Market Analysis

Beyond the Numbers

Traders Focus On Washington Ahead Of Key Vote
3/24/2017 8:53 AM

The major U.S. index futures are pointing to a higher opening on Friday, although traders may be reluctant to make significant moves as the House prepares to hold a vote on a Republican bill to repeal and replace Obamacare.

House Republican leaders delayed a vote on the bill on Thursday amid indications of a lack of support, but President Donald Trump has demanded that the vote go forward today.

However, CNN’s latest whip count suggests the legislation still does not have the votes to pass, with thirty-one House Republicans either opposed to or leaning against the bill.

With Democrats expected to be unified in opposition, Republicans can afford only twenty-one defections in the House and are likely to face an even tougher uphill battle in the Senate.

Trump has warned Republican lawmakers that voters could punish them if they do not vote in favor of the legislation to dismantle Obamacare.

If a vote on the replacement fails, it could cast doubt on Trump's ability to deliver on promises of increased infrastructure spending, tax cuts and deregulation.

Stocks showed a lack of direction over the course of the trading session on Thursday, as traders kept an eye on developments on Capitol Hill. The major averages spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session slightly lower. The Dow edged down 4.72 points or less than a tenth of a percent to 20,656.58, the Nasdaq dipped 3.95 points or 0.1 percent to 5,817.69 and the S&P 500 slipped 2.49 points or 0.1 percent to 2,345.96.

The choppy trading on Wall Street extended the lackluster performance seen in the previous session amid continued uncertainty about the fate of the House Republican plan to repeal and replace Obamacare.

On the U.S. economic front, a report released by the Labor Department showed an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended March 18th.

The report said initial jobless claims climbed to 258,000, an increase of 15,000 from the previous week's revised level of 243,000.

The increase surprised economists, who had expected jobless claims to edge down to 240,000 from the 241,000 originally reported for the previous week.

Meanwhile, a separate report from the Commerce Department showed a substantial increase in new home sales in the month of February.

The report said new home sales spiked by 6.1 percent to an annual rate of 592,000 in February after surging up by 5.3 percent to a revised 558,000 in January. Economists had expected new home sales to climb to a rate of 565,000.

With the much bigger than expected increase, new home sales soared to their highest level since reaching an eight-year high of 622,000 in July.

Most of the major sectors once again ended the day showing only modest moves, contributing to another lackluster close by the broader markets.

Steel stocks saw considerable weakness, however, with the NYSE Arca Steel Index sliding by 1.1 percent. The index largely offset the 1.2 percent gain posted in the previous session.

Gold and biotechnology stocks also saw notable weakness on the day, while some strength was visible among tobacco and commercial real estate stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.32 to $48.02 a barrel after falling $0.34 to $47.70 a barrel on Thursday. Meanwhile, after dipping $2.50 to $1,247.20 an ounce in the previous session, gold futures are slipping $2.30 to $1,244.90 an ounce.

On the currency front, the U.S. dollar is trading at 111.05 yen compared to the 110.94 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0801 compared to yesterday’s $1.0783.


Asian stocks closed mostly higher on Friday, showing little reaction to the postponement of a vote on the Republican plan to repeal and replace the Affordable Care Act.

Underlying sentiment remained positive amid bets that the delayed vote would go ahead later in the day. Failure to pass the bill would cast doubt on Trump's ability to deliver on promises of increased infrastructure spending, tax cuts and deregulation.

Chinese shares rose despite worries over tightening liquidity and an increased crackdown on speculation in the property market. The benchmark Shanghai Composite Index climbed 20.90 points or 0.64 percent to end at 3,269.45, while Hong Kong's Hang Seng Index inched up 30.57 points or 0.13 percent to 24,358.27.

Japanese shares recovered from a weak start to close higher as the yen weakened against the dollar and banks posted strong gains after recent selling. The Nikkei 225 Index rallied 177 points or 0.93 percent to end at 19,262.53. The benchmark index still fell 1.3 percent for the week. The broader Topix index closed 0.88 percent higher at 1,543.92.

Toshiba shares soared as much as 7.6 percent on a Nikkei report that its lenders are demanding a Chapter 11 restructuring for the company's Westinghouse unit by the end of March. In addition, a regulatory filing showed that Singapore-based fund Effissimo Capital Management has become the largest shareholder in the company.

On the economic front, the latest survey from Nikkei revealed that activity in Japan's manufacturing sector continued to expand in March, albeit at a slower rate, with a PMI score of 52.6 compared to 53.3 in February.

Australian shares gained ground, led by banks, as ANZ and Commonwealth raised variable rates for investors and interest-only mortgages, joining other rivals who lifted their rates last week. The benchmark S&P/ASX 200 Index climbed 45.50 points or 0.80 percent to 5,753.50 but ended the week 0.8 percent lower after two straight weeks of gains. The broader All Ordinaries Index closed 42.10 points or 0.73 percent higher at 5,796.10.

The big four banks rose between 0.5 percent and 1.9 percent. Retailer Harvey Norman advanced 0.7 percent after saying an ASIC investigation is a routine review of its accounts for the 2015/16 financial year.


European stocks have drifted lower in cautious trade on Friday as investors await the vote on the Republican healthcare plan.

While the French CAC 40 Index has fallen by 0.4 percent, the German DAX Index is down by 0.1 percent and the U.K.’s FTSE 100 Index is just below the unchanged line.

Bollore shares have tumbled as the French transportation company offered Blue Solutions' shareholders an option to sell their shares at a price of 17 euros per share.

Telecom Italia has slid despite the company swinging back to profit in 2016 from a net loss of 70 million euros the previous year.

Meanwhile, British engineering firm Smiths Group has shown a notable move to the upside after its first-half results beat forecasts.

On the economic front, activity in the Eurozone private sector reached a near six-year high in March, flash survey data from IHS Markit showed. The composite output index rose to 56.7 from 56.0 in February.

French economic growth doubled as estimated in the fourth quarter, final data from the statistical office Insee showed. GDP grew 0.4 percent following third quarter's 0.2 percent expansion.

Separately, a recent spike in inflation does not mean interest rates must be raised, Bank of England policymaker Gertjan Vlieghe said.

Much of the inflationary pressure can be attributed to the sterling's devaluation and the consequent rise in prices of products such as fuel and food, Vlieghe said in an interview to the Times newspaper.

U.S. Economic Reports

Reflecting a continued increase in demand for commercial aircraft and parts, the Commerce Department released a report showing that new orders for U.S. manufactured durable goods shot up by more than anticipated in the month of February.

The report said durable goods orders jumped by 1.7 percent in February after surging up by a revised 2.3 percent in January.

Economists had expected orders to climb by 1.2 percent compared to the 2.0 percent spike that had been reported for the previous month.

Excluding orders for transportation equipment, durable goods orders rose by 0.4 percent in February after edging up by 0.2 percent in January. The increase fell short of estimates for 0.6 percent growth.

At 9:05 am ET, St. Louis Federal Reserve President James Bullard is due to speak at an Economic Club of Memphis Economic Briefing in Memphis, Tennessee.

New York Fed President William Dudley is scheduled to speak at a fireside chat with business and economics students at the York College of The City University of New York at 10 am ET.

Additionally, a 1 pm ET, San Francisco Fed President John Williams will discuss monetary policy in an era of low nominal rates and low inflation with economists and reporters at the Brookings Institution in Washington, D.C.

Stocks in Focus

Shares of Micron (MU) are moving sharply higher in pre-market trading after the chip maker reported better than expected second quarter earnings and provided upbeat guidance.

Late-stage clinical oncology company Eleven Biotherapeutics (EBIO) is also likely to see early strength after reporting a significantly narrower fourth quarter loss.

KB Home (KBH) reported better than expected first quarter earnings. The homebuilder also reported revenues that exceeded analyst estimates.

On the other hand, shares of Finish Line (FINL) are likely to come under pressure after the athletic footwear and apparel retailer reported weaker than expected fourth quarter earnings and provided disappointing guidance.

Video game retailer GameStop (GME) is also moving lower in pre-market trading after reporting fourth quarter earnings that beat estimates but forecasting weaker than expected full-year earnings.
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