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Beyond the Numbers

OPEC Meeting In Focus Amid Light Economic Day
6/22/2018 8:58 AM

The major U.S. index futures are pointing to a higher opening on Friday, with stocks likely to regain ground after moving notably lower in the previous session.

The markets may benefit from bargain hunting, with the Dow likely to rebound after closing lower for eight consecutive sessions.

Traders are also likely to keep an eye on the outcome of the Organization of the Petroleum Exporting Countries meeting in Vienna, Austria.

A report from Reuters said OPEC ministers have reached an agreement to raise oil production by about 1 million barrels per day beginning in July.

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Stocks moved mostly lower during trading on Thursday following the mixed performance seen on Wednesday. With the drop on the day, the tech-heavy Nasdaq pulled back off the record closing high set on Wednesday and the Dow extended its losing streak to eight sessions.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow fell 196.10 points or 0.8 percent to 24,461.70, the Nasdaq slid 68.56 points or 0.9 percent to 7,712.95 and the S&P 500 dropped 17.56 points or 0.6 percent to 2,749.76.

The weakness on Wall Street was partly due to lingering concerns about the trade dispute between the U.S. and China along with uncertainty about the outcome of this week's OPEC meeting.

Saudi Arabia and Russia are reportedly pushing for an increase in oil production, with OPEC expected to announce its decision on output on Friday.

Notable declines by some online retailers also weighed on the Nasdaq after the Supreme Court ruled states can force online shoppers to pay sales tax.

Negative sentiment may also have been generated by some disappointing economic data, including a report from the Conference Board showing a slightly smaller than expected increase by its index of leading economic indicators in the month of May.

The Conference Board said its leading economic index edged up by 0.2 percent in May after climbing by 0.4 percent in April. Economists had expected the index to rise by 0.3 percent.

"The U.S. LEI still points to solid growth but the current trend, which is moderating, indicates that economic activity is not likely to accelerate," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at the Conference Board.

A separate report from the Philadelphia Federal Reserve showed a much bigger than expected slowdown in the pace of growth in regional manufacturing activity in the month of June.

The Philly Fed said its index for current general activity slumped to 19.9 in June from 34.4 in May. While a positive reading still indicates growth in regional manufacturing activity, the index had been expected to dip to 29.0.

On the other hand, the Labor Department released a report showing a modest decrease in initial jobless claims in the week ended June 16th.

The report said initial jobless claims dipped to 218,000, a decrease of 3,000 from the previous week's revised level of 221,000.

Economists had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week.

Energy stocks saw significant weakness on the day amid expectations that the OPEC meeting in Vienna, Austria, will result in an increase in oil production.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 2.3 percent, the Philadelphia Oil Service Index tumbled by 2.1 percent and the NYSE Arca Natural Gas Index slumped by 1.7 percent.

Considerable weakness was also visible among biotechnology stocks, which gave back ground after moving notably higher over the two previous sessions. The NYSE Arca Biotechnology Index dropped by 1.9 percent after ending Wednesday's trading at a record closing high.

Steel, housing, and semiconductor stocks also showed notable moves to the downside on the day, reflecting broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are soaring $1.53 to $67.07 a barrel after dipping $0.17 to $65.54 a barrel on Thursday. Meanwhile, after falling $4 to $1,267.20 an ounce in the previous session, gold futures are edging down $0.10 to $1,270.40 an ounce.

On the currency front, the U.S. dollar is trading at 110.10 yen compared to the 109.99 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1655 compared to yesterday's $1.1604.

Asia

Asian stocks ended mixed on Friday as worries about a potential trade war persisted and investors waited for the outcome of the OPEC meeting.

Chinese shares rose but posted their worst weekly loss since early February on worries over a continuing trade dispute with the U.S. The benchmark Shanghai Composite Index rose 14.14 points or 0.459 percent to 2.889.95 but ended the week down about 4 percent.

Trade worries lingered after Chinese Commerce Ministry spokesman Gao Feng accused the U.S. of using bullying tactics and blackmail in threatening to impose tariffs on hundreds of billions of dollars of Chinese imports.

Separately, U.S. Commerce Secretary Wilbur Ross said on Thursday the end goal of the trade negotiations is to reduce high trade barriers and tariffs for U.S. firms.

Hong Kong's Hang Seng Index edged up 42.65 points or 0.2 percent to 29,338.70. Hong Kong's consumer price inflation climbed an annual 2.1 percent in May, faster than the 1.9 percent rise seen in April, data from the Census and Statistics Department showed.

Meanwhile, Japanese shares fell as a firmer yen and tariff concerns pulled down automakers. The Nikkei 225 Index lost 176.21 points or 0.8 percent to finish at 22,516.83, while the broader Topix Index closed 0.3 percent lower at 1,744.83.

Honda Motor gave up 2 percent and Toyota shed 2.7 percent after German automaker Daimler issued a profit warning, citing the escalating trade spat between the U.S. and China.

Shipping firms Mitsui OSK Lines and Kawasaki Kisen fell around 1 percent each on worries that a trade war may hurt the global economy.

On the data front, Japanese consumer price inflation rose by 0.7 percent year-on-year in May, government data indicated, matching expectations.

Australian markets fell modestly even as banks climbed after ANZ doubled its share buyback program. The benchmark S&P/ASX 200 Index dipped 6.90 points or 0.1 percent to 6,225.20 after finishing almost one percent higher the previous day. The broader All Ordinaries Index eased 0.2 percent to close at 6,322.10.

ANZ rallied 2.9 percent after doubling its share buyback program to A$3 billion. The other three banks rose over 1 percent each on a weaker Aussie dollar.

On the other hand, mining and energy stocks closed broadly lower, with BHP Billiton, Rio Tinto, Woodside Petroleum, Origin Energy and Santos losing 1-3 percent.

Telecom giant Telstra dropped 1.5 percent to extend losses from the previous session after announcing its plan to cut 8,000 jobs.

Outdoor advertising company APN Outdoor Group declined 2.4 percent as it raised its takeover bid for rival Here, There & Everywhere's Ashdel advertising unit to A$540 million from an initial A$500 million.

Europe

European stocks have moved mostly higher on Friday, with banks leading the surge after finance ministers from 19 nations finalized plans to get Greece out of its eight-year bailout program and a top lawmaker in Italy's far-right League party reportedly said the government doesn't want to exit the euro.

Investors also cheered flash data from IHS Markit showing that the euro area private sector expanded at a faster pace in June. The composite output index unexpectedly rose to 54.8 from 54.1 in May. The index was forecast to fall to 53.9.

While an improvement was reported from the 18-month low seen in May, the June reading represented the second-weakest expansion seen over the past 17 months.

The Organization of the Petroleum Exporting Countries will meet in Vienna today and expectations remain high that the oil cartel will reach some sort of agreement on raising oil output.

While the U.K.'s FTSE 100 Index has jumped by 1.3 percent, the French CAC 40 Index is up by 0.9 percent and the German DAX Index is up by 0.4 percent.

Global aerospace giant Airbus has advanced after saying it is accelerating measures to reduce risks stemming from the Brexit.

BP Plc and Tullow Oil have also rallied as oil prices rose more than 1 percent ahead of the OPEC meet outcome. Homebuilders are also moving higher.

Meanwhile, automakers have continued to suffer on concerns over an intensifying trade spat between the European Union and the U.S.

U.S. Economic Reports

There are no major U.S. economic reports scheduled to be released on the day.

Stocks In Focus

Shares of Tandem Diabetes Care (TNDM) are spiking in pre-market trading after the medical device company announced FDA approval of its t:slim X2 Insulin Pump with Basal-IQ technology.

Cybersecurity software and services company BlackBerry (BB) is also likely to see early strength after reporting fiscal first quarter results that exceeded analyst estimates.

Shares of CarMax (KMX) may also move to the upside after the used car retailer reported fiscal first quarter results that beat expectations on both the top and bottom lines.

On the other hand, shares of Red Hat (RHT) are moving sharply lower in pre-market trading after the software company reported better than expected fiscal first quarter results but provided disappointing guidance for the current quarter.
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