Market Analysis

Beyond the Number

Lackluster Data May Temper Market Mood
11/26/2014 9:21 AM

The major U.S. index futures are pointing to a roughly flat opening on Wednesday, with sentiment reflecting negativity amid the release of some sour domestic data. Jobless claims climbed strongly, and notwithstanding a better than expected headline number, the inner details of the durable goods orders data were worrisome. A separate Commerce Department report showed that personal income and spending rose a little less than expected. The trio of data has sent the dollar lower. The markets may now turn towards a few more key economic data on regional manufacturing activity, new home sales, pending home sales and consumer sentiment for direction.

The overbought U.S. markets did not have enough momentum to push higher on Tuesday amid the release of mixed economic data. The major averages opened higher following the release of better than expected third quarter GDP data and lukewarm house prices data. However, an unexpected decline in consumer confidence data triggered selling in late morning trading and the averages were mostly confined below the unchanged line till the mid-session.

Although the averages recovered in the afternoon, the Dow Industrials pulled back in the final few minutes of trading before closing down 2.96 points or 0.02 percent at 17,815. The S&P 500 Index showed volatility, moving in and out of the positive territory in the afternoon before ending down 2.38 points or 0.12 percent at 2,067. Meanwhile, the Nasdaq Composite closed at 4,758, up 3.36 points or 0.07 percent.

Sixteen of the thirty Dow components closed lower, while the remaining fourteen stocks advanced. Exxon Mobil (XOM), 3M Co. (MMM), JP Morgan Chase (JPM), Home Depot (HD) and Chevron (CVX) declined sharply in the session, while Cisco Systems (CSCO), Disney (DIS), United Technologies (UTX) and Visa (V) gained ground.

Energy stocks were among the worst hit in the session, while gold stocks saw considerable strength on the day.

On the economic front, the Commerce Department reported that third quarter GDP growth was upwardly revised to 3.9 percent from the initially estimated 3.5 percent. Economists had expected a downward revision to 3.3 percent. Personal consumption growth was upwardly revised to 2.2 percent from 1.8 percent. Spending on equipment, intellectual property and residential construction was also upwardly revised, while non-residential construction spending was downwardly revised.

Meanwhile, confidence among U.S. consumers declined unexpectedly in November, according to the results of a survey by the Conference Board. The corresponding consumer confidence index fell to 88.7 from 94.1 in October. The present situation index fell 3 points to 91.3 and the expectations index declined 6.8 points to 87.

The results of the Richmond Federal Reserve’s regional manufacturing survey showed a sharp decline in the manufacturing index to 4 in November from 20 in October.

The results of two separate house price surveys released yesterday were lukewarm. The Federal House Finance Agency’s survey showed that house prices were unchanged in September, belying expectations for a 0.4 percent increase. The annual change was a positive 4.3 percent.

Meanwhile, the S&P/Case-Shiller 20-city composite house price index rose 0.3 percent month-over-month in September, in line with expectations. Annually, the index was up 4.9 percent, a slowdown from the 5.6 percent increase in August but more than the 4.7 percent growth expected by economists.

Currency, Commodity Markets

Crude oil futures are slipping $0.66 to $73.43 a barrel after tumbling $1.69 to $74.09 a barrel on Tuesday. Meanwhile, an ounce of gold is currently trading at $1,195.80, down $1.30 from the previous session’s close of $1,197.10. On Tuesday, gold rose $1.40. The most actively traded February futures are currently down $1.10 at $1,196.70 an ounce.

On the currency front, the U.S. dollar is trading at 117.75 yen compared to the 117.97 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2485 compared to yesterday’s $1.2474.


The Asian markets closed mostly higher, with the Chinese, Hong Kong and Australian market advancing on optimism concerning growth in China, while the Japanese market ended modestly lower amid subdued trading in the yen. A lackluster mood prevailed in most of the remaining markets in the region.

Japan’s Nikkei 225 average languished below the unchanged line for the bulk of the session before closing down 24.04 points or 0.14 percent at 17,384.

Real estate, resource, financial, food, pharma, construction, retail and utility stocks came under selling pressure, while most export stocks gained ground.

Meanwhile, Australia’s All Ordinaries opened higher and rose sharply in early trading but was found moving roughly sideways for the remainder of the session. The index added 59.40 points or 1.12 percent before closing at 5,380.

The market witnessed broad based strength, with IT, material, real estate, industrial, healthcare, financial and consumer discretionary stocks posting notable gains.

Hong Kong’s Hang Seng Index closed 268.07 points or 1.12 percent higher at 24,112 and China’s Shanghai Composite Index rallied 36.75 points or 1.43 percent before closing at 2,604.

On the economic front, data released by the Shoko Chukin Bank showed that confidence among Japanese small and medium sized enterprises improved marginally in November. The small business confidence index rose to 47.7 in November from 47.4 in the prior month, while it was expected to increase by a more modest margin to 47.5.


European stocks, which were higher till the mid-session in the wake of positive U.K. GDP data, have given back part or all their gains following the release of mostly negative U.S. economic data

In corporate news, Thomas Cook announced that its CEO Harriet Green is stepping down and its COO Peter Fankhauser will assume the role of CEO, with immediate effect. The company also announced full year results that came broadly in line with expectations.

United Utilities reported higher profits and sales for its first half. Helped by strong performances in the U.S. and emerging markets, caterer Compass reported higher full year profits.

On the economic front, a report released by German Federal Statistical Office showed that import prices in Germany fell 1.2 percent year-over-year in October, slower than the 1.6 percent drop in September and the 1.5 percent drop forecast by economists. On a monthly basis, import prices eased 0.3 percent. At the same time, export prices rose 0.3 percent year-over-year but fell 0.1 percent month-over-month.

Consumer confidence in France strengthened in November, the results of a survey by statistical office INSEE showed. The consumer confidence index rose to 87 in November from 85 in October, while economists had expected a reading of 86.

Revised report released by the U.K. National Statistical Office showed that U.K. GDP grew 0.7 percent sequentially in the third quarter, unrevised from the previous estimate published on October 24. This follows a 0.9 percent expansion in the second quarter. On a year-on-year, GDP increased 3 percent, in line with the preliminary estimate.

U.S. Economic Reports

After reporting an unexpected drop in new orders for U.S. manufactured durable goods in the previous month, the Commerce Department released a report showing that durable goods orders unexpectedly rebounded in the month of October.

The report said durable goods orders climbed by 0.4 percent in October following a revised 0.9 percent decrease in September. Economists had expected orders to fall by 0.5 percent compared to the 1.3 percent drop that had been reported for the previous month.

However, excluding a notable rebound in orders for transportation equipment, durable goods orders fell by 0.9 percent in October after edging up by 0.2 percent in September.

First-time claims for U.S. unemployment benefits unexpectedly increased in the week ended November 22nd, according to a report released by the Labor Department.

The report said initial jobless claims rose to 313,000, an increase of 21,000 from the previous week's revised level of 292,000. Economists had expected jobless claims to dip to 286,000 from the 291,000 originally reported for the previous week.

Personal income in the U.S. rose by less than expected in the month of October, according to a report released by the Commerce Department. The increase in personal spending also fell short of economist estimates.

The report said personal income edged up by 0.2 percent in October, matching the increase seen in September. Economists had been expecting income to increase by about 0.4 percent.

Additionally, the Commerce Department said personal spending also crept up by 0.2 percent in October after coming in unchanged in the previous month. Spending had been expected to rise by 0.3 percent.

MNI Indicators is scheduled to release the results of its business survey for the Chicago region at 9:45 am ET. The consensus estimate calls for a drop by the Chicago business barometer to 63.2 in November from 66.2 in October.

In October, the business barometer advanced 5.7 points to 66.2, marking the highest level in a year. The new orders index also rose to a 1-year high. Additionally, the production and order backlogs indexes also increased month-over-month and the employment index climbed to its highest level since November 2013.

Reuters and the University of Michigan are due to release the final results of their consumer sentiment survey for November at 9:55 am ET. Economists expect the index to be upwardly revised to 90 from the mid-month reading of 89.4.

The Commerce Department is also scheduled to release its new home sales report at 10 am ET. Economists expect new home sales to come in at a seasonally adjusted annual rate of 470,000 in October compared to 467,000 in September.

New home sales rose to a seasonally adjusted annual rate of 467,000 in September from a downwardly revised rate of 466,000 in August. Inventories measured in absolute numbers rose to 207,000 from 204,000 in August, while inventories measured in terms of months of supply were unchanged at 5.3 months.

The National Association of Realtors is due to release its pending home sales report for October at 10 am ET. Economists expect the pending home sales index to rise 0.6 percent month-over-month in October.

The pending home sales edged up 0.3 percent month-over-month in September, a smaller than expected increase. Pending home sales in the Northeast and the South rose, while pending sales in the Midwest and West were down.

The Energy Information Administration will release its weekly petroleum status report for the week ended November 21st at 10 am ET.

Crude oil stockpiles rose by 2.6 million barrels to 381.1 million barrels in the week ended November 14th and were in the upper half of the average range. Gasoline inventories increased by 1 million barrels and were in the middle of the average range. Meanwhile, distillate inventories declined by 2.1 million barrels, remaining near the lower limit of the average range.

Refinery capacity utilization averaged 89.1 percent over the four weeks ended November 14th compared to 88 percent over the four weeks ended November 7th.

The Treasury Department is scheduled to release the results of its auction of 7-year notes at 1 pm ET.

Stocks in Focus

Hewlett-Packard (HPQ) reported fourth quarter earnings that met estimates, while its revenues were below estimates. The company’s first quarter and full year 2015 earnings per share guidance was lackluster.

Analog Devices (ADI) reported better than expected fourth quarter results and issued in line guidance for the first quarter.

Deere & Co. (DE) reported better than expected fourth quarter results.

TiVo (TIVO) reported third quarter earnings that trailed estimates, while its service and technology revenues exceeded estimates. The company’s fourth quarter service and technology revenue guidance was weak. (CTRP) reported better than expected third quarter results but its fourth quarter revenue growth guidance trailed expectations.

McCormick (MCK) said its board has approved an increase in its quarterly dividend to 40 cents per share from 37 cents per share.

Amgen (AMGN) and AstraZeneca (AZN) announced that a Phase III study evaluating two doses of psoriasis treatment brodalumab has met its primary end points when compared with Stelara and placebo.

Hain Celestial (HAIN) announced that its shareholders have approved an increase in the number of authorized shares to 150 million from 100 million. The company also noted that its board previously approved a 2 for 1 stock split in the form of a 100 percent dividend, subject to shareholders approving an increase in the number of authorized shares.

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