US markets are looking at a tentatively higher open on Wednesday, a day that could mark a key juncture for stock market performance. It is the traditional start to earnings season with Alcoa Inc (NYSE:AA) reporting its performance in the first quarter but more importantly for modern central-bank enabled markets; the minutes from the last Federal Reserve meeting are released.
After such a strong day on Monday, it’s understandable that markets should have pulled off their highs yesterday to close slightly lower before today’s news from the Fed. After all, the surge on Monday following a collapse in jobs growth to half of what was expected was purely based on speculation over monetary policy.
At the last meeting the Fed dropped its “patience” language but also revised down its growth and inflation forecasts. The removal of forward guidance was largely priced in so it was the growth revisions that markets reacted to. It could be said that the last statement has left the Fed willing to hike rates; the minutes will hopefully offer some details on what might make them feel they are able to.
If oil prices can hold up, Royal Dutch Shell (LONDON:RDSa)’s huge takeover of BG Group (LONDON:BG) could spur some big gains in US energy stocks on the prospect of perhaps US oil giants Exxon Mobil (NYSE:XOM) or Chevron engaging in a similar deal. The energy sector is beaten down from the drop in oil prices so it makes a lot of strategic sense for the majors to get “opportunistic” about growing through acquisitions, especially when slashed capex budgets reduce the ability to growing organically.
Alcoa report earnings after today’s close in a release that is always important for getting a strong start to the reporting season.
Futures suggest the:
S&P 500 will open 2 points higher at 2,078 with the
Dow Jones expected to open 21 points higher at 17,896 and the
Nasdaq 100 unchanged at 4,344.
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