Market Analysis

Beyond the Numbers

Positive Earnings News May Lead To Strength On Wall Street
10/25/2016 9:09 AM

The major U.S. index futures are pointing to a modestly higher opening on Tuesday, with stocks poised to add to the gains posted in the previous session. A positive reaction to the latest batch of earnings news may contribute to early strength on Wall Street.

U.S. stocks advanced solidly on Monday amid news on the merge-and-acquisition front. The major averages opened higher and moved roughly sideways for the rest of the session, ending moderately to notably higher.

The Dow Industrials added 77.32 points or 0.43 percent before ending at over a 2-week high of 18,223 and the S&P 500 Index closed 10.17 points or 0.47 percent higher at 2,151, also a 2-week high. The Nasdaq Composite Index ended at 5,310, up 52.43 points or 1 percent.

Among the sectors, retail and semiconductor stocks gained ground, but gold and oil service stocks moved notably to the downside.

Twenty-one of the thirty Dow components closed the session higher, while nine stocks retreated. Microsoft (MSFT), Boeing (BA) and Wal-Mart (WMT) were among the biggest gainers of the session.

On the economic front, the flash estimate released by Markit showed that its manufacturing PMI rose to 53.2 in October from 51.4 in September, while economists expected a reading of 51.4.

The Chicago Federal Reserve’s national activity index improved yet remained depressed in September. The index rose to -0.14 from -0.55.

Commodity, Currency Markets

Crude oil futures are slipping $0.09 to $50.43 a barrel after ending Monday's session down $0.33 at $50.52 a barrel. Meanwhile, an ounce of gold is trading at $1,270.40, up $6.70 from the previous session’s close of $1,263.70. On Monday, gold fell $4.

On the currency front, the U.S. dollar is trading at 104.78 yen compared to the 104.18 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0860 compared to yesterday’s $1.0882.


The Asian markets moved about in a lackluster manner before ending mixed. Even amid concerns about a Fed rate hike, a weaker yen and better-than-expected GDP data from South Korea helped to cap overall losses to some extent.

The Japanese market ended at a six-month high as the yen remained subdued. The Nikkei 225 Index opened higher and moved roughly sideways for the rest of the session, ending up 30.83 points or 0.76 percent to 17,365, the highest level since April 25.

Among the prominent gainers, J Front Retailing, Nippon Sheet Glass, Dainippon Screen Manufacturing, Sumitomo Mitsui Trust, TDK, Mitsui Mining & Smelting and Mitsubishi Motors jumped 3-7 percent. Hitachi, Nissan Motor, Toyota, Honda Motor, Suzuki Motor and Mazda rallied 1-3 percent. Kyushu Railway shares soared 15 percent on their first day of trading.

Australia stocks also rose, as higher metal prices boosted miners and banks gained ground ahead of earnings results from three of the big four banks. Healthcare stocks also rebounded from a recent string of losses. The All Ordinaries index closed 34.20 points or 0.62 percent higher at 5,523.

Chinese shares ended on a flat note as the yuan continued to weaken to hit a fresh six-year low. The benchmark Shanghai Composite Index inched up 3.69 points or 0.12 percent to 3,132, while Hong Kong's Hang Seng index closed 38.97 points or 0.17 percent lower at 23,565.

In economic news, data released by the Bank of Korea showed that South Korea's third-quarter GDP grew by 0.7 sequentially, beating forecasts for 0.6 percent growth. On an annual basis, the economy expanded 2.7 percent, marking the slowest growth in more than a year amid a massive recall of Samsung smartphones and strikes at Hyundai Motor.


European stocks opened higher and have been witnessing buoyancy amid the release of some domestic earnings news and German business confidence data.

In major corporate news, French telecom giant Orange reported higher third quarter earnings, while it maintained its 2016 forecast. Novartis (NVS) reported an increase in third quarter profit. Core earnings per share were ahead of estimates, while sales were impacted by generic competition and pricing.

Syngenta’s third quarter sales fell 3 percent, while excluding the impact of the change in sales terms in Brazil, sales rose 2 percent.

On the economic front, confidence among German businesses improved in October, the results of a survey by the Ifo institute showed. The Ifo business confidence index rose to 110.5 in October from 109.5 in the prior month. Economists had expected a reading of 109.6.

The current conditions index climbed to 115.0 from 114.7 a month ago. The index was forecast to rise marginally to 114.9. At the same time, the expectations index came in at 106.1 versus 104.5 in the prior month.

U.S. Economic Reports

The Conference Board is scheduled to release its consumer confidence index for October at 10 am ET. The consensus estimate calls for a reading of 101, down from 104.1 in September.

The consumer confidence index for September unexpectedly rose to a post-recession high of 104.1 in September from a revised 101.8 in August. Economists had expected the index to drop to 98.8. The assessment of the labor market was upbeat. The present situation index climbed 3.2 points to 128.5, and the expectations index rose to 87.8 from 86.1.

Also at 10 am ET, the Richmond Federal Reserve is due to release its regional manufacturing index for October. In September, the index was at -8.

The Treasury Department is set to announce the results of its auction of 2-year notes at 1 pm ET.

Atlanta Federal Reserve Bank President Dennis Lockhart will give a speech to the Opportunity Finance Network in Atlanta at 1:20 pm ET.

Stocks in Focus

3M (MMM) reported better than expected third quarter results. DuPont (DD) also reported better than expected quarterly results and raised its full-year earnings guidance.

Construction equipment manufacturer Caterpillar (CAT) reported third quarter earnings that exceeded analyst estimates but on weaker than expected revenues. The company also cut its full-year forecast.

Visa (V) reported upbeat earnings and revenues for its third quarter, as total payment volumes increased.

Rambus (RMBS) reported third quarter adjusted earnings that exceeded estimates.

Swift Transportation (SWFT) reported better than expected third quarter earnings per share, but its revenues were shy of estimates. The company’s full year adjusted earnings per share guidance was in line.

Crane (CR) reported better than expected third quarter results and guided full year earnings per share in line.

Everest Re (RE) reported above-consensus operating profit per share for its third quarter.

Sonic’s (SONC) fourth quarter adjusted earnings per share trumped estimates, but its revenues missed estimates. The company’s 2017 adjusted earnings per share view was negative.

Akamai Technologies (AKAM), Apple (AAPL), Capital One Financial (COF), Chipotle Mexican Grill (CMG), Discover Financial Services (DFS), Express Scripts (ESRX), Juniper Networks (JNPR), Pandora Media (P) and Unisys (UIS) are among the companies due to release their quarterly results after the close of trading.
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