Initial jobless claims rose 5,000 to 320,000 in the week ended March 15th, in-line with economists’ expectations. The number of Americans filing new applications for unemployment benefits remains near the lowest levels in four months, a positive sign that the labor market is improving. Stocks were poised to open lower after yesterday’s sell-off. Federal Reserve Chair Janet Yellen uttered three words that sent a shiver through the markets: “around six months.” Those three words sent stocks and bond prices sharply and suddenly lower yesterday. In her press conference, Yellen went further in offering a specific time frame for when the Fed might raise interest rates than the official Fed statement did, whether she meant to or not. The markets heard “six months after the fed ends the taper” and interpreted that to mean the Fed rate hikes could start as early as the spring of 2015, rather than mid-to-late 2015, as many were expecting. Yellen qualified that timeline, saying it will ultimately depend on inflation and the state of the job market, but it wasn’t qualification enough to undo the damage those three words did.
In addition to the Fed, investors are also watching China’s slowing economic growth. Goldman Sachs (GS) slashed its 2014 and 2015 growth forecasts for China, citing recent weakness in trade and consumption data. Goldman now sees 7.3% growth for 2014, below China's official target of 7.5%. In our poll today, we want to know which you believe poses a bigger threat to the bull market: China or the Fed? Cast your vote and post your comments as well.
In corporate news, homebuilder Lennar (LEN) reported better-than-expected quarterly results on a surge in deliveries and home selling prices. Earnings beat Wall Street estimates by $0.07 a share. Revenue jumped 38%. The company believes the housing market is in the early stages of recovery and Lennar is optimistic it will continue to see growth in market share and profitability.
An Arizona state Senate panel voted yesterday to allow Tesla (TSLA) to sell its cars directly to customers instead of going through a dealer as state law now requires. If passed, the bill would allow companies that only make electric cars to sell directly to customers. Arizona is one of four states currently in the running for Tesla's multi-billion dollar "gigabattery" factory. Tesla has faced resistance from other states on direct-selling. New Jersey last week adopted new rules that prohibit Tesla's direct-sales model.
Sony (SNE) will begin offering original programming via its PlayStation game consoles. The first series the company has ordered is a supernatural drama called "Powers," based on a comic book of the same name. "Powers" - which will be produced by corporate sibling Sony Pictures Television - will stream exclusively in the U.S. on the PlayStation Network which has 30 million Internet-connected devices. PlayStation already allows users to buy TV shows and movies through the console. PlayStation is competing with Microsoft's XBox, to have their devices known for delivering video as well as being a game console.
And activist investor Carl Icahn yesterday softened his demands for eBay (EBAY) to spin off its PayPal unit entirely. Now, Icahn is calling for eBay to sell 20% of PayPal in an initial public offering. For months, Icahn has waged a very public and contentious battle with eBay over the online-payment business. eBay has consistently maintained that eBay and PayPal are better off together.
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