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Beyond the Numbers

Fed In Focus As Dow Goes For 4th Day Of Gains
8/16/2017 8:55 AM

Equity futures are pointing to a higher open on Wall Street. Further gains would add to a three-day winning streak for the Dow, though Tuesday ended with a mixed session that saw the S&P 500 finish lower.

Investors are shrugging off a disappointing reading from the housing sector. Government data showed that housing starts dipped in July compared to the previous month, coming in below what economists had expected.

Wall Street is more focused on the release of additional data from the Federal Reserve. The central bank is poised to release the minutes of its last policy meeting during the afternoon.

In the corporate sector, Target Corp. (TGT) reported second quarter earnings of $672 million or $1.23 per share compared to $680 million or $1.17 per share last year. Analysts expected $1.19 per share.

Revenue grew to $16.43 billion from $16.17 billion in the previous year. For the third quarter, the company projects earnings of $0.75 to $0.95 per share, while its full year earnings forecast is in a range of $4.34 to $4.54 per share.

Shares of Target are up nearly 4 percent in premarket trading.

The major averages finished Tuesday's session with a mixed performance. Bargain hunting fueled gains on Monday, but the momentum stalled early in Tuesday's action, as investors bided their time for more information. Dow Jones Industrial Average closed 5.28 points or 0.02 percent higher. S&P 500 Index was finished down 1.23 points or 0.05 percent.

Commodity, Currency Markets

Crude oil futures steadied Wednesday morning, but reaction to an industry report showing a massive drop in U.S. crude oil inventories was muted.

The American Petroleum Institute (API) reported a huge draw of 9.2 million barrels in United States crude oil inventories-the biggest draw since September 2016.

The Energy Information Administration is out with the government's report this morning.

WTI light sweet crude oil was up 10 cents at $47.66 a barrel.

Asia

Asian stocks ended mixed on Wednesday as underlying sentiment turned cautious in the wake of expectations for a December rate hike from the Federal Reserve and the IMF's warning that China's credit growth is on a "dangerous trajectory".

China's Shanghai Composite index dropped 4.81 points or 0.15 percent to 3,246.55 after central bank data showed China's new yuan loans fell sharply in July and broad money supply growth slowed.

Meanwhile, the International Monetary Fund revised upward its growth forecast for China, but warned the country's debt is on dangerous trajectory. Hong Kong's Hang Seng index was up 234 points or 0.86 percent at 27,409 in late trade.

Japanese shares ended slightly lower, dragged down by automakers on uncertainty about the fate of Mexico ahead of the first round of NAFTA negotiations.

Japan's Nikkei average slid 24.03 points or 0.12 percent to 19,729.28. Toyota Motor shed 1.3 percent and Mazda Motor eased 0.3 percent. Japan Airlines advanced 1.6 percent after Nomura Securities raised its rating on the stock.

Europe

European stocks rose for a third day on Wednesday as the dollar held relatively stable on Fed rate hike expectations and flash estimate from Eurostat showed the euro area economy expanded as initially estimated in the second quarter.

The pan-European Stoxx Europe 600 index was up 0.7 percent at 378.93 in late opening deals after closing 0.1 percent higher the previous day.

Higher commodity prices lifted mining and energy stocks. Miners Anglo American, Antofagasta and Glencore all rose over 2 percent while oil major Tullow Oil jumped as much as 4 percent.

U.S. Economic Reports

Government statistics released on Wednesday showed that housing starts unexpectedly fell in July from the previous month's levels. Building permits were also below expectations.

A report issued by the U.S. Department of Commerce said housing starts fell 4.8 percent from the previous month, dropping to an annual rate of 1.155 million units in July. This was down from the revised June estimate of 1.213 million units.

July's housing starts figure was 5.6 percent lower than in the same period last year.

Economists had expected housing starts to edge up to a rate of 1.225 million from the 1.215 million originally reported for the previous month.

The Commerce Department said building permits also fell during the month. The figure dropped by 4.1 percent compared to the previous month, slipping to a rate of 1.223 million units in July. June's figure was revised to a pace of 1.275 million units.

Building permits, an indicator of future housing demand, had been expected to come in at a pace of about 1.25 million units.

The Energy Information Administration or EIA's Petroleum Status Report that provides weekly information on petroleum inventories in the U.S. is expected at 10.30 am ET. The crude oil inventories in the previous week was down 6.5 million barrels, while gasoline inventories grew by 3.4 million barrels.

The Federal Open Market Committee's minutes will be published today at 2.00 pm ET. The minutes provide a detailed look at what Fed members were thinking when they made their last policy decision. Investors will be looking for any clue as to when the next interest rate hike will come.
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