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Beyond the Numbers

Markets Exemplify Caution Ahead of Yellen Speech
8/22/2014 9:03 AM

The major U.S. index futures are pointing to a roughly flat opening on Friday, with sentiment reflecting apprehensions, especially after the recent market run up. With things largely quite on the economic front, the markets get to digest some corporate news released after the close of trading yesterday. Forward guidance of most companies has been lackluster, which underlines the fears concerning the evolving economic outlook. Traders may also closely sift through Fed Chair Janet Yellen’s speech on the labor market at Jackson Hole to gauge the central bank’s stance on interest rates.

U.S. stocks added to their gains on Thursday on the heels of largely upbeat economic data. The major averages opened higher and the Dow Industrials and the S&P 500 Index held above the unchanged line throughout the session before closing in positive territory, with the S&P 500 Index closing at a fresh record high The Dow Industrials ended up 60.36 points or 0.36 percent at 17,040 and the S&P 500 Index closed 5.86 points or 0.29 percent higher at 1,992.

Meanwhile, the Nasdaq Composite recovered from an early move to the downside but continued to trade with apprehension. The index moved decisively into positive territory by the mid-session before closing up 5.62 points or 0.12 percent at 4,532.

Twenty-five of the thirty Dow components closed higher, led by Intel (INTC), JP Morgan Chase (JPM) and Johnson & Johnson (JNJ). On the other hand, Merck (MRK) declined sharply.

Financial stocks gained ground, while airline, gold and biotechnology stocks declined.

On the economic front, the Labor Department reported jobless claims fell to 298,000 in the week ended August 16th from 312,000 in the previous week. However, the four-week average rose to 301,000 from 296,000. Continuing claims calculated with a week’s lag declined by 49,000 to 2.50 million in the week ended August 9th.

The Philadelphia Federal Reserve’s manufacturing survey showed that activity in the region accelerated. The diffusion index of manufacturing activity rose 4 points to 28 in August, reaching the best level since March 2011. The new orders index jumped to 34.2, while the order backlogs index slipped 13 points to -4.1, the weakest since December. The employment index slid 3 points. On a positive note, the 6-month outlook index rose to 66.4 from 58.1.

The National Association of Realtors reported that existing home sales rose 2.4 percent month-over-month in July to a seasonally adjusted annual rate of 5.15 million units, the best level since September 2013. Sales rose in the South, West and the Midwest, while sales were unchanged in the Northeast. The median price of an existing home was up 4.9 percent year-over-year to $222,900 in July. Inventories measured in terms of months of supply were unchanged at 5.5 months.

The Conference Board’s leading economic indicators index for the U.S. rose 0.9 percent month-over-month in July following a 0.6 percent increase in June. Building permits, financial markets and labor market conditions supported the upside, while business spending indicators remained soft. The coincident indicators index and the lagging indicators index were both up 0.2 percent.

Commodity, Currency Markets

Crude oil futures are slipping $0.34 to $93.62 a barrel after climbing $0.51 to $93.96 a barrel on Thursday. Meanwhile, gold futures are rising $4 to $1,279.40 an ounce. In the previous session, gold slumped $19.80 to $1,275.40 an ounce.
Among currencies, the U.S. dollar is trading at 103.76 yen compared to the 103.85 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3270 compared to yesterday’s $1.3281.

Asia

The Asian markets ended mixed, with the Japanese, Malaysian and Indonesian markets retreating, while the rest of the major markets in the region ended higher, led by the Taiwanese market, where the Weighted Average Index rallied 1.37 percent. Risk appetite emerged following the release of some upbeat U.S. economic data overnight.

The Nikkei 225 average, which hovered mostly above the unchanged line till late afternoon trading, retreated thereafter, ending the session down 47.01 points or 0.30 percent at 15,539. Mining, pharma, utility, banking and real estate stocks gained ground, while most export stocks retreated.

Australia’s All Ordinaries hovered above the unchanged line throughout the session before closing up 6.50 points or 0.12 percent at 5,641. Financial, energy and consumer stocks gained ground, while material, telecom, utility and healthcare stocks moved to the downside.

Hong Kong’s Hang Seng Index ended at 25,112, up 118.13 points or 0.47 percent, and China’s Shanghai Composite Index closed 10.35 points or 0.46 percent higher at 2,241.

Europe

After opening lower, European stocks are seeing some volatility and are currently trading lower ahead of the second day of the Jackson Hole symposium.

In corporate news, the London Stock Exchange said it will raise 938 million pounds through a rights offering. The company also reported higher pre-tax profits for its first quarter.

U.S. Economic Reports

Federal Reserve Chair Janet Yellen is scheduled to speak on the labor market in Jackson Hole, Wyoming, at 10 am ET.

Stocks in Focus

Aeropostale (ARO) reported a second quarter loss and forecast a wider than expected third quarter loss. However, second quarter sales were ahead of expectations.

Gap (GPS) reported second quarter earnings and revenues that were ahead of estimates and raised its earnings guidance for the full year. The company also announced plans to enter India through a franchise arrangement.

Home Depot (HD) announced the appointment of Craig Menear as its CEO and president, effective November 1, 2014, as incumbent CEO Frank Blake transitions to the role of Chairman.

In the tech space, Marvell (MRVL) reported better than expected second quarter earnings and in line revenues, while its third quarter guidance was weak.

Salesforce.com’s (CRM) second quarter results were ahead of expectations and the company raised its full year guidance. Mentor Graphics’ (MENT) also reported better than expected second quarter results, while the company’s third quarter and full year guidance was weak.

ScanSource (SCSC) reported above-consensus results for its fourth quarter but issued below consensus adjusted earnings guidance for the first quarter. GameStop (GME) reported better than expected second quarter results and maintained its full year earnings guidance. Brocade Communications’ (BRCD) third quarter results exceeded estimates.

Williams (WMB) announced a 32 percent increase in its quarterly dividend to 56 cents per share.

Tuesday Morning (TUE) reported a loss for its fourth quarter that narrowed from the year-ago period. However, the loss was wider than expected and the company’s revenues also trailed expectations.

Intuit (INTU) unexpectedly reported a fourth quarter loss on an adjusted basis but its revenues exceeded estimates. The company’s first quarter and full year guidance was weak.



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