Market Analysis

Beyond the Numbers

Commodity Rally a Positive Even as Earnings Woes Hurt
10/9/2015 8:50 AM

The major U.S. index futures are pointing to a higher opening on Friday, as futures shed off some early jitteriness. Commodities are firmer, with oil holding above $50-a-barrel level. However, concerns about the reporting season could act as a dampener, as Alcoa released disappointing results. Earnings worries, if intensify, could lead to profit taking, as the Dow and the S&P 500 Index trader at the highest level in more than 6 weeks.

U.S. stocks ended Thursday’s session higher, encouraged by the realization that a rate hike is not imminent. The major averages opened lower and were found mostly languishing in the red until the release of the Fed minutes at 2 pm ET. With the minutes suggesting most Fed officials favored delaying a rate increase due to global growth risks, the averages advanced sharply before consolidating their gains in the last hour of trading.

The Dow Industrials added 138.46 points or 0.82 percent before ending at 17,051 and the S&P 500 Index closed 17.60 points or 0.88 percent higher at 2,013, while the Nasdaq Composite added a more modest 19.64 points or 0.41 percent before ending at 4,811.

Twenty-four of the thirty Dow components closed higher and two stocks ended unchanged, while the remaining four declined. Caterpillar (CAT), Chevron (CVX) and Nike (NKE) were among the best performers of the session. Meanwhile, Apple (AAPL) fell 1.16 percent.

Transportation, utility, basic material, energy, housing and computer hardware stocks advanced notably in the session.

On the economic front, jobless claims fell by 13,000 to 263,000 in the week ended October 3rd from the previous week’s revised level of 276,000. Economists had expected claims to decline to 271,000. The four-week moving average fell by 3,000 to 267,500.

Meanwhile, continuing claims calculated with a week’s lag rose to 2.204 million in the week ended September 26th from 2.195 million in the week ended September 19th.

Currency, Commodity Markets

Crude oil futures are climbing $0.89 to $50.32 a barrel after surging up $1.62 to $49.43 a barrel on Thursday. An ounce of gold is currently trading at $1,151.40, up $7.10 from the previous session’s close of $1,144.30. On Thursday, gold slipped $4.40.

On the currency front, the U.S. dollar is trading at 120.33 yen compared to the 119.93 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1352 compared to yesterday’s $1.1276.


The major Asian markets advanced strongly, taking heart from the positive performance on Wall Street overnight. The rally in oil prices also supported sentiment. The South Korean and Taiwanese markets were closed for public holidays.

The Japanese market benefited from the weakness of the yen, which fell on rising risk appetite. The Nikkei 225 Index opened higher and moved roughly sideways in the morning. Beginning in early after afternoon trading, the average moved steadily higher before ending up 297.50 points or 1.64 percent at 18,439.

A majority of stocks advanced in the session, with export stocks leading the gains. On the other hand, Fast Retailing slumped 9.75 percent following the release of below-consensus results and weak guidance. Peer J Front Retailing declined over 1 percent.

Australia’s All Ordinaries Index hovered in positive territory throughout the session before ending up 67.80 points or 1.29 percent at 5,309. The market witnessed broad based strength, with energy and material stocks leading the way higher.

Hong Kong’s Hang Seng Index ended at 22,459, up 103.89 points or 0.46 percent, and China’s Shanghai Composite added 39.79 points or 1.27 percent before ending at 3,183.

On the economic front, a report released by the Australian Bureau of Statistics showed that home loans issued in Australia rose 2.9 percent in August, below forecasts for a 4.7 percent increase. The value of loans rose 6.1 percent following a 1.7 percent increase in the previous month. Meanwhile, investment lending eased 0.4 percent.


European stocks opened higher, and although the major averages gave back some of their gains, they are still trading moderately higher.

In corporate news, UTi Worldwide (UTIW) announced a deal to be acquired by Danish company DSV for $7.10 per share in cash or $1.35 billion in total.

On the economic front, the U.K. Office of National Statistics said the visible U.K. trade deficit narrowed to 11.1 billion pounds in August, while economists expected a deficit of 9.9 billion pounds. The total trade deficit narrowed to 3.3 billion pounds from 4.4 billion pounds.

Meanwhile, a separate report showed that construction output in the U.K. fell 1.3 percent year-over-year in August, while economists expected a 1.4 percent increase.

U.S. Economic Reports

Import prices in the U.S. saw a modest decrease in the month of September, according to a report released by the Labor Department, with a drop in non-fuel prices offsetting a rebound in fuel prices.

The report said import prices edged down by 0.1 percent in September after tumbling by a revised 1.6 percent in August. Economists had expected import prices to fall by 0.4 percent.

Additionally, the Labor Department said export prices dropped by 0.7 percent in September after slumping 1.4 percent in the previous month. Export prices had expected to dip by 0.2 percent.

Atlanta Federal Reserve President Dennis Lockhart is due to deliver a speech in New York at 9:15 am ET. At 1:30 pm ET, Chicago Fed President Charles Evans will speak on monetary policy in Milwaukee.

The Commerce Department is set to release its wholesale inventories data at 10 am ET. The consensus estimate calls for a 0.1 percent increase in wholesale inventories at the end of August.

Wholesale inventories edged down 0.1 percent month-over-month in July, belying expectations for a 0.3 percent increase. This followed a downwardly revised 0.7 percent increase in June. Wholesale sales fell 0.3 percent. Annually, wholesale inventories were 4.9 percent higher compared to a 4.2 percent drop in sales. The wholesale inventories to sales ratio came in at 1.30 in July compared to 1.19 a year ago.

Stocks in Focus


Alcoa (AA) reported third quarter adjusted earnings of 7 cents per share on revenues of $5.6 billion, down 11 percent year-over-year. The results trailed expectations.

AngioDynamics (ANGO) reported in line first quarter adjusted earnings, while its revenues missed expectations. The company’s reiterated its 2016 guidance.

Ruby Tuesday (RT) reported an unexpected loss for the first quarter, while its revenues exceeded estimates.

Helen of Troy (HELE) reported better than expected second quarter results and raised the low end of its guidance range for 2016.

Other Corporate News

Gap (GPS) reported a 1 percent decline in net sales growth for September, citing a challenging month. Comparable store sales were also down 1 percent year-over-year compared to a flat performance in the year-ago period.

PC makers will be in the spotlight after Gartner reported that worldwide PC shipments fell 7.7 percent year-over-year to 73.7 million units in the third quarter. Desktop as well as notebook PCs and premium ultramobile shipments declined.

Lenovo’s share of the PC market rose to 20.3 percent from 19.6 percent, although shipments fell 4 percent. Hewlett-Packard (HPQ) commanded 18.5 percent of the market, up from 17.8 percent in the year-ago period. HP also saw its shipments fall by 4 percent. Shipments of Dell and Apple (AAPL) rose 0.5 percent and 1.5 percent, respectively. Their respective market share was 13.8 percent and 7.6 percent.

St. Jude (STJ) announced the completion of its previously announced acquisition of Thoratec Corp., a provider of mechanical circulatory support technology for the treatment of advanced heart failure.

PolyOne (POL) announced a 20 percent increase in its quarterly dividend to 12 cents per share.

United Airlines (UAL) reported that its consolidated traffic and capacity rose 1.4 percent year-over-year each in September. Load factor was unchanged.
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