Overnight Markets and News

Jun E-mini S&Ps (ESM18 -0.01%) this morning are down -0.01% and European stocks are down -0.04% as the markets await the FOMC's first policy decision with Jerome Powell as Fed Chair. Losses were limited due to strength in energy stocks with May WTI crude oil (CLK18 +0.96%) up +0.93% at a 3-week high after API data late Tuesday showed U.S. crude inventories fell -2.74 million bbl last week. Crude prices also rallied after President Trump hinted at a withdrawal from a deal curbing Iran's nuclear program, which raises the risk of Iran's crude exports being stopped by sanctions. GBP/USD rallied +0.41% and the 10-year Gilt yield climbed to a 2-week high of 1.54% after the UK Jan unemployment rate unexpectedly fell to a 42-1/2 year low and after average weekly earnings rose at the fastest pace in over 2-years, which may prompt a hawkish response from the BOE when it meets tomorrow. Asian stocks settled mixed: Japan closed for holiday, Hong Kong -0.43%, China -0.29%, Taiwan unch, Australia +0.23%, Singapore -0.06%, South Korea -0.06%, India +0.42%. China's Shanghai Composite fell back from a 1-week high and closed lower as insurance stocks sold-off after a report from S&P Global Ratings said increased regulatory controls could cut the insurance sector's pace of growth in half over the next two years.

The dollar index (DXY00 -0.22%) is down -0.25%. EUR/USD (^EURUSD +0.25%) is up +0.29% after the council of German economic advisers raised their German 2018 GDP estimate. USD/JPY (^USDJPY -0.16%) is down -0.17%.

Jun 10-year T-note prices (ZNM18 -0-045) are down -3.5 ticks.

The German government's council of economic advisers raised the German 2018 GDP forecast to 2.3% from a 2.2% estimate in Nov and said the ECB's exit from "extremely expansive" monetary policy is "overdue" in view of improved economic outlook and higher inflation.

The UK ILO unemployment rate unexpectedly fell -0.1 to 4.3% for the 3-monhts through Jan, stronger than expectations of no change at 4.4% and matched a 42-1/2 year low.

UK Jan average weekly earnings rose +2.8% 3-mo avg y/y, stronger than expectations of +2.6% 3-mo avg y/y and the fastest pace of increase in 2-1/3 years.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +0.9% with purchase sub-index +3.4% and refi sub-index -2.2%), (2) Q4 current account balance (expected -$125.0 billion, Q3 -$100.6 billion), (3) Feb existing home sales (expected +0.4% to 5.40 million, Jan -3.2% to 5.38 million), (4) EIA weekly Petroleum Status Report.

Notable Russell 1000 earnings reports today include: General Mills (consensus $0.78).

U.S. IPO's scheduled to price today: none.

Equity conferences this week: Oppenheimer Healthcare Conference on Tue-Wed, Bank of America Merrill Lynch Global Industrials Conference on Tue-Thu, ACI European Fuels Markets & Refining Strategy Conference on Thu, Gabelli & Company Waste Conference on Fri.

Market Comments

Jun S&P 500 E-mini stock futures (ESM18 -0.01%) this morning are down -0.25 points (-0.01%). Tuesday's closes: S&P 500 +0.15%, Dow Jones +0.47%, Nasdaq +0.31%. The S&P 500 on Wednesday closed higher on carry-over support from a rally in European stocks and on the +2.27% rally in crude oil prices to a 3-week high, which boosted energy stocks. Stocks were undercut by weakness in technology stocks after Oracle plunged 9% when it reported weaker-than-expected Q3 cloud revenue. There was also concern the Trump administration’s aggressive trade policies may start a trade war after reports that the White House plans to impose tariffs worth as much as $60 billion on Chinese products as part of a battle over safeguarding intellectual property.

Jun 10-year T-note prices (ZNM18 -0-045) this morning are down -3.5 ticks. Tuesday's closes: TYM8 -9.50, FVM8 -5.75. Jun 10-year T-notes on Tuesday slipped to a 1-week low and closed lower. T-note prices were undercut by the sharp +2.27% rally in crude oil to a 3-week high, which boosted inflation expectations, and by concern about the Tue/Wed FOMC meeting, which is expected to produce a rate hike and a more hawkish FOMC view on the path for the federal funds rate in 2018-2020.

The dollar index (DXY00 -0.22%) this morning is down =0.228 (-0.25%). EUR/USD (^EURUSD +0.25%) is up +0.0035 (+0.29%) and USD/JPY (^USDJPY -0.16%) is down -0.18 (-0.17%). Tuesday's closes: Dollar Index +0.606 (+0.68%), EUR/USD -0.0093 (-0.75%), USD/JPY +0.43 (+0.41%). The dollar index on Tuesday closed higher on weakness in EUR/USD after the German Mar ZEW expectations of economic growth fell -12.7 to a 1-1/2 year low of 5.1, weaker than expectations of -4.8 to 13.0. There was also some short-covering in the dollar ahead of the Tue-Wed FOMC meeting where the Fed is expected to raise the fed funds target range by 25 bp and may signal support for four rate hikes this year.

May crude oil (CLK18 +0.96%) this morning is up +59 cents (+0.93%) at a 3-week high and May gasoline (RBK18 +0.76%) is up +0.0114 (+0.58%). Tuesday's closes: May WTI crude +1.41 (+2.27%), May gasoline +0.0376 (+1.94%). May crude oil and gasoline on Tuesday rallied to 3-week highs and closed higher. Crude oil prices were boosted by signs the global oil glut is shrinking faster than expected after data from Joint Technical Committee of OPEC and non-OPEC nations sowed global oil inventories in Feb were 44 million bbl above the 5-year average, down from 74 million bbl above in Jan. Gasoline prices were boosted by expectations for Wednesday's weekly EIA gasoline stockpiles to decline by -2.5 million bbl.

Metals prices this morning are mixed with Apr gold (GCJ18 +0.21%) +3.7 (+0.28%), May silver (SIK18 +0.37%) +0.075 (+0.46%), and May copper (HGK18 -0.30%) -0.005 (-0.15%) at a fresh 3-1/4 month low. Tuesday's closes: Apr gold -5.9 (-0.45%), May silver -0.140 (-0.86%), May copper -0.0440 (-1.43). Metals on Tuesday closed lower with Apr gold at a 2-week low, May silver at a 3-month low, and May copper at a 3-1/4 month low. Metals prices were undercut by a stronger dollar and increased copper supplies after LME copper inventories rose +3,200 MT to a 2-week high of 322,475 MT.

Overnight U.S. Stock Movers

Wellcare Health Plans (WCG -0.04%) was upgraded to 'Outperform' from 'Market Perform' at Wells Fargo Securities with a price target of $220.

Cboe (CBOE +1.16%) was downgraded to 'Underweight' from 'Neutral' at JPMorgan Chase with a price target of $106.

FedEx (FDX +0.95%) rallied 3% in after-hours trading after it reported Q3 adjusted EPS of $3.72, well above consensus of $3.11.

Whiting Petroleum (WLL +3.93%) was rated anew 'Buy' at Johnson Rice & Co with a price target of $58.

Arena Pharmaceuticals (ARNA +28.68%) lost 1% in after-hours trading after it said it will offer 7.5 million shares of its common stock via Citigroup, Leerink Partners, Cantor Fitzgerald, Credit Suisse, RBC Capital Markets, Guggenheim Capital and JMP Group.

MuleSoft (MULE +27.16%) gained almost 5% in after-hours trading after Salesforce.com agreed to buy the company for $6.5 billion.

AAR Corp (AIR +0.30%) dropped over 3% in after-hours trading after it reported Q3 sales of $456.3 million, weaker than consensus of $477.2 million.

Prothena Corp PLC (PRTA +2.05%) surged 15% in after-hours trading after it signed a R&D pact with Celgene where it received $100 million upfront and a $50 million equity investment from Celgene under an agreement to develop new therapies for a number of neurodegenerative diseases.

Arcadia Biosciences (RKDA -15.50%) rose 2% in after-hours trading after it reported Q4 revenue of $1.4 million versus $540,000 in the year-earlier period.

DBV Technologies SA (DBVT -2.65%) slid 2% in after-hours trading after it announced it will offer $150 million in a global offering of new ordinary shares, in the form of American Depository Shares (ADS).

Steelcase (SCS -0.70%) lost over 3% in after-hours trading after it forecast Q1 adjusted EPS of 12 cents to 16 cents, below consensus of 19 cents.

TPG Specialty Lending (TSLX -0.17%) fell almost 4% in after-hours trading after it announced it launched a public offering of 3.75 million shares of common stock.

Laureate Education (LAUR -1.16%) rallied 5% in after-hours trading after it reported Q4 adjusted Ebitda of $354.7 million, higher than consensus of $309.3 million.