Futures for the Dow Jones today (Wednesday) forecast a 124-point decline after China surprised the global markets by announcing it will devalue the yuan, a decision that pushed the U.S. dollar higher. The world's second-largest economy continues to struggle and is looking for ways to kick-start growth. Following several rounds of rate hikes, the devaluation will likely offer a boost to its exports market but raise new concerns about a possible currency war between China and the West.
On Tuesday, the Dow Jones plunged more than 212 points after China elected to devalue its yuan currency by 2%. It's an action that could have dire consequences to the U.S. economy. It was the largest devaluation in the Chinese yuan's history. The yuan's value was cut almost 1.9% against the U.S. dollar.
According to The Wall Street Journal, the People's Bank of China (PBOC) believes this will reform the yuan's regulation and more closely align the currency with market forces. The PBOC also followed some of the International Monetary Fund's (IMF) suggestions when it came to changing the currency's regulation. Here's why that is so important...
Top News in the Stock Market Today
The Stock Market Today: Today, investors will focus on a speech by New York Federal Reserve Bank President William Dudley and a critical oil inventory report from the U.S. Energy Information Administration (EIA). Investors will continue to focus on the decision by China's central bank to devalue its currency. Technical traders are paying attention to the reemergence of the bearish signal known as the "death cross" when the Dow Jones' 50-day moving average slips below its 200-day moving average.
Oil Outlook:Oil prices received a bump this morning after falling to six-month lows in the wake of China's currency devaluation. WTI crude futures for September gained 1.1% to hit $43.58 per barrel. Meanwhile, Brent oil prices added 0.7% to $49.52 per barrel. Money Morning Global Energy Strategist Dr. Kent Moors explains what China's surprise currency announcement means for oil prices, and, more importantly, offers his outlook for when prices will return to the $70 range. Read it all here.
Earnings Reports: Companies reporting earnings include Cisco Systems Inc. (Nasdaq: CSCO), Alibaba Group Holding Ltd.(NYSE: BABA), Macy's Inc. (NYSE: M), NetEase Inc. (Nasdaq ADR: NTES), and News Corp. (Nasdaq: NWSA).
Pre-Market Movers in the Stock Market Today: AAPL, BABA, GE
Pre-Market Movers No. 1, AAPL: Shares of Apple Inc. (Nasdaq: AAPL) slumped another 1.3% this morning as traders react to China's surprise decision to devalue its currency. The stock fell 5.2% yesterday as exposure to the world's second-largest economy rattled confidence in the iPhone manufacturer. Investment firm Jefferies slashed its price target from $135 to $130 over concerns about exposure to China. But we're sticking to a $200 price target for the company. Here's a breakdown on how you can make 74% on Apple stock.
Pre-Market Movers No. 2, BABA: Shares of Alibaba Group Holding Ltd. (NYSE: BABA) fell more than 5.5% after the company reported its slowest growth rate in five years and weaker than expected earnings on Wednesday morning. According to Wall Street estimates, the company should report per-share earnings of $0.58 on revenue of $3.39 billion. Here's what to expect from BABA stock after the earnings report.
Pre-Market Movers No. 3, GE: Shares of General Electric Co. (NYSE: GE) fell more than 1% this morning after the company announced plans to sell its U.S.-based healthcare financial unit to Capital One Financial Corp. (NYSE: COF) for roughly $9 billion. This is just the latest divestiture in finance for General Electric as the company continues to center on Jeffrey Immelt's vision of being a company dedicated to the manufacturing and industrial sectors.
Stocks to Watch Today: AAL, LUV, SAVE, GM, F, FCAU
Stocks to Watch No. 1, AAL: Airline stocks were big winners on Tuesday. The day's top performer was American Airlines Group Inc. (Nasdaq: AAL), which gained nearly 2.5% after reporting passenger miles in July reached a new record of 21.8 billion. That's a near 5% gain from the same month in 2014. Shares of Southwest Airlines Co. (NYSE: LUV) were up 1.5% on Tuesday and continued to show gains this morning. Finally, Spirit Airlines Inc. (Nasdaq: SAVE) added more than 2.8% yesterday.
Stocks to Watch No. 2, GM, F, FCAU: Investors should keep an eye on automotive stocks during today's trading as investors continue to sell in the wake of expected weakness thanks to China's currency devaluation and a stronger dollar affecting sales in Asia. Shares of General Motors Co. (NYSE: GM) were down more than 1%, while Ford Motor Co. (NYSE: F) dipped nearly 0.9%. Shares of Fiat Chrysler Automobiles NV (NYSE: FCAU) were the pre-market's worst performer, sliding a little more than 4%.
Today's U.S. Economic Calendar (all times EDT)
MBA Mortgage Applications at 7 a.m.
William Dudley Speaks at 8:30 a.m.
Atlanta Fed Business Inflation Expectations at 10 a.m.
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.
