Market Analysis

Beyond the Numbers

Markets May Attempt to Consolidate Amid Mixed Catalysts
4/17/2014 9:20 AM

The major U.S. index futures are pointing to a slightly higher opening on Thursday, with sentiment reflecting some optimism among traders following the release of encouraging jobless claims data that showed a smaller than expected increase in claims. While tech earnings of the day have been disappointing, earnings from financial and some other blue chip companies have been encouraging. Although the markets could attempt to hold their ground in the wake of the mixed catalysts, some degree of pullback is likely going into the extended weekend.

U.S. stocks rose for the third straight day on Wednesday amid the release of positive tech earnings and mixed economic numbers. Federal Reserve Chair Janet Yellen’s promise of a stimulatory environment also lent support to the markets. The major averages opened higher but gave back some of their gains by late morning trading. Thereafter, the averages advanced steadily before closing notably higher.

The Dow Industrials ended up 162.29 points or 1 percent at 16,425 and the S&P 600 Index added 19.33 points or 1.05 percent before closing at 1,862, while the Nasdaq Composite Index ended at 4,086, up 52.06 points or 1.29 percent.

Twenty-six of the thirty Dow components closed higher and one stock ended unchanged, while the remaining three stocks declined. 3M (MMM), Visa (V), United Technologies (UTX), Microsoft (MSFT), Disney (DIS), Goldman Sachs (GS) and American Express (AXP) ended notably higher, while UnitedHealth (UNH) retreated sharply a day ahead of its quarterly results.

Brokerage, transportation, biotechnology, basic material, oil, retail, housing and computer hardware stocks were among the best performers of the session, while gold stocks retreated sharply.

On the economic front, the Commerce Department reported that housing starts came in at a seasonally adjusted annual rate of 946,000 in March compared to 920,000 in February. Single-family starts rebounded to 635,000, up 6 percent, while multi-family starts eased to 311,000. Meanwhile, building permits, considered an indicator of future housing activity, slid to 990,000 in March from 1.014 billion in February. Both housing start and building permits came in below expectations.

Meanwhile, the Federal Reserve reported that industrial production rose 0.7 percent month-over-month in March, ahead of expectations. Manufacturing output, accounting for roughly 75 percent of the total production, climbed 0.5 percent, mining output was up 1.5 percent and utility output rose 1 percent. Production of consumer goods moved up 0.7 percent and business equipment output advanced 0.5 percent, while vehicle and machinery output declined month-over-month.

The Dow Industrials settled close to an overhead resistance yesterday. With some of the latest earnings disappointing, some pullback is likely unless positive catalysts support the index. In that case, the index could find support around 16,372, its 21-day MA (currently at 16,329), 16,261, its 50-day MA (currently at 16,219) and its 100-day MA (currently at 16,173). On the upside, the index has resistance around 16,477, 16,530 and 16,577

Commodity, Currency Markets

Crude oil futures are adding $0.08 to $103.84 a barrel after edging up $0.01 to $103.76 a barrel on Wednesday.

The previous session lackluster performance came amid the increase in risk aversion and the release of the weekly petroleum status report, which showed that crude oil stockpiles rose by 10 million barrels to 394.1 million barrels in the week ended April 11th. Inventories remained above the average range for this time of the year.

Meanwhile, gasoline inventories slipped by 0.2 million barrels and were near the lower limit of the average range. Distillate stockpiles declined by 1.3 million barrels and were below the lower limit of the average range. Refinery capacity utilization averaged 87.5 percent over the four weeks ended March 11th compared to 86.7 percent over the four weeks ended April 4th.

Gold futures, which rose $3.20 to $1,303.50 an ounce in the previous session, are currently slipping $1.80 to $1,301.70 an ounce.

Among currencies, the U.S. dollar is trading at 102.18 yen compared to the 102.23 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3860 compared to yesterday’s $1.3816.


The major Asian markets closed mixed, as the positive sentiment generated by the positive performance on Wall Street overnight was countered by uncertainty surrounding the Ukrainian crisis and the global economy.

The Japanese market experienced volatility throughout the session before closing roughly flat, as the yen was little changed throughout the Asian session. The Nikkei 225 index moved back and forth across the unchanged line before closing down 0.15 points at 14,418. Export stocks moved mostly to the downside, while utility, food, resource, pharma, retail, construction and telecom stocks gained ground.

Australia’s All Ordinaries hovered in positive territory throughout the session, ending up 32.20 points or 0.59 percent at 5,445. The market witnessed broad based strength, with energy, consumer staple and financial stocks leading the way higher.

Hong Kong’s Hang Seng Index closed at 22,760, up 64.23 points or 0.28 percent, while China’s Shanghai Composite Index ended 6.24 points or 0.30 percent lower at 2,099.

On the economic front, the Australian Bureau of Statistics reported that new motor vehicle sales eased 0.3 percent month-over-month in March following a 0.1 percent increase in February.

A report released by Japan’s Cabinet Office showed that confidence among Japanese consumers declined to the lowest level since August 2011, with the index declining 1 point to 37.5 in March.


European markets had an insipid start following yesterday’s rally, with some disappointing domestic earnings, the Ukraine crisis and the economic uncertainty serving to keep sentiment subdued. However, with the release of some positive U.S. earnings and jobless claims data, the averages have recovered and are currently trading moderately higher.

The leaders of Ukraine, Russia, the EU and the U.S. are set to meet in Geneva later today in a bid to resolve the standoff between Russia and Ukraine.

In corporate news, German software giant SAP (SAP) reported first quarter earnings and sales that missed estimates. The company also warned of the currency impact on its second quarter earnings.

Distillers Diageo and Remy Cointreau reported disappointing results, with the former’s third quarter sales slipping, while the latter reported a decline in its full year profits. Paint manufacturer Akzo Nobel’s first quarter earnings also trailed estimates.

On the economic front, a report released by the German Federal Statistical Office showed that German producer prices fell 0.9 percent year-over-year in March, the same pace as in February but faster than the 0.7 percent drop expected by economists.

The European Automobile Manufacturers Association reported that new car sales surged up 10.6 percent year-over-year in March following an 8 percent increase in February.

U.S. Economic Reports

After reporting initial jobless claims at their lowest level in almost seven years in the previous week, the Labor Department released a report showing that claims rebounded slightly in the week ended April 12th.

The Labor Department said initial jobless claims inched up to 304,000, an increase of 2,000 from the previous week's revised level of 302,000. Economists had expected jobless claims to climb to 315,000 from the 300,000 originally reported for the previous week.

The Philadelphia Federal Reserve is due to release the results of its regional manufacturing survey at 10 am ET. The consensus estimate calls for an increase in the index to 10 in April from 9 in March.

Manufacturing activity in the Philadelphia region moved into expansion territory in March. The manufacturing index jumped to 9 in March from –6.3 in February. The new orders index rose to 5.7 from –5.2 and the shipments index jumped 16 points to 5.7. At the same time, the employment index slipped 3 points, although it remained in positive territory. The future general business activity index declined to 35.4 from 40.2.

The Treasury Department will make announcements concerning next week’s auction of 2-year, 5-year and 7-year notes at 11 am ET.

Stocks in Focus

IBM (IBM) reported first quarter non-GAAP earnings of $2.54 per share on revenues of $22.5 billion, down 4 percent. The earnings were in line, while the revenues missed estimates. For the full year, the company expects non-GAAP earnings of at least $18 per share, ahead of the $17.84 per share consensus estimate.

Honeywell’s (HON) first quarter earnings exceeded estimates, while its revenues were below estimates. The company’s 2014 guidance was lukewarm. General Electric (GE) reported better than expected earnings, while its revenues were slightly shy of estimates.

Google (GOOG) reported first quarter earnings and revenues that trailed estimates, hurt by weak advertisement prices.

SanDisk (SNDK) reported first quarter non-GAAP earnings of $1.44 per share on revenues of $1.51 billion, up 13 percent. The results exceeded estimates.

PepsiCo. (PEP) reported first quarter profit and revenues that beat estimates and the company said it is targeting mid-single digit growth in organic revenues for 2013. Goldman Sachs’s (GS) results also beat estimates. Morgan Stanley (MS) reported first quarter earnings ahead of estimates and revenues also beat estimates.

UnitedHealth (UNH) reported lower first quarter earnings that however exceeded estimates, while its revenues were slightly shy of estimates. The company’s 2014 guidance was lukewarm.

Capital One Financial (COF) reported first quarter net income of $1.96 per share on net revenues of $5.4 billion, down 3 percent. The earnings exceeded estimates, while the revenues were below estimates.

American Express (AXP) reported first quarter earnings of $1.33 per share on total revenues, net of interest expense, of $8.2 billion. The earnings beat estimates but the revenues were shy of estimates.

Sallie Mae (SLM) reported first quarter core earnings of 51 cents per share, missing the consensus estimate.

United Rentals (URI) reported first quarter adjusted earnings of 90 cents per share on revenues of $1.005 billion. The earnings exceeded estimates, while the revenues were in line. The company raised its 2014 revenue guidance, which was still below the consensus estimate.

MasterCard (MA) announced a deal to acquire Pinpoint Pty. Ltd, a provider of loyalty and rewards services to financial institutions. The deal is expected to close in the second quarter of 2014.

Noble Corp. (NE) reported fourth quarter net income of 99 cents per share on revenues of $1.3 billion. The results exceeded estimates.

Steel Dynamics (STLD) reported first quarter earnings of 17 cents per share on net sales of $1.8 million. The earnings beat estimates, while the revenues were slightly shy of estimates.

Sonoco (SON) said its board approved a 1 cent increase in its dividend to 32 cents per share.

Yahoo (YHOO) announced that the company has nominated three new members to its board, including co-founder David Filo, Charles Schwab and Lee Scot. The company’s shareholders will vote on the nominees at its annual meeting on June 25th, 2014.

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