Fed Speak And "Irrational Behavior" For China Investors
Stocks in the U.S. are pointing lower this morning. The Fed's statement, important economic data and earnings could all drive the markets today. President Bush speaks on the economy on Wall Street and Treasury Secretary Hank Paulson appears before Senate Banking on the Chinese currency issue. Our John Harwood will be on Wall Street today, and Hampton Pearson will bring us coverage of Paulson's remarks..
Asian markets slumped, with China's stock market losing nearly 5% on worries the Chinese government could take some official moves to cool its super hot stock market. A leading Chinese legislator, Cheng Siwei, warned in an interview with the Financial Times that the Chinese stock market is developing into a bubble and that investors are in danger of irrational behavior. Cheng, the National People's Congress Vice Chairman, also reportedly commented in Dubai at the FT's China-Middle East Summit that only 30% of the companies listed on the Shanghai Stock Exchange meet "western" investment criteria. This is not the first warning, and we'll look today at what a bursting bubble in China could mean. European markets are lower, as the whole world awaits the Fed.
LOTS OF DATA: The first look at fourth quarter GDP, forecast to be between 2.2% to 3.5%, is reported today, along with the employment cost index. Construction spending and the Chicago Purchasing Managers report come out at 10 am. Our Steve Liesman will report on all of this plus tell us what the Fed's statement means when it is released at 2:15 pm.
FED: There is no expectation the Fed will change rates when it issues its statement later today, but there is some speculation the Fed comments could show a stronger economy and that it could change its view on the housing market. But Liesman said he doesn't think the Fed's view on housing is necessarily significant though a change in language in either direction could affect the markets. "I don't think the Fed has any particular insight into the housing market.," he said, noting it is the Fed's seriously unique insight into the economy and inflation that is meaningful.. "I think they'll upgrade the economy a little," he said of the Fed's comment. "I don't think they change their big outlook."
ROCK 'N OIL: What is going on in the oil markets? Some market pundits say the speculative funds are rolling back in with the cold weather, as they watched crude climb 5.5% yesterday, but it would seem someone had to be jumping out with nearly as much conviction on Monday when the market was down three percent. Oil prices are slightly lower this morning but that could change quickly and turn into another volatile day. We'll watch inventories data today at 10:30 am for some guidance on supply. Investor Jimmy Rogers told our Maria Bartiromo on Closing Bell yesterday that oil could go to over $100 during the course of the commodities bull market which has many years to go. We'll talk about the speculators' role and what's up with OPEC today.
EARNINGS CENTRAL: Altria and Boeing report today, and Google reports after the bell. Altria should also reveal information on its plan to spin off Kraft Foods. CNBC.com reporter Christina Cheddar Berk reported the plan could be challenged by at least one plaintiff's attorney representing smokers. She will report more on Altria today on CNBC.com. Time Warner this morning reported a 34% jump in quarterly profits, including a gain.
DEAL? MAYBE: Bristol Myers is reportedly looking at its options and has hired investment banks to help it, according to the Financial Times. This comes after a French news letter reported that Bristol Myers and Sanofi were possible merger partners. In merger news, India's Tata Steel will become the world's fifth-biggest steelmaker after its successful $11.3 billion bid for Anglo-Dutch steelmaker Corus Group.
A NEW VISTA: Microsoft topped the list in the Wall Street Journal's corporate reputation survey because of Bill Gates charitable efforts. Microsoft bested J&J which had been the winner for seven years in a row.