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Beyond the Number

Upbeat Earnings News May Lead To Strength On Wall Street
11/21/2017 8:50 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks poised to add to the modest gains posted in the previous session.

The upward momentum for the markets comes on the heels of upbeat quarterly earnings news from some well-known companies.

Nonetheless, overall trading activity may remain somewhat subdued as many traders are away from their desks ahead of the Thanksgiving Day holiday on Thursday.

Following the mixed performance seen last week, stocks saw modest strength during trading on Monday. Buying interest was somewhat subdued, however, limiting the upside for the major averages.

The major averages all closed in positive territory. The Dow climbed 72.09 points or 0.3 percent to 23,430.33, the Nasdaq edged up 7.92 points or 0.1 percent to 6,790.71 and the S&P 500 inched up 3.29 points or 0.1 percent to 2,582.14.

News on the merger-and-acquisition may have generated some positive sentiment, with chipmaker Marvell Technology (MRVL) reaching an agreement to acquire Cavium (CAVM) for about $6 billion.

The Conference Board also released a report showing a much bigger than expected jump by its index of leading U.S. economic indicators in the month of October.

The report said the leading economic index surged up by 1.2 percent in October after inching up by a revised 0.1 percent in September.

Economists had expected the index to climb by 0.6 percent compared to the 0.2 percent drop originally reported for the previous month.

"The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at the Conference Board.

Nonetheless, traders seemed reluctant to make more significant moves amid continued uncertainty about U.S. tax reform and news of political instability in Germany.

The upcoming Thanksgiving Day holiday on Thursday is also likely to keep some traders away from their desks, leading to light trading throughout the week.

Electronic storage stocks showed a significant move to the upside over the course of the session, driving the NYSE Arca Disk Drive Index up by 1.8 percent. With the advance, the index reached its best closing level in over two years.

NetApp (NTAP) and Micron Technology (MU) turned in two of the storage sector's best performances, jumping by 3.4 percent and 3.2 percent.

Considerable strength was also visible among networking stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Networking Index. The index reached its best closing level in over sixteen years.

Semiconductor and brokerage stocks also saw notable strength on the day, while gold, natural gas, and biotechnology stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are inching up $0.08 to $56.50 a barrel after falling $0.46 to $56.09 a barrel on Monday. Meanwhile, after plunging $21.20 to $1,275.30 an ounce in the previous session, gold futures are rising $2.40 to $1,277.70 an ounce.

On the currency front, the U.S. dollar is trading at 112.52 yen compared to the 112.62 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued $1.1723 compared to yesterday’s $1.1733.

Asia

Asian stocks finished broadly higher on Tuesday as overnight gains on Wall Street and solid economic data from Germany and the U.S. helped investors shrug off renewed worries over political uncertainty in Germany.

China's Shanghai Composite Index climbed 18.69 points or 0.6 percent to finish at 3,411.09, while Hong Kong's Hang Seng Index surged up 557.76 points or 1.9 percent to 29,818.07.

Japanese shares rose notably as the greenback remained supported by higher U.S. bond yields. The Nikkei 225 Index advanced 154.72 points or 0.7 percent to 22,416.48, and the broader Topix closed 0.7 percent higher at 1,771.13.

Automakers posted broad-based gains, with Honda Motor rising 0.7 percent and Toyota Motor ending up 1.4 percent. Robot maker Fanuc advanced 1.8 percent and lender Mitsubishi UFJ Financial gained 1.2 percent.

Defense equipment maker Ishikawa Seisakusho jumped 9.3 percent and Howa Machinery soared 17.4 percent after U.S. President Donald Trump named North Korea a state sponsor of terrorism.

Australian shares eked out modest gains as a stronger showing in Chinese steel futures helped lift miners and rising bond yields supported financials.

The benchmark S&P/ASX 200 Index rose 17.85 points or 0.30 percent to 5,963.52, while the broader All Ordinaries Index finished up 16.20 points or 0.3 percent at 6,044.20.

ANZ, Westpac, BHP Billiton and Rio Tinto rose between 0.2 percent and 0.4 percent. Crown Resorts gained 1.2 percent after announcing changes to its leadership team.

Meanwhile, GrainCorp lost nearly 5 percent after the company warned that fiscal 2018 will be a challenging year for its grains business.

Australia's consumer confidence strengthened during the week ended November 19th to the highest level in sixteen weeks, a weekly survey compiled by ANZ Bank and Roy Morgan Research showed today.

Separately, minutes of the Reserve Bank's November meeting showed that policymakers remained concerned about slow wage growth and inflation.

Europe

European stocks have moved to the upside despite German political uncertainty and ahead of the release of minutes from the latest Fed and ECB meetings later this week.

The euro steadied somewhat after German Chancellor Angela Merkel said she would prefer a new election to ruling with a minority.

While the U.K.’s FTSE 100 Index has risen by 0.3 percent, the French CAC 40 Index and the German DAX Index are up by 0.7 percent and 0.9 percent, respectively.

Italy's biggest utility Enel has risen after it unveiled plans to invest 24.6 billion euros in capital spending over the next three years.

EasyJet shares have also soared after the airline reported a 17 percent drop in full-year pre-tax profits but said its revenue trends for the first quarter are encouraging.

Meanwhile, home improvement retailer Kingfisher has fallen after reporting a small drop in third quarter sales.

Johnson Matthey has also moved to the downside and Melrose has slumped on disappointing earnings updates.

U.S. Economic Reports

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of October.

Existing home sales are expected to rise to an annual rate of 5.43 million in October after climbing by 0.7 percent to a rate of 5.39 million in September.

Outgoing Federal Reserve Chair Janet Yellen is scheduled to participate in a moderated discussion with British economist Mervyn King in New York at 6 pm ET.

Stocks In Focus

Shares of Medtronic (MDT) are moving to the upside in pre-market trading after the medical device maker reported fiscal second quarter results that beat analyst estimates on both the top and bottom lines.

Cybersecurity services company Palo Alto Networks (PANW) is also likely to see early strength after reporting better than expected fiscal first quarter results and raising its full-year outlook.

Shares of Hormel Foods (HRL) may also move higher after the food company reported fiscal fourth quarter results that exceeded analyst estimates.

On the other hand, shares of DSW (DSW) are moving sharply lower in pre-market trading after the shoe retailer reported weaker than expected third quarter results.

Soup maker Campbell Soup (CPB) is also likely to come under pressure after reporting fiscal first quarter results that came in below estimates and lowering its full-year earnings outlook.

Shares of Lowe’s (LOW) are also moving to the downside in pre-market trading even though the home improvement retailer reported third quarter earnings and revenues that beat estimates.
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