inflation. The minutes from the Bank of Japan’s October 6-7 meeting showed that policymakers expressed concern the central bank’s 2% inflation target might be reached later than expected. This was confirmed at the end of October when the BOJ said its target wouldn’t be reached until “around the second half of fiscal 2016.” The BOJ warned that the slowdown in China could hurt other emerging markets and weigh on exports. All told, the central bank maintained its upbeat view on the economy. The Japanese yen is down 0.3% at 121.97 per dollar.
Norway’s central bank says its oil slump is deepening. The Norges Bank held its benchmark interest rate at a record-low 0.75%. The central bank said, “The effects of the fall in oil prices and decline in oil investment are gradually becoming evident, especially in regions closely linked to the oil industry.” In addition, the Norges Bank said unemployment was rising and household consumption was slowing. The Norwegian krone is stronger by 0.7% at 8.5716 per dollar.
Facebook is at an all-time high after its earnings beat. The social-media giant beat on the top and bottom lines. Facebook announced earnings of $0.57 per share, easily beating the $0.52 that Wall Street was anticipating. Revenue jumped 41% versus last year to $4.5 billion, ahead of the $4.37 billion that analysts were expecting. The closely followed monthly-active-users number also beat, coming in at 1.55 billion, edging out the 1.52 billion that was anticipated. CEO Mark Zuckerberg noted the growth in video, saying: “It’s pretty amazing how quickly it’s growing. But there’s a lot more to do.”
Apple might release the iPhone 7 early. Apple Insider says a source has said Apple is considering releasing its iPhone 7 earlier than its usual September launch. Since 2012, Apple has released all of its new iPhone models in late September. The early release could occur because the iPhone 6 and iPhone 6s have similar designs and investor demand might begin to slow, Apple Insider says.
Deutsche Bank has been fined by US regulators. The German investment bank will pay $258 million for violating US sanctions against countries like Iran and Syria, AFP reports. Shares of Deutsche Bank have shrugged off the news, trading up 0.4% after initially opening to a loss of 1%.
Stocks markets around the world are mostly higher. China’s Shanghai Composite (+1.8%) led the advance in Asia, and France’s CAC (+0.9%) paces the gains in Europe. S&P 500 futures are higher by 6.00 points at 2,100.75.
Economic data flows. Initial and continuing claims, productivity, and unit labor costs are all due out at 8:30 a.m. ET. Natural-gas inventories will be released at 10 a.m. ET. The US 10-year yield is unchanged at 2.22%.
Earnings reporting remains heavy. Agrium, AstraZeneca, BCE, Duke Energy, Molson Coors Brewing, and Ralph Lauren are among the names reporting before markets open. Con Edison, Kraft Heinz, Shake Shack, and Walt Disney highlight the names scheduled to release their quarterly results following the closing bell.