Market Analysis

Beyond the Numbers

Profit Taking May Lead To Pullback On Wall Street
9/23/2016 8:59 AM

The major U.S. index futures are pointing to a slightly lower opening on Friday following the strong upward move seen over the two previous sessions. Profit taking may weigh on the markets, as traders cash in on the recent gains. Trading activity may be somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

U.S. stocks advanced for the third straight session on Thursday amid the release of some domestic economic data, an extension of the commodity rally and a lingering positive reaction to Wednesday’s Fed decision.

The major averages opened higher and moved roughly sideways in a broad range. Although there was a loss of momentum in late afternoon trading, renewed buying lifted the averages yet again, leading to a positive close.

The Dow Industrials added 98.76 points or 0.54 percent before ending at 18,393, the S&P 500 Index closed 14.06 points or 0.65 percent higher at 2,177 and the Nasdaq Composite closed at a new record closing high of 5,340, up 44.34 points or 0.84 percent.

Twenty-eight of the thirty Dow components ended the session higher, while only two stocks declined. Procter & Gamble (PG), Disney (DIS), United Technologies (UTX), Coca-Cola (KO), Boeing (BA), Cisco Systems (CSCO), Apple (AAPL) and Verizon (VZ) were among the biggest gainers of the session.

Among the sectors, housing and oil service stocks advanced notably, but gold stocks gave back some ground.

On the economic front, the Labor Department reported that jobless claims fell to 252,000 in the week ended September 17th from 260,000 in the previous week. Economists had expected an uptick in claims to 262,000. The four-week average fell to 258,500 from 260,750. Continuing claims calculated with a week’s lag were down 36,000 to 2.113 million.

A report released by the National Association of Realtors showed that existing home sales came in at a seasonally adjusted annual rate of 5.33 million units in August, down from the downwardly revised 5.38 million-unit rate for July. Economists expected sales to have come in at a 5.44 million unit-rate compared to the 5.39 million-unit rate initially reported for July.

Single-family home sales fell 2.3 percent, but condominium sales jumped 10.5 percent. Existing home inventories measured in absolute terms fell to 2.04 million units from 2.11 million units, with the months of supply at 4.6 months. The median price of an existing home fell 1.3 percent month-over-month to $240,200, rendering the annual rate to 5.1 percent.

The Federal Housing Finance Agency said its house price index climbed a seasonally adjusted 0.5 percent month-over-month in July, ahead of the 0.4 percent growth expected by economists. The annual rate of growth accelerated to 5.8 percent from a revised 5.7 percent.

The Conference Board reported that its leading economic indicators fell 0.2 percent month-over-month in August, while economists expected a 0.1 percent increase. The July growth was upwardly revised to 0.5 percent from 0.4 percent. Six of the 10 components making up the index served as drags, while the interest rate spread continued to positively influence the index.

The Chicago Federal Reserve’s national activity index unexpectedly fell to -0.55 in August from 0.24 in July, suggesting a contraction in activity. Meanwhile, the Kansas City Federal Reserve’s regional manufacturing index improved to 6 in September from -4 in August.

Commodity, Currency Markets

Crude oil futures for November delivery are slipping $0.11 to $46.21 barrel after climbing $0.98 to $46.32 a barrel on Thursday, marking the fourth straight session of gains that lifted futures to the highest level since September 8th.

Gold futures are currently trading at $1,343.80 an ounce, down $0.90 from the previous session’s close of $1,344.70 an ounce. On Thursday, gold rallied $13.30.

On the currency front, the U.S. dollar is trading at 100.79 yen compared to the 100.76 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1220 compared to yesterday’s $1.1208.


The major Asian markets went about in a lackluster manner before ending mixed as the central-bank induced din died down. The Japanese, Chinese, Shanghai, Hang Seng and Indian markets ended lower, while the rest of the markets posted gains.

With the yen remaining close to its recent lows, the Japanese market experienced some profit taking, as it re-opened after yesterday’s public holiday. The Nikkei 225 Index languished below the unchanged line throughout the session before ending down 53.60 points or 0.32 percent at 16,754.

Retail, export, financial, real estate, telecom and chemical stocks moved to the downside. However, housing, refining, utility and pharma stocks ended mostly higher. Food stocks saw mixed sentiment.

Australia’s All Ordinaries Index rose steadily after showing tentativeness in early trading. The index closed 52.30 points or 0.96 percent higher at a 3-week high of 5,519, rising for the fourth straight session.

The market witnessed an across-the-board rally, with telecom, real estate and healthcare stocks among the standout performers.

Hong Kong’s Hang Seng Index ended at 23,687, down 73.32 points or 0.31 percent, and China’s Shanghai Composite Index closed 8.42 points or 0.28 percent lower at 3,034.

On the economic front, provisional results released by Markit showed that the Japanese manufacturing sector returned to expansion, with a PMI score of 49.2 in September compared to 49.5 in August.

Meanwhile, all industry activity grew at a slower pace in July, the Ministry of Economy, Trade and Industry said. The all industry activity index rose 0.3 percent month-over-month in July following June's 1 percent increase. Nonetheless, this was the second consecutive increase in activity and better than the expected 0.2 percent growth.


European stocks are seeing weakness on profit taking after gains in recent sessions, with oil’s weakness and weak private sector activity data weighing on stocks.

On the economic front, the eurozone private sector grew at the slowest pace in 20 months in September, flash data from Markit showed. The flash composite output index slid to 52.6 in September from 52.9 in August. Economists had expected the reading to fall marginally to 52.8. The factory PMI improved to 52.6 from 51.7 in August, while it was expected to fall to 51.5.

Meanwhile, the services PMI dropped to 52.1 from 52.8 in the prior month. This was the lowest in 21 months. The index was forecast to remain unchanged at 52.8.

French statistical office INSEE downwardly revised its second quarter GDP estimate for France to show a 0.1% drop following a 0.7 percent increase in the first quarter. The preliminary estimate showed no growth for the second quarter.

U.S. Economic Reports

Markit is set to release its flash U.S. manufacturing PMI for September at 9:45 am ET. Economists expect the index to edge down to 52 from 52.1 in August.

Philadelphia's Patrick Harker will deliver prepared remarks about the role of Fed in the community in Philadelphia at 12 pm ET.

Regional Fed presidents Harker, Atlanta's Dennis Lockhart and Cleveland's Loretta Mester will speak on a panel about the role of Fed in the community in Philadelphia at 12:20 pm ET.

Dallas Fed President Robert Kaplan will participate in a moderated Q&A session at the Texas Oil & Gas Association Lone Star Energy Forum followed by a Q&A with media in Houston. The event is scheduled for 12:30 pm ET.

Stocks in Focus

Athletic footwear and apparel retailer Finish Line (FINL) is moving higher in pre-market trading after reporting second quarter earnings that met analyst estimates on better than expected sales.

Novatel Wireless (MIFI) may also see early strength after announcing an agreement to sell its mobile broadband business to Hong Kong-based T.C.L. Industries Holdings for $50 million.

Meanwhile, shares of Facebook (FB) may move to the downside after a report from the Wall Street Journal said the social media giant overestimated average viewing time for its video ads for two years.

AAR Corp. (AIR) reported better than expected first quarter adjusted earnings per share from continuing operations and revenues.

Sarepta Therapeutics (SRPT) said it is pricing its underwritten public offering of 5.02 million shares at $59.75 per share, below Thursday’s closing price of $60.97.
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