Market Analysis

Beyond the Numbers

Cohn’s Resignation Likely To Weigh On Wall Street
3/7/2018 9:00 AM

The major U.S. index futures are pointing to a lower opening on Wednesday as traders digest news of the resignation of White House chief economic advisor Gary Cohn.

The resignation by Cohn, a free trade advocate, comes after President Donald Trump announced plans to impose tariffs on steel and aluminum imports.

In a statement, Trump said Cohn did a “superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again.”

Trump said in a post on Twitter that he would make a decision on a new chief economic advisor “soon,” adding, “Many people wanting the job - will choose wisely!”

After failing to sustain an initial upward move, stocks showed a lack of direction over the course of the trading session on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the day in positive territory. The Dow inched up 9.36 points or less than a tenth of a percent to 24,884.12, the Nasdaq advanced 41.30 points or 0.6 percent to 7,372.01 and the S&P 500 rose 7.18 points or 0.3 percent to 2,728.12.

The choppy trading on the day was partly attributed to concerns about Cohn leaving the White House.

The strength seen early in the day came amid easing geopolitical concerns following reports that North Korea is willing to talk about denuclearization.

South Korea's national security director Chung Eui-yong told reporters North Korea would be willing to denuclearize if its security was guaranteed.

"North Korea made clear its willingness to denuclearize the Korean peninsula and the fact there is no reason for it to have a nuclear program if military threats against the North are resolved and its regime is secure," Chung said.

On the U.S. economic front, the Commerce Department released a report showing a slightly bigger than expected decrease in factory orders in the month of January.

The Commerce Department said factory orders tumbled by 1.4 percent in January after jumping by an upwardly revised 1.8 percent in December.

Economists had expected factory orders to drop by 1.3 percent compared to the 1.7 percent spike originally reported for the previous month.

Gold stocks showed a significant move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2 percent. The strength among gold stocks came amid a sharp increase by the price of the precious metal.

Considerable strength was also visible among computer hardware and semiconductor stocks, with the NYSE Arca Computer Hardware Index and the Philadelphia Semiconductor Index climbing by 1.6 percent and 1.5 percent, respectively.

Tobacco, chemical, and housing stocks also saw notable strength, while telecom and utilities stocks moved to the downside on the day.

Commodity, Currency Markets

Crude oil futures are slipping $0.21 to $62.39 a barrel after inching up $0.03 to $62.60 a barrel on Tuesday. Meanwhile, after jumping $15.30 to $1,335.20 an ounce in the previous session, gold futures are falling $2.80 to $1,332.40 an ounce.

On the currency front, the U.S. dollar is trading at 105.82 yen compared to the 106.13 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2416 compared to yesterday’s $1.2404.


Asian stocks gave up early gains to end lower on Wednesday after White House chief economic adviser Gary Cohn resigned from the Trump administration, raising concerns that President Donald Trump will go ahead with his plan to impose tariffs and risk a trade war.

Worries about the potential impact of a trade war overshadowed easing geopolitical concerns after North Korea said it is willing to talk about denuclearization.

China's Shanghai Composite index dropped 18.18 points or 0.55 percent to 3,271.46, while Hong Kong's Hang Seng index slumped 313.81 points or 1.03 percent to 30,196.92.

Japanese shares closed lower as steelmakers extended recent losses on trade tariff worries. The Nikkei 225 index fell 165.04 points or 0.77 percent to 21,252.72, and the broader Topix index closed 0.72 percent lower at 1,703.96.

Japan Steel Works dropped 2.4 percent, Nippon Steel lost 2.2 percent and Kobe Steel fell as much as 7.4 percent.

Australian shares tumbled as trade war fears intensified and data showed the economy grew below expectations in 2017. GDP growth slipped to 2.4 percent over the last year, compared with the annualized rate of 2.8 percent seen in the third quarter.

The benchmark S&P/ASX 200 index fell by 60.40 points or 1.01 percent to finish at 5,902, while the broader All Ordinaries index ended down 56.10 points or 0.93 percent at 6,005.40.

The big four banks fell between 0.7 percent and 1.6 percent, and retailers Woolworths and Wesfarmers ended down about 1.5 percent each. Lower base metal prices pulled down miners, with heavyweights BHP Billiton and Rio Tinto falling around 1 percent.

Oil stocks Origin Energy, Santos and Beach Energy dropped 2-5 percent despite crude oil prices rising overnight. Gold miners bucked the weak trend, with Evolution Mining, Newcrest, Norther Star and Regis Resources climbing 1-2 percent.


European stocks have turned mixed over the course of the session. While the French CAC 40 Index is down by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the German DAX Index is up by 0.5 percent.

Deutsche Post shares have fallen after the German mail and logistics group reported a lower net profit for the fourth quarter due to a higher tax rate.

Publicis Groupe and WPP have also moved lower on reports that Procter & Gamble is accelerating its efforts to transform the business of marketing.

Meanwhile, paper packaging firm Smurfit Kappa has rallied after the company's board reaffirmed its rejection of a takeover offer from U.S. rival International Paper.

Rolls Royce Holdings has also jumped after the plane engine maker reported a 2017 profit before tax of 4.9 billion pounds, a material increase over the 2016 loss of 4.6 billion pounds.

On the economic front, France's foreign trade gap widened notably at the start of the year, as exports fell and imports rose, data from the customs office showed.

The trade deficit widened to 5.6 billion euros in January from 3.4 billion euros in December. The expected shortfall was 4.45 billion euros.

Separately, U.K. house prices grew at the slowest pace in five years in February, data from the Lloyds bank subsidiary Halifax and IHS Markit showed.

House prices increased 1.8 percent year-on-year in the three months to February, slower than the 2.2 percent rise registered in January. This was the weakest rate since March 2013.

U.S. Economic Reports

A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by more than expected in the month of February.

ADP said employment in the private sector jumped by 235,000 jobs in February after surging up by a revised 244,000 jobs in January.

Economists had expected an increase of about 195,000 jobs compared to the addition of 234,000 jobs originally reported for the previous month.

A separate report from the Commerce Department showed the trade deficit widened by more than expected in the month of January.

The report said the trade deficit widened to $56.6 billion in January from $53.9 billion in December. The deficit had been expected to widen to $55.1 billion.

Revised data released by the Labor Department showed U.S. labor productivity was unchanged in the fourth quarter.

The Labor Department said labor productivity was unchanged in the fourth quarter compared to the previously reported 0.1 percent drop. Economists had expected the dip in productivity to be unrevised.

Meanwhile, the report said unit labor costs surged up by 2.5 percent compared to the previously reported 2.0 percent jump. The increase in labor costs was expected to be revised to 2.1 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 2nd.

Crude oil inventories are expected to increase by 3.0 million barrels after climbing by 2.5 million barrels in the previous week.

The Federal Reserve is scheduled to release its Beige Book report at 2 pm ET. The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, may shed light on the outlook for interest rates.

At 3 pm ET, the Fed is due to release its report consumer credit in the month of January. Consumer credit is expected to increase by $17.9 billion.

Stocks In Focus

Shares of Autodesk (ADSK) are moving sharply higher in pre-market trading after the design software maker reported a narrower than expected fourth quarter loss on better than expected revenues.

Tax preparer H&R Block (HRB) may also see early strength after reporting a narrower than expected fiscal third quarter loss.

On the other hand, shares of Ross Stores are seeing pre-market weakness after the discount retailer reported fourth quarter results that beat estimates but provided disappointing guidance.

Video streaming giant Netflix (NFLX) may also move to the downside after Stifel downgraded its rating on the company’s stock to Hold from Buy.
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