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1. Yellen vows to continue Fed stimulus
The future queen of green, Janet Yellen, was summoned by the Senate Thursday for a job interview. "So why do you want to lead the Federal Reserve?" The line of questioning had little to do with the qualifications of Yellen, the Brown-educated, Yale doctor-ated, current vice chairman of the Fed. In fact, the questioning indicated that the Senate will most certainly approve the first-ever female head of our nation's central bank. If not her job qualifications, what did they actually talk about?
Some senators asked what the Fed was doing to fix the growing income inequality problem, and others wondered why the Fed hasn't regulated banks better, and still others tried to blame the financial crisis on the ineptitude of the Fed. Finger-pointing is not what interested investors, though -- they wanted to know about the stimulus plans (The Washington Post).
What investors heard from Yellen was a staunch defense of Fed's current stimulus initiative -- her support for the third quantitative easing stimulus policy (aka "QE3") that is still chugging away, as the Fed spends $85 billion on monthly bond purchases to keep interest rates low, which encourages economy-boosting borrowing. Yellen said the QE3 is supporting the economy and that, above all, it will continue to help improve the unemployment situation. Investors were relieved, since QE3 has helped boost the S&P 500 26% already this year, and it looks like things won't be a-changing.
2. Wal-Mart earnings were a bit cheap
It's too bad that Wal-Mart (NYSE: WMT ) couldn't buy a better version of its earnings report at one of its megastores. Wal-Mart announced Thursday that sales in the U.S. fell for the third straight quarter. The main pain over the last few months has been from a slowdown in spending by lower-income Americans, who have hesitated to pull out their wallets before jobs growth picks up (CNBC).
The scariest of scaries for investors, though, is what we're calling the "nightmare before Christmas" issue in the earnings report. Wal-Mart execs announced that they expect sales to remain flat even through the spending spree that is the U.S. holiday shopping season. Why? Wal-Mart says it's all the increasing competition leading up to December. Wall Street prefers holiday cheer to pessimism.
The takeaway is that Wal-Mart has some more optimistic plans it wants you to know about. The megastore maker plans to expand through smaller stores closer to cities over the next couple of years instead of through the famous rural supercenters often used for pre-bachelor party stock-piling runs. If Wal-Mart really wants to expand more, they might want to cut this top seller.
3. Cisco earnings hurt by Snowden leak
It wasn't a bad connection, but network equipment maker Cisco (NASDAQ: CSCO ) dropped more than 10% Thursday on a really bad earnings report. Not only did profits drop 4.6% from a year earlier, but Cisco expects sales to fall 8%-10% in the current quarter and is projecting the next one to be even worse -- and all the loss in business seems to be coming from emerging markets.
So why all the overseas pain? One man: Edward Snowden. When the awkward NSA contractor leaked word about U.S. Internet spying over the summer, it turns out a lot of that was done through Cisco equipment. That's the kind of publicity that makes a government like China's skeptical of your product and not want to touch it. According to Cisco CEO John Chambers, this is a sales fall-off the likes of which he's "never seen."
- US industrial production
- The N.Y. Fed's "Empire State" manufacturing report