Market Analysis

Beyond the Numbers

Light Trading May Lead To Volatility On Wall Street
11/22/2017 9:03 AM

The major U.S. index futures are pointing to a higher opening on Wednesday, although trading activity is likely to be somewhat subdued.

The markets may continue to benefit from the upward momentum seen in the previous session, which lifted the major averages to new record closing highs.

Light trading activity may lead to some volatility, however, as many traders will be looking to get a head start on the Thanksgiving Day holiday.

Traders that remain at their desks may be reluctant to make significant moves ahead of the release of the minutes of the Federal Reserve’s latest policy meeting.

After ending Monday’s trading modestly higher, stocks showed a significant move to the upside during trading on Tuesday. With the upward move on the day, the major averages reached new record closing highs.

The major averages ended the day firmly in negative territory. The Dow climbed 160.50 points or 0.7 percent to 23,590.83, the Nasdaq jumped 71.76 points or 1.1 percent to 6,862.48 and the S&P 500 advanced 16.89 points or 0.7 percent to 2,599.03.

The continued advance by the major averages was partly due to strength among technology stocks, with Apple (AAPL) and Microsoft (MSFT) turning in two of the Dow's best performances.

Upbeat earnings news from several well-known companies also contributed to the continued strength on Wall Street.

Shares of Hormel Foods (HRL) moved notably higher after the food company reported fiscal fourth quarter results that exceeded analyst estimates.

Apparel retailer Urban Outfitters (URBN) also posted a significant gain after reporting better than expected third quarter results.

On the other hand, shares of Lowe's (LOW) closed lower even though the home improvement retailer reported third quarter earnings and revenues that beat estimates.

Soup maker Campbell Soup (CPB) came under pressure after reporting fiscal first quarter that came in below estimates and lowering its full-year earnings outlook.

In economic news, the National Association of Realtors released a report showing a much bigger than expected jump in existing home sales in the month of October.

The report said existing home sales surged up by 2.0 percent to an annual rate of 5.48 million in October from a downwardly revised 5.37 million in September.

Economists had expected existing home sales to climb by 0.7 percent to a rate of 5.43 million from the 5.39 million originally reported for the previous month.

Computer hardware stocks showed a substantial moved to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 2.4 percent. With the upward move, the index reached its best intraday level in four months.

Within the hardware sector, supercomputer manufacturer Cray (CRAY) posted a standout gain, soaring by 9.1 percent.

Significant strength also emerged among airline stocks, as reflected by the 1.4 gain posted by the NYSE Arca Airline Index. The index climbed to a one-month intraday high.

Internet, trucking, and biotechnology stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are advancing $0.91 to $57.74 a barrel after rising $0.41 to $56.83 a barrel on Tuesday. Gold futures, which climbed $6.40 to $1,281.70 an ounce in the previous session, are up $3.70 at $1,285.40 an ounce.

On the currency front, the U.S. dollar is trading at 111.98 yen compared to the 112.45 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1750 compared to yesterday’s $1.1738.


Asian stocks finished broadly higher on Wednesday after the major U.S. averages hit fresh record closing highs overnight, buoyed by upbeat corporate earnings results and higher commodity prices.

Investors remained focused on the minutes from the latest Fed and ECB meetings due today and tomorrow, respectively.

China's Shanghai Composite Index climbed 20.05 points or 0.6 percent to 3,430.55, while Hong Kong's Hang Seng Index advanced 185.42 points or 0.6 percent to 30,003.49.

Japanese shares edged higher after Wall Street's record overnight finish. The benchmark Nikkei 225 Index rose 106.67 points or 0.5 percent at 22,523.15, and the broader Topix Index gained 0.3 percent to close at 1,777.08. TDK, Toshiba, Japan Steel Works, Fuji Electric and Mitsubishi UFJ Financial climbed 2-6 percent.

Australian shares finished higher as rising oil and metals prices helped lift commodity-related stocks. The benchmark S&P/ASX 200 Index gained 22.89 points or 0.4 percent to end at 5,986.41, while the broader All Ordinaries Index closed 0.4 percent higher at 6,067.60.

Santos, Oil Search, Woodside Petroleum and Origin Energy climbed 1-2 percent as oil hovered near a two-year high on expectations of an OPEC production cut next week. Higher iron ore prices helped lift miners, with BHP Billiton rising 1.4 percent and Rio Tinto closing up 0.9 percent.

Meanwhile, banks ended mostly lower. Webjet shares fell 11.6 percent after the online travel booking company issued a disappointing earnings forecast.

On the economic front, the latest survey from Westpac Bank revealed that the Australian economy continued to expand in October.

Another report from the Australian Bureau of Statistics showed that the value of total construction work done in Australia surged up 15.7 percent sequentially in the third quarter of 2017.

South Korea's Kospi rose 9.81 points or 0.4 percent to 2,540.51, with tech stocks once again leading the surge. Samsung Electronics, SK Hynix and LG Electronics jumped 1-3 percent.


European stocks are turning in a mixed performance on Wednesday as the euro has inched higher for a second straight day and investors awaited cues from the release of minutes from the latest Fed and ECB meetings.

While the German DAX Index has edged down by 0.1 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

Akzo Nobel shares have moved to the upside after the Dutch paint maker and U.S. peer Axalta ended their merger discussions without agreement.

Shares of Medicrea Group have surged higher in Paris. The French medical devices company announced that it has received FDA clearance for its IB3D range of 3D-printed Titanium.

The Sage Group has also jumped after the British software developer reported a substantial increase in annual profit.

SSP Group shares have surged higher after the company raised its full-year dividend and proposed a special payout.

Meanwhile, Charles Stanley has fallen after the wealth manager warned of regulatory changes weighing on the business.

Travel firm Thomas Cook has also slumped after reporting a 40 percent drop in earnings at its U.K. division in the year to September 30th.

U.S. Economic Reports

After reporting an unexpected increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report showing a pullback in initial jobless claims in the week ended November 18th.

The report said initial jobless claims fell to 239,000, a decrease of 13,000 from the previous week's revised level of 252,000.

Economists had expected jobless claims to drop to 240,000 from the 249,000 originally reported for the previous week.

A separate report from the Commerce Department showed an unexpected drop in durable goods orders in the month of October, with the decrease primarily reflecting a sharp pullback in orders for transportation equipment.

The Commerce Department said durable goods orders tumbled by 1.2 percent in October after surging up by an upwardly revised 2.2 percent in September.

The decrease surprised economists, who had expected orders to edge up by 0.3 percent compared to the 2.0 percent increase that had been reported for the previous month.

Excluding the steep drop in orders for transportation equipment, durable goods orders rose by 0.4 percent in October after jumping by 1.1 percent in September. Ex-transportation orders had been expected to climb by 0.5 percent.

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

The consumer sentiment index for November is expected to be upwardly revised to 98.0 from 97.8, which was down from 100.7 in October.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended November 17th. Crude oil inventories are expected to drop by 2.2 million barrels.

The Treasury Department is scheduled to announce the details of next week’s auctions of two-year, five-year, and seven-year notes at 11 am ET.

At 2 pm ET, the Federal Reserve is due to release the minutes of its latest monetary policy meeting, which may shed additional light on the outlook for interest rates.

Stocks In Focus

Shares of Hewlett Packard Enterprise (HPE) are moving notably lower in pre-market trading on news Meg Whitman is stepping down as CEO. HPE reported fiscal fourth quarter results that beat analyst estimates.

Clothing brand and retailer Guess (GES) is under pressure in pre-market trading after reporting third quarter earnings that matched expectations but on weaker than expected revenues.

On the other hand, shares of GameStop (GME) are seeing pre-market strength after the video game retailer reported better than expected third quarter results.

Heavy machinery maker Deere (DE) may also move to the upside after reporting fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.
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