Market Analysis

Beyond the Numbers

Trump Comments, Weak GDP Data, Mixed Earnings May Lead To Choppy Trading
4/28/2017 8:57 AM

The major U.S. index futures are pointing to a roughly flat opening on Friday, as traders digest comments from President Donald Trump as well as the latest U.S. economic data.

Geopolitical concerns may weigh on the markets after Trump warned of a major conflict with North Korea over its nuclear and missile programs.

“There is a chance that we could end up having a major, major conflict with North Korea. Absolutely,” Trump said in an interview with Reuters on Thursday.

Trump said he wants to resolve the standoff with North Korea peacefully but argued a diplomatic solution is “very difficult.”

Traders are also digesting a Commerce Department report showing weaker than expected economic growth in the first quarter along with a mixed batch of corporate earnings news.

Stocks turned in a relatively lackluster performance during trading on Thursday but managed to end the day mostly higher. With the upward move on the day, the tech-heavy Nasdaq reached a new record closing high.

The major averages finished the session in positive territory. The Dow inched up 6.24 points or less than a tenth of a percent to 20,981.33, the Nasdaq rose 23.71 points or 0.4 percent to 6,048.94 and the S&P 500 edged up 1.32 points or 0.1 percent to 2,388.77.

The choppy trading seen on Wall Street for much of the day came as traders digested the latest batch of earnings news.

Shares of Comcast (CMCSA) saw notable strength on the day after the telecom giant reported first quarter results that exceeded analyst estimates.

Drug giant Bristol-Myers (BMY) also moved to the upside after reporting first quarter results that topped expectations.

On the other hand, Southwest Airlines (LUV) came under pressure after reporting first quarter earnings and revenues that came in below analyst estimates.

Auto giant Ford (F) also moved lower despite reporting better than expected first quarter results on both the top and bottom lines.

In U.S. economic news, the Labor Department released a report showing an unexpected increase in initial jobless claims in the week ended April 22nd.

The report said initial jobless claims climbed to 257,000, an increase of 14,000 from the previous week's revised level of 243,000.

The increase surprised economists, who had expected jobless claims to edge down to 241,000 from the 244,000 originally reported for the previous week.

A separate report released by the Commerce Department showed that new orders for manufactured durable goods climbed by less than expected in the month of March.

The Commerce Department said durable goods orders rose by 0.7 percent in March after jumping by a revised 2.3 percent in February.

Economists had expected orders to surge up by 1.2 percent compared to the 1.8 percent increase that had been reported for the previous month.

Excluding a jump in orders for transportation equipment, durable goods orders edged down by 0.2 percent in March after climbing by 0.7 percent in February.

The National Association of Realtors also released a report showing a pullback in pending home sales in the month of March.

NAR said its pending home sales index fell by 0.8 percent to 111.4 in March after jumping by 5.5 to 112.3 in February. Economists had expected pending home sales to drop by 1.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Railroad stocks showed a strong move to the upside, driving the Dow Jones Railroads Index up by 2.1 percent. With the gain, the index reached its best closing level in over two years.

Kansas City Southern (KSU) and Union Pacific (UNP) turned in two of the railroad sector's best performances on the day.

Significant strength was also visible among semiconductor stocks, as reflected by the 1.4 percent advance by the Philadelphia Semiconductor Index. The index climbed to a sixteen-year closing high.

On the other hand, oil service stocks moved sharply lower, dragging the Philadelphia Oil Service Index down by 3.1 percent. The drop pulled the index down to a five-month closing low. The weakness among oil service stocks came amid a decline in crude oil prices.

Gold stocks also saw considerable weakness despite an increase by the price of the precious metal, while natural gas and airline stocks also moved notably lower.

Commodity, Currency Markets

Crude oil futures are climbing $0.70 to $49.67 a barrel after sliding $0.65 to $48.97 a barrel on Thursday. After rising $1.70 to $1,265.90 an ounce in the previous session, gold futures are inching up $0.60 to $1,266.50 an ounce.

On the currency front, the U.S. dollar is trading at 111.69 yen compared to the 111.26 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0915 compared to yesterday’s $1.0873.


Asian stocks ended on a cautious note on Friday, with a mixed bag of U.S. earnings and U.S. President Donald Trump's warning of a "major, major conflict" between the U.S. and North Korea weighing on the markets.

In an interview ahead of his 100th day in office, Trump said a major conflict with North Korea was possible over its nuclear and ballistic missile programs, but he said he would prefer a diplomatic outcome to the dispute.

China's Shanghai Composite Index edged up 2.47 points or 0.08 percent to 3,154.66, but ended the week down about 0.6 percent on concerns over tightening regulation and cooling economic growth. Hong Kong's Hang Seng Index fell 83.35 points or 0.34 percent to 24,615.13.

Japanese shares lost ground as investors digested a barrage of economic data. The Nikkei 225 Index dropped 55.13 points or 0.29 percent to 19,196.74, but ended the week with a 3 percent gain. The broader Topix index closed 0.32 percent lower at 1,531.80.

Nintendo shares rallied 2.1 percent after the company said strong sales of its new Switch console would help it to double annual profits. Sony edged down marginally and Honda Motor shed 0.4 percent before releasing their earnings results after the close.

On the economic front, Japanese industrial output fell 2.1 percent in March from the previous month after a 3.2 percent gain in February, government data showed.

The jobless rate held steady at 2.8 percent in the month, household spending fell more than expected and consumer price inflation remained stagnant at 0.2 percent, while retail sales rose more than expected, separate reports showed.

Australian shares ended flat but posted their third straight month of gains. The benchmark S&P/ASX 200 Index closed up 2.60 points or 0.04 percent at 5,924.10, while the broader All Ordinaries index inched up 3.20 points or 0.05 percent at 5,947.60.

Mining giant BHP Billiton shed 0.6 percent, while Rio Tinto rose 1.1 percent and smaller rival Fortescue Metals Group climbed 1.9 percent. Energy majors Oil Search and Origin Energy fell over 1 percent, but Santos rose 1.2 percent.

Banks ended narrowly mixed. Gold miners Newcrest and Northern Star tumbled around 4 percent each as gold remained on track to post its biggest weekly drop in seven.

Tatts Group declined 3.8 percent after the company rejected a sweetened all-cash A$6 billion bid from private equity group Pacific Consortium.


European stocks are mixed on Friday as U.S. President Donald Trump warned of a major conflict with North Korea and investors digested a slew of corporate earnings reports.

Eurozone inflation accelerated more than expected in April, flash data from Eurostat showed, helping support underlying sentiment to some extent.

Inflation rose to 1.9 percent in April from 1.5 percent in March. Economists had forecast the annual rate to rise to 1.8 percent.

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

UBS AG has advanced after a turnaround in its wealth management business helped the Swiss bank post a 79 percent jump in its first quarter net profit.

Electrolux shares have also rallied after the Swedish household-appliance maker reported a bigger than expected rise in first-quarter earnings amid an improving trend across all of its business.

Bayer has risen as the pharmaceuticals and chemicals giant confirmed its outlook for 2017, citing significant sales and earnings growth achieved by Covestro in the first quarter.

Sanofi has also rallied after the drug maker confirmed its earnings outlook for the year after reporting significantly a higher profit in its first quarter.

Royal Bank of Scotland Group has rallied nearly 2 percent after the bank reported its first quarterly profit since 2015.

Meanwhile, Linde shares have fallen after the industrial gases company warned once again that its revenue growth could decline in the year ahead due to challenging market conditions.

On the economic front, German retail sales recovered in March amid revisions to the historical data, provisional data showed. Retail sales grew an annual 2.3 percent, offsetting February's revised 2.3 percent drop.

French consumer spending decreased for the second straight month in March, defying economists' expectations for an increase, official data showed. Consumer spending dropped 0.4 percent from the previous month.

The U.K. economy expanded at the slowest pace in a year at the start of 2017, a preliminary estimate from the Office for National Statistics showed today.

GDP grew only 0.3 percent in the first quarter from the prior three months, marking the slowest rate of growth since the first quarter of 2016.

Another report showed that U.K. house prices unexpectedly fell for a second straight month in April, driving the annual pace of growth to its lowest level in nearly four years.

U.S. Economic Reports

The Commerce Department released a report showing that economic growth slowed by more than anticipated in the first three months of 2017.

The report said gross domestic product increased by 0.7 percent in the first quarter after jumping by 2.1 percent in the fourth quarter. Economists had expected GDP to climb by 1.2 percent.

The weaker than expected increase in GDP in the first quarter represents the worst performance since a 1.2 percent decline in the first quarter of 2014.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of April.

The Chicago business barometer is expected to drop to 56.5 in April after inching up to 57.7 in March, although a reading above 50 would indicate continued growth.

The University of Michigan is due to release a revised report on consumer sentiment in the month of April at 10 am ET. The consumer sentiment index is expected to be unrevised at the preliminary reading of 98.0.

At 1:15 pm ET, Federal Reserve Board of Governor Lael Brainard will discuss “Fintech and the Future of Finance” at the Kellogg School of Management at a Northwestern University conference in Evanston, Illinois.

Philadelphia Fed President Patrick Harker is scheduled to give a speech on “How STEM Can Get You Anywhere” at the X-STEM Symposium in Washington, D.C., at 2:30 pm ET.

Stocks in Focus

Shares of Intel (INTC) are moving notably lower in pre-market trading after the semiconductor giant reported first quarter earnings that exceeded analyst estimates but on weaker than expected revenues.

Chipmaker Qualcomm (QCOM) may also come under pressure after cutting its fiscal third quarter guidance due to Apple (AAPL) withholding future royalty payments amid a dispute between the companies.

Microsoft (MSFT) reported better than expected fiscal third quarter earnings, but the software giant’s revenues missed estimates.

Meanwhile, shares of Amazon (AMZN) are likely to see early strength after the online retail giant reported first quarter results that beat expectations on both the top and bottom lines.

Google parent Alphabet (GOOGL) is also moving higher in pre-market trading after reporting better than expected first quarter earnings and revenues.

Exxon Mobil (XOM) reported first quarter earnings that came in above analyst estimates, although the energy giant reported weaker than expected revenues.
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