Market Analysis

Beyond the Numbers

Choppy Trading May Persist Amid Mixed Earnings
7/29/2016 9:16 AM

The major U.S. index futures are pointing to a mixed opening on Friday, suggesting stocks may extend the lackluster performance seen over the past several sessions. A mixed batch of earnings news may lead to choppy trading along with reaction to the Bank of Japan’s monetary policy decision.

U.S. stocks had another lackluster outing on Thursday, ending mixed for the third straight session in reaction to mixed domestic earnings.

The major averages opened lower but showed a lack of direction till the mid-session. While the averages began moving steadily higher in the afternoon, they still closed mixed on the day.

The Dow Industrials fell 15.82 points or 0.09 percent before ending at 18,456, while the S&P 500 Index edged up 3.48 points or 0.16 percent to 2,170 and the Nasdaq Composite closed at 5,155, up 15.17 points or 0.30 percent.

Twenty of the Dow components closed lower for the session, but ten stocks rose. Caterpillar (CAT) and Boeing (BA) were among the worst performers of the session, while Apple (AAPL), Home Depot (HD), Travelers (TRV) and Verizon (VZ) gained ground.

Among the sectors, retail and computer hardware stocks saw some strength, but weakness was visible among networking stocks.

On the economic front, the Labor Department reported that jobless claims rose to 266,000 in the week ended July 23rd from a downwardly revised reading of 252,000 for the previous week. Economists expected claims to have increased to 264,000 from the 253,000 initially reported for the previous week. However, the four-week average fell to 256,500 from 257,500. Continuing claims calculated with a week's lag rose by 7,000 to 2.139 million in the week ended July 16th.

The Commerce Department's advance goods trade balance report for June showed a widening of the goods deficit to $63.3 billion from the $61.1 billion deficit for May.

A preliminary report also showed that wholesale inventories remained unchanged in June compared to the previous month, when inventories rose 0.1 percent. Retail inventories climbed 0.5 percent.
Currency, Commodity Markets??

Crude oil futures for September delivery are slipping $0.05 to $41.09 a barrel after sliding $0.78 to $41.14 a barrel on Thursday. Gold futures are currently trading at $1,346.10 an ounce, up $13.80 from the previous session’s close of $1,332.30 an ounce. On Thursday, gold climbed $4.30.

On the currency front, the U.S. dollar is trading at 102.80 yen compared to the 105.27 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1153 compared to yesterday’s $1.1077.


The Asian markets closed mixed, with most late closing markets retreating sharply, as the stimulus provided by the Bank of Japan did not measure up to market expectations. The Japanese, Australian and New Zealand markets rose moderately, while the rest of the markets declined.

The Japanese market ended higher despite the yen strengthening in the wake of the announcement by the Bank of Japan. The Nikkei 225 Index languished below the unchanged for much of the session, with the index retreating sharply in the immediate aftermath of the rate decision. After staging a recovery, the index moved higher in late trading, ending up 92.43 points or 0.56 percent at 16,569.

Financial, utility, housing and food stocks rose notably, while most resource and export came under selling pressure.

Australia's All Ordinaries Index also ended an uneasy session up 7.30 points or 0.13 percent at 5,644. Consumer, healthcare, industrial, telecom and utility stocks saw notable strength, but energy and material stocks fell steeply.

Meanwhile, China's Shanghai Composite Index ended at 2,979, down 14.98 points or 0.50 percent, and Hong Kong's Hang Seng Index closed 282.97 points or 1.28 percent lower at 21,891.

On the economic front, the Bank of Japan raised the target for exchange-traded fund purchases and doubled its dollar lending program in addition to the fiscal stimulus that the government unveiled two days ago. Moreover, the BoJ downgraded its projections for inflation and growth for fiscal 2016.

A slew of data released ahead of the BoJ decision showed that inflation in Japan remained well entrenched in negative territory in June, the unemployment rate in Japan fell to 3.1 percent in June from 3.2 percent in May, household spending remained lackluster, retail sales fell more than expected and housing starts fell for the first time in 6 months in June. On the other hand, industrial output growth exceeded expectations.

European stocks saw a volatile morning session amid reaction to the BoJ announcement and another slew of domestic earnings and mostly disappointing domestic data.

In major corporate news, UBS (UBS) reported a decline in its second quarter profits, although the drop was not as steep as feared. The bank expects challenging conditions to persist.

Sanofi (SNY) reported a decline in second quarter profits and sales. IAG's profits trailed expectations, as a weaker pound weighed on its numbers. Barclays (BCS) also reported a decline in second quarter profits, while Arcelor Mittal (MT) reported higher quarterly EBITDA.

On the economic front, a flash estimate released by Eurostat showed that GDP rose 0.3 percent sequentially in the second quarter, slower than the 0.6 percent growth in the first quarter. The growth was in line with estimates.

Separate reports showed that the jobless rate for the region came in at 10.1 percent in June, the same rate as in May and in line with estimates, while annual inflation was at 0.2 percent in July, faster than the 0.1 percent rate in June.

The German Federal Statistical Office reported that German retail sales edged down 0.1 percent month-over-month in June, marking the first drop in 3 months. Economists expected a 0.1 percent increase for the month.

The first estimate released by French statistical office INSEE showed that French GDP was unchanged in the second quarter, belying expectations for a 0.2 percent increase. A separate report showed that French consumer spending unexpectedly fell in June.

U.K. mortgage approvals declined to a one-year low in June, the Bank of England reported, with the number of mortgages approved falling to 64,766 in June from 66,722 in May.

U.S. Economic Reports??

Growth in U.S. economic activity in the second quarter accelerated from the first quarter, according to the initial estimate released by the Commerce Department on Friday, although the pace of growth came in well below economist estimates.

The report said gross domestic product climbed by 1.2 percent in the second quarter following a downwardly revised 0.8 percent increase in the first quarter.

Economists had expected GDP to jump by 2.6 percent compared to the 1.1 percent growth that had been reported for the previous quarter.

A separate report from the Labor Department showed that its employment cost index rose by 0.6 percent in the second quarter.

San Francisco Federal Reserve Bank President John Williams is due to speak on the remaining Fed tools at 9:30 am ET followed by a media briefing in Cambridge, Massachusetts.

MNI Indicators is scheduled to release the results of its Chicago business survey for July at 9:45 am ET. Economists expect the business barometer to slip to 54 from 56.8 in June.

Business activity in the Chicago-area improved notably in June. The business barometer rose to 56.8 from 49.2 in the previous month, while economists expected a reading of 50.5. New orders and order backlogs both moved into expansion territory. However, the employment index was at the lowest level since November 2009.

At 10 am ET, the University of Michigan is set to announce its final consumer sentiment index for July. Economists expect the index to come in at 90.6, upwardly revised from the flash estimate of 89.5.

Dallas Fed President Rob Kaplan is due to speak at the Independent Bankers Association of New Mexico's Annual Meeting at 1 pm ET followed by a Q&A session.

Stocks in Focus??

Google parent Alphabet (GOOGL) reported better than expected second quarter results, helped by higher search and advertising revenues.

Amazon (AMZN) reported second quarter results that were notably ahead of expectations and issued positive third quarter revenue guidance.

Baidu.com (BIDU) reporting disappointing second quarter results and gave disappointing guidance for its third quarter.

CBS (CBS) reported above-consensus earnings and revenues for its second quarter.

Expedia (EXPE) reported better than expected second quarter adjusted earnings, but its revenues missed estimates. The company also said it might seek to list its Trivago unit.

Ingram Micro (IM) reported second quarter adjusted earnings above the consensus estimate.

KLA-Tencor's (KLAC) fourth quarter adjusted earnings exceeded expectations.

Wynn Resorts (WYNN) reported better than expected second quarter earnings per share and a small increase in revenues.

Shares of Exxon Mobil (XOM) are moving lower in pre-market trading after the oil giant reported weaker than expected second quarter results.

Rival Chevron (CVX) reported its third consecutive quarterly loss in the second quarter but on stronger than expected revenues.

Merck (MRK) reported better than expected second quarter results and narrowed its full-year revenue guidance range.
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