The main equity indices plunged around 30 minutes into the session, shortly after Fed Chair Janet Yellen began her testimony before the Joint Economic Committee. The timing of the drop also coincided with comments from Russian President Vladimir Putin, who said that he was pulling back troops from the Ukraine border. Putin urged pro-Russian separatists to not delay the coming referendum vote on May 25. However, NATO and the US said that there was no indication of a troop withdrawal and Ukraine stated that military drills were continuing on their border.
In her testimony, Yellen reviewed few new pieces of information to the market. She noted that some areas of small-cap stocks were seeing possible overvaluation, but as a whole, equity and broad asset valuations were within their historical ranges. Her testimony also reiterated that there's no formula for when the first rate hike will be and purchases are likely to wind down by the fall. Yellen also said that the Fed is considering steps to curb risk among big financial firms, which could include large asset managers.
FireEye's (NASDAQ:FEYE) poor results last night got tech off to a bad start today and ended up causing a broader sell-off. The stock was down 24.7%. Other cloud- and security-sector stocks fell by similar amounts. Twitter (NYSE:TWTR) continued to be under pressure, tacking another 6% of losses to yesterday's 18% decline.
Tomorrow's Financial Outlook
Tomorrow's only economic report is weekly jobless claims. Economists expect claims to decline to 325,000 and trend back toward their four-week moving average of 320,000. FOMC members Plosser, Evans, Tarullo, Yellen, and Bullard will be speaking in one form or another tomorrow. Chair Yellen will testify before the Senate Budget Committee, where her comments will likely be very similar to today's testimony to the Joint Economic Committee.
One of the main potential catalysts for risk assets overnight is China's April trade balance report. Any significant changes in exports will affect raw materials such as iron ore, copper, and steel and their related stocks. The other event to watch is the ECB rate decision tomorrow morning at 7:45 a.m. EDT. President Mario Draghi is likely to reiterate his very dovish stance on monetary policy, but news reports have indicated that the central bank isn't ready to pull the trigger on further easing. There's an outside possibility that the ECB lowers its benchmark rate to 0.15% and its deposit rate into the negative.
There are 42 major US companies scheduled to report earnings tomorrow. Notable reports include Cablevision (NYSE:CVC), CBS (NYSE:CBS), Regeneron (NASDAQ:REGN), Priceline (NASDAQ:PCLN), IntercontinentalExchange Group (NYSE:ICE), Nvidia (NASDAQ:NVDA), Medivation (NASDAQ:MDVN), RocketFuel (NASDAQ:FUEL), and Monster Beverage (NASDAQ:MNST).
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