Market Outlook – June 14, 2018

Feds Raise Interest Rates & Cites Economic Expansion

 

With the U.S. economy currently growing at a pace above 4.0%, the Federal Reserve saw it fitting to raise interest rate once more on Wednesday. The central bank also cited the low unemployment rate and higher inflation as contributing factors to making the decision.

The benchmark short-term interest rate has been increased by a quarter percentage point and thereby pushing the funds rate target to 1.75% to 2%. This latest rate adjustment rate is closely tied to consumer debt, mostly credit cards, home equity credit lines and other adjustable-rate instruments. The Feds also indicated that two more rate hikes are likely this year.

For his part, Chairman Jerome Powell was satisfied with the recovery saying the economy was in “great shape.”  He added, “I think we are far enough away now though that the risks are kind of balanced.” But the Feds would want to see bigger gains in wages and productivity, stable prices and full employment to make it more ideal.

U.S. Stock Market Slumps after Rate Hike Announcement

 

On Wednesday, the main U.S. stock benchmarks closed trading at near session lows. The slump came after the Federal Reserve announced the second increase in benchmark interest rates this year. Investors took note of the central bank’s slightly aggressive plan to tighten monetary policy in 2018 than had previously been projected.

The Dow Jones Industrial Average retreated 119.53 points (-0.5%) where the nearly 2% drop of Boeing Co. (BA) and Caterpillar Inc. (CAT) pulling the blue-chip index down. The broader S&P 500 Index fell 11.22 points (-0.4%), with only the consumer-discretionary sector out of the index’s 11 major sectors finishing in positive territory.

The Nasdaq Composite Index shed as well, dropping 8.09 points (-0.1%) although the tech-heavy benchmark had set an intraday record of 7,748.96 before skinning the gains.

Trump to Meet with Top Trade Advisers on Chinese Tariffs

 

United States President Donald Trump will meet with his top trade advisers on Thursday to discuss the issue of tariffs on Chinese goods. White House set the deadline to publish the list on Friday, June 15. Trump, along with his advisers will decide whether to activate the threatened tariffs on imports from China.

The initial tariff list targets $50 billion worth of Chinese goods. However, some sources say they are making revisions to make it slightly lower but still close to the original amount. Reuters was informed by industry lobbyists that the publication of a Federal Register notice could be expected as early as Friday or if not, until next week.

Comcast Formalizes Bid for Fox Assets

 

Without missing a beat, Comcast Corp. (CMCSA) formally launches its bid to acquire some assets of Twenty-First Century Fox (FOXA). It is also a challenge to the outstanding $52.4 all-stock deal offer of Walt Disney Co. (DIS).

The U.S. media conglomerate made the dramatic move after a federal judge approved the $85 billion deal between AT&T Inc. (T) and Time Warner Inc. (TWX). Comcast’s offer is $65 billion cash for assets that would include Fox’s film and television studios and international businesses.

Although Fox remains subject to the terms the Disney offer, the company would “carefully review and consider” Comcast’s offer.

Microsoft’s Technology to Challenge Amazon

 

Reuter News published a report on Thursday saying that Microsoft Corp. (MFST) is working on a technology that would do away with cashiers and checkout lines at retail stores.  The U.S. software giant has already shown the sample technology to international retailers. There are talks with Walmart Inc. (WMT)  for a possible collaboration.

Microsoft’s push for a check-out free retail aims to compete with Amazon.com Inc.’s (AMZN) Amazon Go. The highly automated store of the world’s biggest online retailer will open two more in Chicago and San Francisco. The branch in Seattle has been operating since  January.  Thus, rivals want to have their own automated checkout services.

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