By Geoffrey Smith
Investing.com -- Joe Biden proposes quadrupling the tax on stock buybacks, in a State of the Union speech otherwise only notable for some political theater. Uber and Walt Disney report earnings, with investors keen to see whether the returning Bob Iger can work his magic again in the Magic Kingdom. Stocks are set to give up some of their post-Powell gains at the open. There are first signs of the West inching toward sending Ukraine modern fighter jets, and crude oil rises after the first drop in U.S. inventories in six weeks. Here's what you need to know in financial markets on Wednesday, February 8th.
1. Biden proposes quadrupling stock buyback tax in noisy SOTU
U.S. President Joe Biden proposed quadrupling the 1% tax on stock buybacks, in a State of the Union address that was otherwise lacking in bold new ideas for his administration.
Biden made a point of embarrassing Republican representatives who have called for cuts in Social Security as negotiations on lifting the Debt Ceiling struggle to make progress. House Leader Kevin McCarthy has never embraced that position, but has been unable to extinguish talk among a subset of GOP lawmakers who have called for it.
Elsewhere, Biden promised to take a strong line against China, less than a week after U.S. air force jets shot down a surveillance balloon that crossed much of the country. However, he made no direct reference to the incident.
2. Iger 2 - The Return of the King
Walt Disney (NYSE:DIS) reports earnings after the close, sharpening the focus on the returning Bob Iger as the entertainment giant counts the cost of an expensive expansion into streaming.
The Mouse House is expected to report a rebound in earnings to just under 80c a share after a sharp drop to 30c in the three months through September. Ongoing recoveries in its cruise and theme park businesses are likely to support the numbers, as will a movie division that profited from big hits with Avatar and its Marvel franchises. However, the focus will be on the performance of Disney+, where analysts will be hoping for a sharp narrowing of the previous quarter’s $1.5 billion operating loss.
Also reporting Wednesday are ride-hailing giant Uber (NYSE:UBER) and CVS Health (NYSE:CVS), which confirmed Tuesday’s reports of a $10.6B takeover of Oak Street Health with an early release.
3. Stocks set to open lower after post-Powell rally
U.S. stock markets are set to open lower, correcting slightly after posting strong gains on Tuesday in response to an interview by Federal Reserve Chair Jerome Powell. In the interview, Powell had not appeared to take a more hawkish line on inflation in the wake of the January labor market report, although he repeated that the labor market remains tight, and that inflation was unlikely to return to target before the end of 2024.
New York Federal Reserve President John Williams is due to speak at 09:15 ET (14:15 GMT).
By 06:30 ET, Dow Jones futures were down 63 points, or 0.2%, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures were down 0.1%. The three main cash indices had posted gains of between 0.8% and 1.9% in response to Powell on Tuesday.
Ahead of Disney’s report, there’ll be attention early on for Chipotle (NYSE:CMG) and Illumina (NASDAQ:ILMN), which missed expectations with their update late on Tuesday, while ADRs in focus include the European oil and gas majors TotalEnergies (NYSE:TTE) and Equinor (NYSE:EQNR), which both reported record profits and announced more stock buybacks. Omnicom (NYSE:OMC) is set for a new record high after the advertising giant reported revenue ahead of its own expectations in the fourth quarter.
4. West edges toward giving fighter jets to Ukraine
Ukraine’s western allies continue to inch toward supplying their top weaponry to Kyiv, amid expectations of a fresh Russian offensive in the coming weeks.
Less than a month after the West finally acceded to President Volodymyr Zelenskiy’s requests for heavy armor, there now appears to be movement on the issue of fighter jets, with the U.K. saying it will train Ukrainian pilots on NATO-standard aircraft.
Zelenskiy is due to visit the U.K. and address parliament on Wednesday, before heading on to a summit in Brussels later in the week.
Earlier this week, UN Secretary-General António Guterres warned that the world risks walking “eyes wide open” into a wider war.
5. Oil at one-week high after U.S. inventory drop
Crude oil prices returned to their highest levels in nearly a week, supported by news that U.S. inventories fell for the first time in six weeks last week, according to the American Petroleum Institute. The U.S. government’s data are due at 10:30 ET, as usual.
By 06:45 ET, U.S. crude futures were up 0.8% at $77.77 a barrel, while Brent crude was up 0.6% at $84.20 a barrel.
Oil is now flowing again out of the Turkish port of Ceyhan, but the earthquakes on Monday that hit Turkey and northern Syria are now confirmed to have killed over 11,000 people, making them one of the worst natural disasters this century.