Market Analysis

Beyond the Numbers

Momentum May Ebb Amid Mixed Earnings, Ebola Scare
10/24/2014 9:13 AM

The major U.S. index futures are pointing to a lower opening on Friday, with sentiment suggesting that some of yesterday’s momentum may ebb. Worries about a probable spread of ebola in the U.S. following reports of a U.S. physician in New York contracting the disease and mixed earnings could deter traders from building on their positions. The U.S. dollar is lower across the board, boosting prices of commodities. The new home sales due to be released shortly after the market open may also impact sentiment.

U.S. stocks advanced solidly on Thursday, helped by some positive earnings and economic data. The major averages opened higher advanced steadily until early afternoon trading, After moving sideways until late afternoon trading, the averages legged down slightly and then moved sideways for the rest of the session.

The Dow Industrials added 216.58 points or 1.32 percent before closing at 16,678, the S&P 500 Index advanced 23.71 points or 1.23 percent before closing at 1,951 and the Nasdaq Composite Index closed at 4,453, up 69.95 points or 1.60 percent.

Twenty-six of the thirty Dow components closed higher, led by Caterpillar (CAT), American Express (AXP), Chevron (CVX), Goldman Sachs (GS), 3M Co. (MMM), Merck (MRK), United Technologies (UTX) and Visa (V). On the other hand, AT&T (T) and Procter & Gamble (PG) moved to the downside.

Transportation, energy, retail, housing, semiconductor, computer hardware and financial stocks advanced strongly in the session.

On the economic front, the Labor Department reported that jobless claims rose to 283,000 in the week ended October 18th from 266,000 in the previous week. Nevertheless, the four-week average fell to 281,000 from 284,000. Continuing claims calculated with a week’s lag fell by 38,000 to 2.351 million in the week ended October 11th, marking the lowest level since 2000.

The Federal House Finance Agency released its house price index for August, which rose 0.5 percent month-over-month, ahead of the 0.3 percent increase forecast by economists.

Markit’s preliminary survey showed that the pace of expansions of the manufacturing activity in the U.S. slowed down more than expected in October. The manufacturing purchasing managers’ index fell to 56.2 in November from 57.9 in September.

Currency, Commodity Markets

Crude oil futures are slipping $1.03 to $81.06 a barrel after rising by $1.57 to $82.09 a barrel on Thursday. An ounce of gold is currently trading at $1,231.90, up $2.8 0 from the previous session’s close of $1,229.10. On Thursday, gold fell $6.20.

Among currencies, the U.S. dollar is trading at 108.04 yen compared to the 108.27 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2678 compared to yesterday’s $1.2646.


The major Asian markets ended mixed once again, with the Australian, Malaysian, Japanese and New Zealand markets ending higher, while the rest of the markets retreated. Although the positive close on Wall Street overnight offered encouragement to traders, worries concerning the global economic momentum remained.

The Japanese market advanced, as the yen turned lower on the resurgence of risk appetite. The Nikkei 225 average opened higher but gave a small portion of its gains in early trading. Thereafter, the index moved sideways before closing up 152.68 points or 1.01 percent at 15,292. Toho Zinc, Takara Holdings and Sumco were among the biggest gainers of the session.

Australia’s All Ordinaries hovered above the unchanged line throughout the session before closing up 29.40 points or 0.55 percent at 5,399. The market witnessed broad based strength, with IT, consumer discretionary, financial, healthcare and industrial stocks leading the gains.

Despite staying above the unchanged line for much of the session, China’s Shanghai Composite Index ended down 0.14 points or 0.01 percent at 2,302. Hong Kong’s Hang Seng closed at 23,302, down 20.98 points or 0.13 percent.

Among the economic data, house prices fell in almost in all Chinese cities, according to a report released by China’s National Bureau of Statistics. House prices were down in 69 of the 70 cities surveyed in September compared to the previous month.

The Conference Board’s leading economic indicators index for China rose 0.9 percent month-over-month in September following a 0.7 percent increase in August. The coincident index advanced 0.5 percent in September following the flat reading in August.


After opening notably lower, European stocks have trimmed some of their losses and are yet lower by late afternoon trading. The market mood reflected reaction to economic data on German consumer sentiment and the U.K. third quarter GDP, noteworthy earnings and reports of an ebola incidence in New York.

In corporate news, Sweden’s Volvo reported better than expected third quarter earnings, while the company also said it will expand its cost reduction program. Ericsson’s (ERIC) third quarter revenues came in ahead of estimates by most analysts, while higher costs dented its margins. Air Liquide reported higher sales for its third quarter and reaffirmed its outlook for the full year. Meanwhile, German chemical company BASF reported a drop in its second quarter profits and lowered its 2015 earnings guidance.

On the economic front, the Gfk group released the results of its forward looking consumer confidence survey, which showed that consumer climate improved slightly. The consumer confidence index is set to rise 0.1 points to 8.5 in November.

Advance estimates released by the U.K. Office for National Statistics showed that U.K. GDP rose 0.7 percent sequentially and 3 percent year-over-year in the third quarter. The growth was in line with estimates.

U.S. Economic Reports

The Commerce Department is scheduled to release its new home sales report for September at 10 am ET. Economists expect new home sales of 460,000 for the month compared to 504,000 in the previous month.

New home sales jumped to a seasonally adjusted annual rate of 504,000 in August from 427,000 in July, reaching the best level since May 2008. New home sales in the West rose notably, while the South and the Northeast also saw gains. Inventories as measured in terms of months of supply fell to 4.8 months in August from 5.6 in July. The median price of a new home rose 8 percent year-over-year.

Stocks in Focus

Microsoft’s (MSFT) first quarter results beat expectations. Meanwhile, (AMZN) reported third quarter results that trailed expectations and issued below consensus revenue guidance for its fourth quarter.

KLA-Tencor (KLAC) reported better than expected first quarter results and announced a $2.75 billion cash dividend and an expanded share repurchase program.

Verisign (VRSN) reported better than expected revenues and earnings for its third quarter.

Ingram Micro’s (IM) third quarter adjusted earnings were in line with estimates, while its revenues bettered expectations. The company issued upbeat guidance for its fourth quarter.

Maxim Integrated (MXIM) reported second quarter earnings that were above estimates, while its revenues trailed expectations. The company’s second quarter guidance was weak.

NETGEAR’s (NTGR) third quarter earnings were below estimates, while its revenues exceeded expectations. The company’s fourth quarter revenue guidance was weak.

Lattice Semiconductor (LSCC) reported better than expected earnings, while its revenues trailed expectations. The company’s fourth quarter revenue guidance was weak.

Synaptics (SYNA) reported first quarter results that trailed estimates. The company’s second quarter revenue guidance was in line.

Juniper Network’s (JNPR) third quarter earnings were ahead of estimates and its revenues were in line. The company’s fourth quarter was weak.

Procter & Gamble (PG) reported first quarter core earnings per share that met estimates, while its sales missed expectations. The company also announced plant to exit its Duracell battery business and spin it off as a stand alone company.

Bristol-Myers Squibb (BMY) reported better than expected third quarter results and confirmed its guidance, which was in line.

Micron Technology (MU) recommended that its shareholders reject the unsolicited mini-tender offer by TRC Capital to purchase up to 4 million shares at $27 per share.

Digital River (DRIV) announced a deal to be bought by an investor group led by Siris Capital for about $840 million or $24 per share in cash.

Compuware (CPWR) reported better than expected second quarter results.

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