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The U.S. Federal Reserve is back in focus again today, and the Dow Jones Industrial Average will jump if central bankers say "jump." According to a new report by the founder of ValueBridge Advisors and Fed Dashboard, the Dow Jones' rise over the last eight years is overwhelmingly owed to the U.S. central bank. ValueBridge's analysis shows the Federal Reserve's loose monetary policy since 2008 is responsible for a staggering 93% of the Dow's gains. Don't expect traders to ignore the Fed given its track record of directing the Dow's performance.
And here's the top stock market news, stocks to watch, and economic calendar for Wednesday, March 16, 2016.
What's Moving the Dow Jones Industrial Average Today: Monetary Policy
Dow futures dipped four points this morning ahead of the Federal Reserve meeting on monetary policy. Here's a breakdown of why the Dow is sliding.
- First up, the Federal Open Market Committee concludes its two-day monetary policy meeting and will announce its plan on interest rates. The markets project a 0% probability that the Fed will hike rates today, according to CME FedWatch. However, pay attention to Federal Reserve Chairwoman Janet Yellen's news conference after the meeting for clues on when the central bank may take action. Financial markets have priced in one hike of 25 basis points this year, although economists anticipate at least two hikes in 2016.
- President Barack Obama will nominate a Supreme Court nominee at 11 a.m. EST. The decision has the potential to shape the nation's highest court for a generation in the wake of Justice Antonin Scalia's death. Speculations of potential nominees include three federal appellate judges: Sri Srinivasan, Merrick B. Garland, and Paul Watford. Republicans are demanding that the next president have the opportunity to nominate a judge.
- Crude oil prices rallied more than 2% on news that OPEC and non-OPEC producers agreed to hold another meeting next month to consider a measure to freeze current output levels. The global oil cartel is hoping to reduce the global glut; however, Iran could still be a thorn in any potential deal. The nation's oil minister recently said it does not plan to join the production freeze until it reaches output of 4 million barrels per day. Currently, 15 OPEC and non-OPEC producers – representing 73% of global oil output – support the initiative to hold oil production at current levels.
- Presidential candidate Hillary Clinton raised a lot of eyebrows when she said she planned to "put a lot of coal companies and coal miners out of business" if she becomes president. However, the Obama administration's policies have already gotten that started. The largest U.S. coal producer, Peabody Energy Corp. (NYSE: BTU), may need to seek bankruptcy protection after failing to meet a $71.1 million interest payment on senior debt. BTU shares fell more than 41% in pre-market hours.
- On the economic front, the February Consumer Price Index (CPI) will be central to policy-making decisions by the Fed in the months ahead. Central bankers are looking for that elusive inflation level to continue to rise, particularly as energy prices increase. Traders will also want to look at February's update on housing starts and industrial production for more insight into the health of the U.S. economy.
Now, here's your list of top stocks to watch in today's market, plus today's economic calendar:
Companies to Watch in the Stock Market Today
- Shares of Valeant Pharmaceuticals International Inc. (NYSE: VRX) are back in focus after shares crashed by more than 51% on Tuesday to their lowest level since 2011. Yesterday, the Canadian firm slashed its forward guidance for 2016 and warned of a possible default event, sending investors for the exits. The news is a crushing blow to activist investor Bill Ackman, who had doubled and tripled down on Valeant stock in recent months. If you listened to Money Morning Global Credit Strategist Michael Lewitt back in October, you'd have seen this earnings report and debt warning coming six months in advance. This morning, VRX stock was up 2.6%.
- After the bell, look for a critical third-quarter earnings report from FedEx Corp. (NYSE: FDX). The global packaging company's performance is a strong proxy of global economic health, particularly around its holiday peak season. Shareholders are also hoping for more information on the company's plans to acquire Dutch rival TNT Express.
- Shares of Oracle Corp. (NYSE: ORCL) gained more than 3% on news the enterprise software company beat Wall Street's quarterly profit expectations. In addition to topping estimates by $0.02, the firm also announced plans to boost its stock buyback program by $10 billion.
- On the earnings side, pay attention to quarterly performance reports from Williams-Sonoma Inc. (NYSE: WSM), Guess? Inc. (NYSE: GES), Jabil Circuit Inc. (NYSE: JBL), and Ctrip.com International Ltd. (Nasdaq ADR: CTRP).
- Chipotle Mexican Grill Inc. (NYSE: CMG) announced it may report its first-ever quarterly loss, a reversal of previous expectations for a break-even earnings report. The announcement comes after new data revealed that its comparable-store sales fell 26% in February in the wake of food-safety incidents.
Today's U.S. Economic Calendar (all times EDT)
- MBA Mortgage Applications at 7 a.m.
- Consumer Price Index at 8:30 a.m.
- Housing Starts at 8:30 a.m.
- Industrial Production at 9:15 a.m.
- EIA Petroleum Status Report at 10:30 a.m.
- FOMC Meeting Announcement at 2:00 p.m.
- FOMC Forecasts at 2 p.m.
- Fed Chair Press Conference at 2:30 p.m.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.