Powell heads to Capitol Hill, plus Under Armour, Lyft earnings: What to know in markets Tuesday

Market participants will their turn to Federal Reserve Chairman Jay Powell’s semi-annual testimony in front of Congress this week for clues on whether the central bank’s stance on interest rates has changed.

Powell will face the House Financial Services Tuesday and then the Senate Banking Committees Wednesday.

“If the Fed recognizes a sharp slowing in Q1, they will be surprised, worried, and prompted to cut rates, as early as the March FOMC. However, the Fed is wary of a temporary disruption from the virus,” Carpenter said. “In January, Chair Powell highlighted ‘...there is likely to be some disruption to activity in China and possibly globally...’ If the Fed expects any slowing to be temporary, they will be inclined to wait for more information, hurting the odds of a cut in March. Indeed, if manufacturing starts to recover, those odds fall a bit more.”

From the Monetary Policy Report submitted to Congress Friday, it was revealed that, “Downside risks to the [Fed’s] outlook had receded towards the end of last year, the coronavirus presented a new source of uncertainty with respect to the Fed's global growth expectations,” according to Deutsche Bank. “In our view, the disruptions from the coronavirus could subtract between 30 - 40 basis points (bps) off of Q1 real GDP growth, though the full-year impact should be more muted (about 10bps) as at most of the lost output is expected to be recouped in the back half of the year.”

Earnings

On the earnings calendar Tuesday, athletic-wear company Under Armour (UAA) and Lyft (LYFT) are expected to reports results.

Ahead of the opening bell, analysts are expecting Under Armour to report adjusted earnings of 10 cents per share on $1.47 billion in revenue during its fourth quarter. The company may report a relatively strong quarter due to easier comparisons and strength in its international business. However, sales in North America are still a sore spot for Under Armour. After three straight quarters of sales deceleration, investors will be looking to see if Under Armour was able to stabilize sales in its home market.

Gross margins are projected to have expanded 92 basis points thanks to supply chain efficiencies.

Investors will also focus on commentary from Under Armour’s management on how the coronavirus is impacting its business in China and the surrounding area. It is estimated that China represents about 10% of Under Armour’s total sales and 15% of its sources.

Rival Nike (NKE) warned last week that the shoemaker would be hit from the ripple effects of the coronavirus. “Similar to others in the marketplace, approximately half of Nike-owned stores have been temporarily closed, with corresponding dynamics across our partner stores,” Nike said. “In addition, we are operating with reduced hours and experiencing lower than planned retail traffic in stores that do remain open. In the short term, we expect the situation to have a material impact on our operations in Greater China.”

After the closing bell, ride-sharing company Lyft will release fourth-quarter financial results. Analysts polled by Bloomberg anticipate the company to report an adjusted loss of 54 cents per share on $985.77 million in revenue.

The key metrics that investors will be focused on with be Active Riders and Average Revenue Per Rider.

RBC analyst Mark Mahaney believes Lyft will benefit from being a ride-sharing pure play in the U.S. “The company is focused on disciplined investments (recently exited six unfavorable scooter markets) and product choices that cater to specific needs (i.e., more price points, subscription offering, etc.) to drive further adoption by pushing each individual along their own respective S-Curve.”

Lyft management’s commentary regarding the AB5 legislation will also be critical as driver retention costs may rise as a result.

Shares of Lyft have been driving higher this year and are up 25% so far. The options market is implying 10.4% move in either direction for the stock following the announcement.

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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