Market Analysis

Beyond the Numbers

Solid GDP Data May Aid in Preserving Momentum
11/25/2014 9:07 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment getting a lift from the release of better than expected GDP data. The Commerce department upwardly revised third quarter growth, reflecting primarily upward adjustments to consumer spending and gross private investment. That said, the overbought levels of the markets could limit any potential upside supported by the data. The markets may also stay tuned to the Conference Board’s consumer confidence data due after the markets open. The data is dollar positive and hence may exert downward pressure on the dollar denominated commodities.

U.S. stocks managed to sustain their upward momentum amid some M&A news flow and mixed second-tier manufacturing data. The gains came despite a private service sector activity data showing an unexpected slowdown in the pace of expansion and the overbought levels of the markets.

The S&P 500 Index and the Nasdaq Composite Index hovered above the unchanged line throughout the session before closing notably higher. The former ended up 5.91 points or 0.29 percent at 2,069 and the Nasdaq Composite Index closed at 4,755, up 41.92 points or 0.89 percent. Meanwhile, the Dow Industrials moved back and forth across the unchanged line throughout the session before closing up 7.84 points or 0.04 percent at a new high of 17,818.

Fifteen of the thirty Dow components closed higher and one stock was unchanged, while the remaining fourteen stocks retreated. Boeing (BA), Disney (DIS) and Intel (INTC) rose notably in the session, while Exxon Mobil (XOM), Verizon (VZ) and AT&T (T) retreated sharply.

Among the sectors, transportation, biotechnology, semiconductor, computer hardware and finance stocks gained ground, while gold stocks came under selling pressure.

Currency, Commodity Markets

Crude oil futures are rising $0.20 to $75.98 a barrel after dipping $0.73 to $75.78 a barrel in the previous session. Meanwhile, gold futures are slipping $3.10 to $1,192.60 an ounce. On Monday, gold dipped $2 to $1,195.70 an ounce.

Among currencies, the U.S. dollar is trading at 118.15 yen compared to the 118.27 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.2416 compared to yesterday’s $1.2442.


The major Asian markets ended mixed as profit taking following yesterday’s advance mitigated the strength generated by the positive close on Wall Street yesterday. The Chinese market extended its strong advance and the Japanese market, which opened after Monday’s public holiday, ended higher despite a bounce back by the yen.

The Nikkei 225 average, the key average of the Japanese market opened higher and witnessed some volatility, although it held above the unchanged line throughout the session before closing up 50.11 points or 0.29 percent at 17,408.

Resource, construction, real estate, insurance, heavy machinery, marine transportation and financial stocks moved to the upside but export stocks saw mixed sentiment amid the yen’s strength. Utility, retail, food and telecom stocks lost ground in the session. The yen firmed up immediately following the release of the minutes of the Bank of Japan’s October 31st Monetary Policy Board meeting and gained further ground after Governor Haruhiko Kuroda said in a speech that he expects the economy to soon attain the central bank’s 2 percent inflation target.

Australia’s All Ordinaries opened lower and declined sharply in early trading. Although the average cut some of its losses by early afternoon trading, it moved roughly sideways for the rest of the session. The index ended down 28.10 points or 0.53 percent at 5,321. Energy and material stocks declined sharply, while utility, telecom, real estate, consumer staple and healthcare stocks also came under modest selling pressure.

Hong Kong’s Hang Seng Index closed at 23,844, down 49.23 points or 0.21 percent, but China’s Shanghai Composite Index ended 34.72 points or 1.37 percent higher at 2,568 and

On the economic front, the minutes released by the Bank of Japan showed that the rationale behind the measures it announced at the meeting was its thinking that additional easing is required to hit the 2 percent inflation target. At the same time, the bank felt that effect of the consumption tax hike announced in April has begun to fade.

Data released by Japanese central bank showed that an index measuring corporate service prices rose 3.6 percent year-over-year in October following a 3.5 percent increase in each of the previous two months. On a monthly basis, prices were up 0.1 percent.

An index measuring Chinese economic activity in the months ahead rose 0.9 percent month-over-month in October, according to a report released by the Conference Board. This follows a 1 percent increase in the previous month.


European stocks started the session higher after yesterday’s mixed showing. However, the averages witnessed some volatility in early trading only to advance subsequently amid the release of some corporate news and positive economic data.

In corporate news, Dutch financial giant ING announced plans to eliminate 1,700 jobs over the next three years amid its digitization drive. Towards the action, the company is set to record a pre-tax charge of 320 million euros in the fourth quarter, as it expects savings of 270 million euros from 2018. British home improvement retailer Kingfisher reported a decline in its third quarter profits, dragged lower by softness in France and adverse foreign currency impact.

On the economic front, revised estimates released by the German Federal Statistical Office showed that the German economy expanded 0.1 percent sequentially in the third quarter, in line with the previous estimate. The performance represented a rebound from the 0.1 percent drop in the second quarter. Annually, the growth slowed to 1.2 percent from 1.4 percent.

A report released by the French statistical office INSEE showed that French business confidence unexpectedly improved. The corresponding index rose a point to 99 in November, while it was expected to ease 1 point to 97.

U.S. Economic Reports

Economic activity in the U.S. unexpectedly increased by more than previously estimated in the third quarter, according to a report released by the Commerce Department.

The report said gross domestic product increased by 3.9 percent in the third quarter compared to the previously reported 3.5 percent increase. The upward revision came as a surprise to economists, who had expected the pace of GDP growth to be downwardly revised to 3.3 percent.

The Federal House Finance Agency is set to release its house price index for September at 9 am ET. Economists expect the house price index to rise by 0.4 percent month-over-month following a 0.5 percent increase in August.

Around the same time, the S&P/Case-Shiller’s house price index for September is scheduled to be released. The 20-city composite house price index is expected to have increased a seasonally adjusted 0.3 percent following a 0.1 percent drop in August. Annually, the index is estimated to have risen an unadjusted 4.7 percent following a 5.6 percent increase in August.

The Conference Board is due to release the results of its consumer confidence survey for November. The consensus estimate calls for an improvement in the index to 96.5 from 94.5 in October.

In October, the consumer confidence index for the U.S. jumped to 94.5 from 89 in September, reaching the highest reading since October 2007. The expectations index climbed to 95 from 86.4, and the present situations index edged up 0.7 points to 93.7.

The results of the Richmond Federal Reserve’s regional manufacturing survey for November due at 10 am ET is expected to show a decline in the manufacturing index to 16 from 20 in October.

The Treasury is due to release the result of the auction of its 5-year note at 1 pm ET.

Stocks in Focus

Campbell Soup (CPB) reported better than expected first quarter results and it narrowed its guidance for 2015.

Hormel Foods (HRML) reported fourth quarter earnings that missed estimates, although its revenue exceeded expectations. The company also announced a 25 percent increase in its dividend,

Tiffany’s (TIF) third quarter adjusted earnings and revenues were below estimates and its outlook was lackluster.

Chico’s FAS (CHS) reported in line third quarter results but its revenues were below estimates.

Brocade Communications (BRCD) reported fourth quarter adjusted earnings and revenues that were ahead of expectations.

Copart (CRPT) reported first quarter earnings that were ahead of estimates, while its revenues were shy of estimates.

Casey’s (CASY) announced that it would revise its financial statements for fiscal years 2012, 2013 and 2014 and the first quarter of 2015 to correct errors arising in ethanol excise tax reporting. The company said it has paid $30.4 million in taxed and $1.1 million in interest to resolve the matter and it quantified the impact on the bottom line at 4.5 cents in each of the affected quarters.

Dycom (DY) reported better than expected first quarter results and issued positive guidance for the second quarter. Nuance Communications (NUAN) also reported fourth quarter results that exceeded estimates.

Papa John’s (PZZA) announced the acquisition of Pizza Corner stores, part of the Global Franchise Architect brands, in South India, expanding its international growth.

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