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Yellen reaction, Tesla and Nike: What to watch today

Michael Santoli
Michael Santoli

Here are three things we're keeping an eye on today at Yahoo Finance.

Number 1:

It’s a good thing for Janet Yellen that she’d never admit to engaging in a currency war. Because if this was her chosen fight, it’s now clear she didn’t come with enough ammunition to overwhelm her enemies.

Federal Reserve Chair Janet Yellen speaks during a news conference at the end of the Federal Open Market Committee meeting, Wednesday, March 18, 2015 in Washington. The Federal Reserve forecasts that the U.S. unemployment rate can now fall further without spurring inflation, a sign that it may move slowly in raising interest rates. (AP Photo/Kevin Wolf)

When the Fed chair struck a gentler tone than expected Wednesday about the prospect of higher interest rates some time this year, bond-fund big shot Bill Gross and others quickly interpreted this as a bid to cool off the surging dollar, whose ascent against other major currencies has been its fastest in nearly 40 years.

The markets tried out this idea for a few hours, as the euro rebounded by more than 4% at one point after the Fed statement and oil bounced, in a rare reprieve for both instruments This cleared the way for a nice little stock-market rally, too.

But overnight, the global assessment was that Yellen can’t counter explicit assaults by other central banks on the value of their own currencies with coy references to slower export growth in the U.S. And so the euro resumed its decline versus the dollar and we are now left wondering if this was a one-day pause in the one-way strong dollar trade.

Of course, a sober assessment of Yellen’s intentions and plans don’t support the idea of outright “currency war.” The Fed is still looking for the perfect delicate moment when it can push short-term rates off the zero line, when most every other central bank of note is pulling policy the other way with rate cuts and money creation.

What Yellen and the other bankers are really engaged in isn’t so much a war as a competition to import a scarce global resource: inflation. Their predecessors of 30 years ago would scarcely recognize this approach, and would probably not believe that it’s so hard to procure inflation for a modern economy.

So now the game is to watch every clue about U.S. price inflation. At the moment, the stock market doesn’t much like the dollar firming again. This is the relationship to watch, until further notice.

Number2:

Elon Musk took to Twitter this week to deny that he uses Twitter to boost his stock price of his electric-car company, Tesla Motors Inc. (TSLA).

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Intended or not, Musk’s tweets hinting about an advance to improve the range of existing Tesla cars helped to halt a six-month slide in the stock. Midday today, Musk will lay out what is expected to be a software update that will allow Teslas to recapture and summon energy better.

Elon Musk is set to announce a significant software update for Tesla cars

The shares have ticked higher by more than 6% this week to recover the $200 level, sparing them for now a return to their 52-week low of $178. A move by the state of New Jersey yesterday to permit sales at Tesla stores is also helping.

Musk’s musings in recent days about the eventual ascendance of self-driving vehicles were also returning some futuristic buzz to the stock, drawing some attention from Tesla’s troubled efforts in China and the perceived challenge of cheaper gas.

We’ll see this afternoon whether investors are truly ready to set aside their newfound skepticism for a bit longer.

Number 3:

Nike Inc. (NKE) is a great company with an expensive stock. It has almost always, since it came public in the early ‘80s, been a great company with an expensive stock.

If anything is different today, as Nike prepares to report quarterly results after the close, it is that Wall Street has a beloved, anointed alternative to the athletic shoe-and-garb leader, in the form of Under Armour Inc. (UA).

Nike scheduled to report earnings today

And right now, Nike’s global dominance isn’t entirely a positive given the headwind of that strong dollar. Under Armour is still predominantly an American business.

As today’s Wall Street Journal points out, Nike rarely fails to at least meet analyst profit forecasts. And fending off upstarts is nothing new for the company. Remember the Reebok Pump high tops?

But traders will look key off of order bookings, which looked somewhat soft last quarter, as well as anything Nike has to say about the newly competitive branding and endorsement wars.

Nike stock is up 80% in the past two years, but has gone sideways for more than three months. Does that show serious fatigue, or just a needed rest for the next leg higher?