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Beyond the Numbers

Stocks May Open Higher Amid Focus On Capitol Hill
11/28/2017 8:58 AM

The major U.S. index futures are pointing to a higher opening on Tuesday following the lackluster performance seen in the previous session.

Stocks may benefit from recent upward momentum, although early trading activity is likely to be somewhat subdued ahead of key events on Capitol Hill.

Traders are likely to keep a close eye on Federal Reserve Chair nominee Jerome Powell’s confirmation hearing before the Senate Banking Committee, looking for clues about his views on monetary policy.

A Senate Budget Committee hearing this afternoon on the Republican tax reform bill is also likely to attract attention.

Ahead of the hearing, GOP Senators Ron Johnson, R-Wis., and Bob Corker, R-Tenn., have indicated they will vote against the bill in its current form.

Stocks showed a lack of direction over the course of the trading session on Monday following the strength seen last week. The major averages spent much of the day lingering near the unchanged line before eventually closing mixed.

While the Dow inched up 22.79 points or 0.1 percent to 23,580.78, the Nasdaq dipped 10.64 points or 0.2 percent to 6,878.52 and the S&P 500 edged down 1.00 point or less than a tenth of a percent to 2,601.42.

The lackluster performance on the Wall Street came as traders seemed reluctant to make significant moves ahead of testimony from Powell and current Fed Chair Janet Yellen.

The Senate Banking Committee is due to hold a confirmation hearing for Powell on Tuesday, while Yellen is scheduled to testify on the economic outlook before the Congressional Joint Economic Committee on Wednesday.

Economic data may also attract attention this week, as traders are likely to keep a close eye on reports on consumer confidence, pending home sales, personal income and spending, and manufacturing activity.

The Commerce Department released a report Monday morning showing new home sales unexpectedly jumped to a ten-year high in October.

The report showed new home sales surged up by 6.2 percent to an annual rate of 685,000 in October from the revised September rate of 645,000.

The notable increase surprised economists, who had expected new home sales to drop to a rate of 625,000 from the 667,000 originally reported for the previous month.

With the unexpected increase, new home sales reached their highest annual rate since hitting 727,000 in October of 2007.

Energy stocks showed a significant move to the downside on the day, moving lower along with the price of crude oil.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index tumbled by 1.8 percent and the Philadelphia Oil Service Index fell by 1.4 percent.

Considerable weakness was also visible among semiconductor stocks, as reflected by the 1.3 percent loss posted by the Philadelphia Semiconductor Index. The drop by the index came after it ended the previous session at a record closing high.

Computer hardware and biotechnology stocks also saw notable weakness on the day, while gold stocks moved higher along with the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are falling $0.42 to $57.69 a barrel after tumbling $0.84 to $58.11 a barrel on Monday. Meanwhile, after climbing $7.10 to $1,294.40 an ounce in the previous session, gold futures are rising $1.40 to $1,295.80 an ounce.

On the currency front, the U.S. dollar is trading at 111.24 yen compared to the 111.09 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued $1.1888 compared to yesterday’s $1.1898.

Asia

Asian stocks finished broadly lower on Tuesday as oil prices fell and Beijing stepped up its crackdown on shadow banking and other risky forms of financing.

Investors also awaited developments on U.S. tax reform ahead of a crucial Senate vote and the confirmation hearing for Fed Chair nominee Jerome Powell.

Japanese shares ended marginally lower after a government source said Japan has detected radio signals from North Korea that indicate Pyongyang could be preparing for another ballistic missile test. The yen reversed gains, helping limit overall losses in the market.

The Nikkei 225 Index gave up early gains to close less than a tenth of a percent lower at 22,486.24. The broader Topix index slid 0.3 percent to finish at 1,772.07.

Toray Industries shares slumped 5.3 percent after the company said a subsidiary had falsified data. Defense-related Howa Machinery jumped as much as 12.5 percent.

Australian shares ended a choppy session marginally lower, dragged down by mining and telecommunication stocks. The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index both ended down about 0.1 percent at 5,984.30 and 6,066.70, respectively.

Weaker commodity prices pulled down miners, with BHP Billiton and Fortescue Metals Group tumbling 2-3 percent, while Rio Tinto shed 0.8 percent. Telstra Corp dropped 1.7 percent in the wake of NBN's move to delay work on the national broadband network rollout.

Mayne Pharma fell 2.4 percent after the company warned of soft first half. Origin Energy rallied 2.5 percent after the company reaffirmed its full-year guidance.

In economic news, Australian consumer confidence eased during the week ended November 28, after strengthening in the previous two weeks, a weekly survey compiled by the ANZ bank and Roy Morgan Research showed.

Meanwhile, Chinese stocks reversed initial losses to close higher as investors hunted for bargains following recent weakness.

The benchmark Shanghai Composite Index rose 0.3 percent to 3,333.66, although Hong Kong's Hang Seng Index edged down 5.34 points or less than a tenth of a percent to 29,680.85.

Europe

European stocks have moved to the upside on Tuesday as German political concerns have eased and investors looked for signs of progress from the Senate debate on U.S. tax reform.

Investor sentiment also got a boost after all seven of the U.K.'s biggest lenders passed the Bank of England's stress test for the first time since the test was launched in 2014.

While the U.K.’s FTSE 100 Index has advanced by 0.8 percent, the French CAC 40 Index is up by 0.5 percent and the German DAX Index is up by 0.3 percent.

In economic news, French consumer confidence improved more than expected in November after weakening in the previous four months, survey data from statistical office Insee showed.

Separately, the European Central Bank said eurozone money supply grew 5 percent annually in October following September's revised 5.2 percent increase. The expected rate was 5.1 percent.

French lender Societe Generale has moved higher after announcing plans to cut 900 jobs as part of a restructuring exercise.

Pharmaceutical company Carmat has also climbed after the company announced the first implantation of its bioprosthetic artificial heart in the Czech Republic as part of its clinical trials in humans.

Casino has advanced after it signed an agreement with Ocado Group to develop the Ocado Smart Platform ecommerce grocery service in France. Ocado shares also soared.

Royal Dutch Shell has rallied after the company confirmed that it would stop its scrip dividend program and make future payments entirely in cash.

On the other hand, BMW shares have fallen after the German automaker announced a 200 million euro investment in a new BMW Group Battery Cell Competence Centre.

U.S. Economic Reports

At 9 am ET, Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of September. Home prices are expected to rise by 0.6 percent.

New York Federal Reserve President William Dudley is due to deliver the welcoming and introductory remarks at the Third Annual Conference on the Evolving Structure of the U.S. Treasury Market event in New York at 9:15 am ET.

At 10 am ET, the Conference Board is scheduled to release its report on consumer confidence in the month of November. The consumer confidence index is expected to dip to 124.5 in November from 125.9 in October.

The Senate Banking Committee also due to hold a confirmation hearing for Federal Reserve Chair nominee Jerome Powell at 10 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $28 billion worth of seven-year notes.

Stocks In Focus

Shares of Buffalo Wild Wings (BWLD) are moving sharply higher in pre-market trading on news Roark Capital's Arby's Restaurant Group will buy the restaurant chain for $157 per share.

Recreational vehicle maker Thor Industries (THO) is also likely to see early strength after reporting fiscal first quarter results that beat analyst estimates on both the top and bottom lines.

Shares of Meredith (MDP) may also see further upside after Jefferies upgraded its rating on the media group to Buy from Hold amid optimism about its acquisition of publisher Time (TIME).

On the other hand, shares of UnitedHealth (UNH) are seeing some pre-market weakness after the health insurer provided disappointing full-year earnings guidance.

Athletic footwear and apparel maker Nike (NKE) may also move to the downside after HSBC downgraded its rating on the company’s stock to Hold from Buy.
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