Market Analysis

Beyond the Numbers

Profit Taking May Lead To Early Weakness On Wall Street
2/24/2017 8:48 AM

The major U.S. index futures are pointing to a lower open on Friday after stocks closed mixed for two consecutive sessions. Traders may look to cash in on some of the recent strength on Wall Street, which helped the Dow close higher for ten straight sessions and reach another new record closing high on Thursday. Nonetheless, trading activity may be somewhat subdued amid some uncertainty about the near-term outlook for the markets.

Stocks turned in a mixed performance during trading on Thursday, with the major averages closing on opposite sides of the unchanged line for the second straight day. The Dow still managed to reach another new record closing high.

While the Dow rose 34.72 points or 0.2 percent to 20,810.32 and the S&P 500 inched up 0.99 points or less than a tenth of a percent to 2,363.81, the tech-heavy Nasdaq fell by 25.12 points or 0.4 percent to 5,835.51.

The choppy trading on Wall Street extended the relatively lackluster performance seen over the course of the previous session.

Traders seemed somewhat reluctant to make significant moves amid uncertainty about the near-term outlook for the markets following recent strength.

The Dow benefited from strong gains by Johnson & Johnson (JNJ), Pfizer (PFE), and Verizon (VZ), which helped the blue chip index close higher for the tenth consecutive session.

On the U.S. economic front, the Labor Department released a report showing a modest increase in initial jobless claims in the week ended February 18th.

The report said initial jobless claims rose to 244,000, an increase of 6,000 from the previous week's revised level of 238,000.

Economists had expected jobless claims to inch up to 241,000 from the 239,000 originally reported for the previous week.

Many of the major sectors ended the day showing only modest moves, although substantial weakness was visible among steel stocks. The NYSE Arca Steel Index plunged by 3.8 percent, pulling back further off the two-year closing high it set on Tuesday.

Networking and semiconductor stocks also saw considerable weakness, contributing to the drop by the tech-heavy Nasdaq. The NYSE Arca Networking Index and the Philadelphia Semiconductor Index fell by 1.9 percent and 1.6 percent, respectively.

Natural gas and transportation stocks also moved to the downside on the day, while notable strength was visible among oil service and pharmaceutical stocks.

Commodity, Currency Markets

Crude oil futures are falling $0.50 to $53.95 a barrel after climbing $0.86 to $54.45 a barrel on Thursday. Meanwhile, gold futures are currently trading at $1,259.90 an ounce, up $8.50 from the previous session’s close of $1,251.40 an ounce. On Thursday, gold jumped $18.10.

On the currency front, the U.S. dollar is trading at 112.11 yen compared to the 112.61 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0607 compared to yesterday’s $1.0582.


Asian stocks fell broadly on Friday as weaker commodity prices weighed on resource stocks and reports suggesting President Donald Trump may not take action on his proposed $550 billion infrastructure promise until 2018 helped fuel demand for safe-haven assets such as gold and the yen.

Japanese shares retreated as the yen's strength hurt exporters. The Nikkei 225 Index ended down 87.92 points or 0.45 percent at 19,283.54, while the broader Topix index closed 0.39 percent lower at 1,550.14.

Honda Motor, Sony and Toyota fell between half a percent and 1 percent as the yen rose amid political uncertainty in Europe.

Toshiba climbed 4.5 percent on a Nikkei report that the company is thinking about having its U.S. unit Westinghouse Electric file for Chapter 11 bankruptcy protection.

Australian shares moved lower, dragged down by losses in the material sector after iron ore and copper prices retreated on worries over Chinese demand. The benchmark S&P/ASX 200 Index dropped 45.70 points or 0.79 percent to 5,739, while the broader All Ordinaries Index closed 45.60 points or 0.78 percent lower at 5,786.90.

BHP Billiton, Rio Tinto and Fortescue Metals Group lost 3-4 percent after China's iron ore futures fell nearly 5 percent. Copper also tumbled more than 3 percent on worries about demand. Graincorp shares fell 2 percent despite the company flagging strong full-year profit growth.

Appearing before a parliamentary committee, RBA governor Philip Lowe ruled out a further cut in interest rates to boost household borrowing, saying lower rates would encourage risky lending and threaten financial stability.

Meanwhile, Chinese shares reversed early losses to end roughly flat on hopes that regulators will press ahead with reforms to fend off systematic risks in the financial system. The benchmark Shanghai Composite Index inched up 2.06 points or 0.06 percent to 3,253.43.

The yuan was little changed after U.S. Treasury Secretary Steven Mnuchin signaled no urgency to brand China a currency manipulator.


European stocks have come under pressure on Friday, with declines in metals prices, French election worries, a slew of disappointing earnings updates and policy uncertainty in the U.S. weighing on the markets.

While the U.K.’s FTSE 100 Index has fallen by 1 percent, the French CAC 40 Index and the German DAX Index are down by 1.5 percent and 1.6 percent, respectively.

On a light day on the economic front, survey results from statistical office Insee showed that French consumer sentiment remained stable in February. The corresponding index held steady at 100, in line with expectations.

Another report from the British Bankers' Association revealed that U.K. mortgage approvals increased to a one-year high of 44,657 in January from 43,581 in the previous month.

Saipem shares have slumped after the Italian oil services group warned of a tough year ahead. British lender Standard Chartered has also moved to the downside after its annual profit missed analyst estimates.

Vivendi shares have also tumbled. After a tough year in 2016, the French media and music firm said it expects Canal Plus' turnaround efforts to bear fruit in 2017. German chemicals giant BASF has also moved lower after issuing a cautious outlook for 2017.

On the positive side, International Cons Airlines Group has rallied after the British-Spanish multinational airline holding company announced a share buyback after posting 2016 operating profits in line with forecasts.

U.S. Economic Reports

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of January.

New home sales are expected to climb to a rate of 576,000 in January after tumbling by 10.4 percent to a rate of 536,000 in December.

The University of Michigan is also due to release its revised report on consumer sentiment in the month of February at 10 am ET.

Economists expect the consumer sentiment index for February to be upwardly revised to 96.0 from the mid-month reading of 95.7. The index came in at 98.5 in January.

Stocks in Focus

Gap (GPS) reported fourth quarter earnings that matched analyst estimates on slightly better than expected revenues. However, the retailer forecast 2017 earnings below expectations.

Department store operator J.C. Penney (JCP) reported better than expected fourth quarter earnings but on revenues that came in just below estimates. The company also announced plans to close two distribution facilities and up to 140 stores over the next few months.

Foot Locker (FL) reported fourth quarter earnings that exceeded analyst estimates on revenues that matched forecasts.

Hotel operator Hilton Worldwide (HLT) announced a stock repurchase program of up to $1 billion, while the board approved changing the company’s corporate name to Hilton Inc., effective March 6th.

Hewlett Packard Enterprise (HPE) reported better than expected first quarter earnings, but the corporate hardware and software maker lowered its full year guidance.
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