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Stocks Back in Defensive Mode as Many Fed Members Take the Mike

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November 12, 2015

It’s a tale of two banks. Bank one is the U.S. Federal Reserve and what many believe is an inclination there to raise interest rates sooner versus later. Then there’s the European Central Bank, which has made clear its comfort with low interest rates and may even expand quantitative easing (QE) as a means to juice the economy.

Against this conflicting backdrop, stock trading has been mixed to mostly lower this week and is tipping south again to kick off Thursday trading. Asian markets did gain after upbeat Japanese machinery order data; Europe is broadly lower and U.S. indicators point down.

Many traders still aren’t convinced of the timing of what would be the first U.S. rate hike in nearly a decade. But a few clues could emerge today. Speeches are scheduled from Fed chief Janet Yellen and four regional Fed presidents Thursday morning, as well as from Vice Chairman Stanley Fischer this afternoon. U.S. interest rate markets have priced in a some 70% chance for a possible December rate hike in the U.S. Meanwhile, ECB President Mario Draghi said in Brussels today that downside economic risks in the region under his watch are "clearly visible.” Industry analysts were quick to say that could translate into an expansion of QE in December.

Retail Stocks Roughed Up. Retail stocks broadly fell Wednesday as Wall Street took cues from disappointing quarterly revenue and a reduced outlook at Macy’s (M). Other share decliners included:  Urban Outfitters (URBN), Tiffany (TIF), Michael Kors (KORS), Fossil (FOSL), Skechers (SKX), and others. But, could it be a rebound day in the sector? Kohl’s (KSS), down 30% so far this year, is an early Thursday gainer after it beat the Street’s profit and sales estimates for Q3. Nordstrom (JWN) is due to release results after the closing bell.

Crude Data Surprise. Crude oil prices rebounded slightly overnight after a nearly 3% skid on Wednesday—a move that helped tug the broader stock market lower. Traders were blindsided by data from the American Petroleum Institute that revealed a surprise spike in supplies. So now, financial markets are braced for a Thursday report from the Energy Information Administration and possible confirmation of a rise in supplies that may trigger more losses for oil and related stocks.

Another Deal Up for Review. Even with choppy broad stock market action, deals and deal buzz have been percolating in recent weeks. Here’s another one: AC/InterActiveCorp. (IACI) late Wednesday made public its $512 million cash offer for Angie’s List (ANGI). As proposed, it’s a deal that could combine the services marketplace and consumer-review site with Internet brands such as About.com and Vimeo. According to a company statement, IAC said it also was willing to consider combining Angie’s List with its HomeAdvisor business through a stock-for-stock exchange. IAC said such a tie-up would create a home-services platform with more than $700 million in revenue. Angie’s List confirmed the terms of the offer in a news release and said it’s willing to consider a combination with HomeAdvisor in a tax-free deal.

Good trading,

JJ

@TDAJJKinahan

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