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MARKET SNAP: At 6:10 a.m. EDT, S&P 500 futures up 0.17%. Treasury yield flat at 1.89%. Nymex up 1.4% to $54.05; gold 0.05% lower at $1192. In Europe, FTSE 100 up 0.40%, DAX up 0.51% and CAC 40 up 0.68%. In Asia, Nikkei 225 down 0.2% and Hang Seng up 0.21%.
WATCH FOR: 9:15 a.m. EDT. March industrial production & capacity utilization. [Expected industrial output -0.5% on-month vs. +0.1% in February; capacity utilization expected 78.7% vs. 78.9%.]; 2 p.m. EDT. Federal Reserve Beige Book; 7:30 p.m. EDT. Federal Reserve Bank of Richmond President Jeffrey Lacker speaks in Charleston, S.C.
THE BREAKFAST BRIEFING
Bubble talk is back on the table.
According to Bank of America Merrill Lynch's monthly Fund Manager Survey, 13% of global investors believe equity bubbles are the biggest risks facing stocks. That number is up from just 2% in February. Among the panel surveyed, 25% believe global stocks are overvalued and 68% think the U.S. is the most expensive region.
Over-priced shares are one point on a laundry list of headwinds facing U.S. markets this year. Major averages have been virtually directionless since late-February, moving with little conviction. The worry is that equity prices have run up on the back of the Federal Reserve's easy-money policy. But now that earnings in the first half of the year are projected to be lackluster and the economy has hit a rough patch after a brutal winter, investors are left questioning whether high stock prices can be sustained.
U.S. stock valuations are at their highest levels since the dot-com days and have become even more stretched this year as oil's plunge and the U.S. dollar's ascent have weighed on corporate earnings. If the landscape does not get better for stocks, investors will be left with a richly-valued market that is well overdue for a correction.
While conceding that U.S. equity valuations are full, Michael Tiedemann, chief investment officer at Tiedemann Wealth Management, says he does not believe the markets are in bubble territory just yet. He says earnings are robust, balance sheets are strong and leverage ratios are healthy. That's not to say a meaningful correction is out of the cards, though, Mr. Tiedemann says.
While valuations are frothy, they are still well below their peak during the height of the Internet bubble. For instance, the S&P 500 currently has a price-to-earnings ratio of 17.4, according to FactSet. That compares to a level of 29.1 just before the turn of the century.
U.S. markets have not been entirely immune to the increasingly high cost of equities in 2015. Gains have decelerated this year as money has flowed abroad, chasing cheaper stocks and rising asset prices, propped up by global central bank easing.
As central banks continue to deploy stimulus via bond purchases and low rates, bubble talk could inflate even more. If central bank actions work as they are intended to do so though, by stimulating the economy, that should help alleviate bubble concerns.
Morning MoneyBeat Daily Factoid: On this day in 1947, Jackie Robinson became the first African-American player in Major League Baseball, competing for the Brooklyn Dodgers.
- By Kristen Scholer
STOCKS TO WATCH
Bank of America is projected to report first-quarter earnings of 29 cents a share, according to a consensus survey by FactSet.
Google shares are worth watching after the U.S. search giant was formally accused by European Union regulators of violating antitrust laws in the bloc. Google said Tuesday it had a "very strong case" against the charges.
Delta Air Lines is forecast to post first-quarter earnings of 44 cents a share, while Netflix is expected to post earnings of 63 cents a share in the first quarter.
Charles Schwab is likely to report first-quarter earnings of 24 cents a share.
After Tuesday's closing bell, Intel said it earned $2 billion, or 41 cents a share, in the first quarter, up from $1.9 billion, or 38 cents a share, a year ago. Sales totaled $12.8 billion. Analysts polled by FactSet had expected earnings of 41 cents a share on sales of $12.83 billion.
MUST READS (LINKS)
Google Is Hit With Antitrust Charges in EU: European Union regulators formally accused Google of violating the bloc's antitrust laws by abusing its dominance of online search, escalating a long-running case that had stalled for years.
China Growth Slowest in Six Years: China's economy started the year on a downbeat note with its slowest quarterly growth rate since 2009, pointing to a further loss of momentum.
Wall Street Rebounds for Banks in First Quarter: Wall Street staged a comeback in the first quarter, as trading and investment-banking businesses shone as bright spots in the earnings of the country's two most valuable banks.
Europe Stocks Up, Euro Down Ahead of ECB: European stocks edged higher on Wednesday, while the euro fell against the dollar, ahead of the latest policy announcement from the European Central Bank.
Nokia to Buy Alcatel-Lucent: Nokia sealed an agreement to buy rival telecom-equipment firm Alcatel-Lucent in a deal that values the French company at $16.6 billion.
Avon Explores Strategic Options: Avon Products is exploring strategic alternatives for the company, including a possible sale of its struggling North America business.
Oil Layoffs Hit 100,000 and Counting: Energy companies have announced plans to lay off more than 100,000 workers around the world since crude-oil prices began to tumble last year.
Oil Prices Rise : Oil prices rose again as the international energy watchdog struck an upbeat note on demand so far this year but warned the outlook remains "murky."
5 Points to Watch in the ECB's April Press Conference: The ECB is set for a relatively drama-free meeting Wednesday, but there could still be tough questions on quantitative easing and Greece. Here are five things to look for.
European Company Bonds in Demand: Investors are hunting for bargains in European corporate bonds after a decline in prices from the ECB's stimulus program.
Slow Emerging-Market Growth Saps Global Prospects: Global economic growth will climb only marginally this year, the International Monetary Fund said in its flagship World Economic Outlook report.
GM Seeks Longer-Term Supplier Contracts in Bid to Cut Costs: GM's new purchasing chief said the company is looking to lock in its supplier contracts for a term covering two vehicle generations, or as long as a decade, in a move aimed at cutting costs and getting access to advanced technology.
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(END) Dow Jones Newswires
April 15, 2015 06:37 ET (10:37 GMT)
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