Market Analysis

Beyond the Numbers

Fed Announcement In Focus On Wall Street
7/24/2017 8:57 AM

The major U.S. index futures are pointing to a roughly flat opening on Monday following the mixed performance seen last week.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement.

Following the lackluster performance seen on Thursday, stocks saw modest weakness during trading on Friday. Selling pressure was somewhat subdued, however, limiting the downside for the major averages.

The major averages ended the day slightly lower but well off their worst levels. The Dow dipped 31.71 points or 0.2 percent to 21,580.07, the Nasdaq slipped 2.25 points or less than a tenth of a percent to 6,387.75 and the S&P 500 edged down 0.91 points or less than a tenth of a percent to 2,472.54.

For the week, the major averages turned in a mixed performance. The Dow fell by 0.3 percent, while the Nasdaq surged up by 1.2 percent and the S&P 500 climbed by 0.5 percent.

A negative reaction to earnings news from some big-name companies weighed on Wall Street, with shares of General Electric (GE) showing a notable decline.

GE slumped by 2.9 percent after the conglomerate reported better than expected second quarter earnings but warned of full-year profits at the low end of its forecasts.

Shares of Microsoft (MSFT) also moved lower on the day even though the software giant reported fiscal fourth quarter results that exceeded forecasts.

On the other hand, credit card giant Visa (V) posted a strong gain after reporting fiscal third quarter results that beat estimates on both the top and bottom lines.

Shares of Capital One (COF) moved sharply higher after the lender and credit card issuer reported better than expected second quarter results.

Overall trading activity was somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

Uncertainty about the near-term outlook for the markets also contributed to the choppy trading following the recent move to record highs by the major averages.

Most of the major sectors showed only modest moves on the day, although considerable weakness was visible among oil service stocks.

Reflecting the weakness in the sector, the Philadelphia Oil Service Index tumbled by 2.3 percent. The slump by oil service stocks came amid a steep drop by the price of crude oil.

Steel stocks also saw significant weakness, resulting in a 1.3 percent drop by the NYSE Arca Steel Index. The index pulled back further off the four-month closing high set on Wednesday.

Electronic storage, semiconductor, and banking stocks also moved to the downside on the day, while some strength was visible among housing, utilities, and gold stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.21 to $45.98 a barrel after slumping $1.15 to $45.77 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,257.90, up $3 from the previous session’s close of $1,254.90. On Friday, gold jumped $9.40.

On the currency front, the U.S. dollar is trading at 110.81 yen compared to the 111.13 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1653 compared to last Friday’s $1.1663.


Asian stocks ended mixed on Monday, with a firmer yen, Friday's oil sell-off and U.S. political concerns weighing on the markets.

Investors also awaited the outcome of U.S. Federal Reserve's monetary policy meeting for more clues on interest rate hikes this year.

Oil prices were slightly higher in Asian trading ahead of the joint OPEC and non-OPEC ministerial meeting later in the day to discuss the issue of rising output in Nigeria and Libya.

China's Shanghai Composite Index rose 12.51 points or 0.4 percent at 3,250.49 after the International Monetary Fund kept its growth forecasts for the world economy unchanged for this year and next but slightly revised up growth expectations for the eurozone and China.

Hong Kong's Hang Seng Index climbed 140.74 or 0.5 percent to 26,846.83 on expectations that China will increase fiscal spending to boost GDP growth in the second half.

Meanwhile, Japanese shares hit over two-week lows as a strong yen weighed on exporters and financials also lost ground after the Bank of Japan reduced its purchases of 5-10 year bonds at its regular operation.

The Nikkei 225 Index shed 124.08 points or 0.6 percent to 19,975.67, the lowest level since July 7th. The broader Topix index closed 0.5 percent lower at 1,621.57.

In economic news, activity in Japan's manufacturing sector continued to expand in June, albeit at a slightly slower pace, the latest survey from Nikkei revealed with an eight-month low manufacturing PMI score of 52.2.

Australian shares fell, dragged down by banks and commodity-related stocks. The benchmark S&P/ASX 200 Index dropped 34.70 points or 0.6 percent to 5,688.10, while the broader All Ordinaries Index fell 33.20 points or 0.6 percent to end at 5,738.

The big four banks fell between half a percent and 1 percent to extend losses for a second day ahead of inflation data due on Wednesday.

Energy majors Woodside Petroleum, Santos, Origin Energy and Oil Search lost 2-4 percent after oil prices fell more than 2 percent on Friday on expectations of a rise in OPEC production for July.

A drop in iron ore prices pulled down miners, with Rio Tinto losing 0.7 percent and Fortescue Metals Group shares falling 1.4 percent.


The major European markets have also turned mixed on the day. While the French CAC 40 Index has risen by 0.3 percent, the German DAX Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.8 percent.

Brexit worries, the recent strength of the euro and weak Eurozone economic data indicating slower growth have dented investor sentiment ahead of the Fed's latest policy meeting.

The Eurozone private sector started the third quarter on a solid footing but the pace of growth slowed for the second successive month in July, flash data from IHS Markit showed. The composite output index fell to a 6-month low of 55.8 in July from 56.3 in June.

Automakers BMW, Daimler and Volkswagen have tumbled after reports that EU regulators are studying reports of cartel among German carmakers.

Ryanair has moved lower in London after the budget airline said it expects the pricing environment to remain very competitive in the second half of the year.

Gemalto has plunged 16 percent after the digital security company announced a goodwill impairment charge of around 420 million euros ($489 million).

On the positive side, Philips Electronics shares have rallied in Amsterdam after the Dutch consumer electronics giant reported a rise in second-quarter net income from continuing operations on higher sales and orders.

Switzerland's third largest private bank Julius Baer has jumped after reporting a 6 percent rise in assets under management in the first six months of 2017.

U.S. Economic Reports

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

Existing home sales are expected to drop by 1.0 percent after climbing by 1.1 percent to an annual rate of 5.62 million in May.

Stocks In Focus

Shares of WebMD (WMBD) are moving sharply higher in pre-market trading after the health website agreed to be acquired by private equity firm KKR (KKR) for $2.8 billion.

Pharmaceutical company NeuroDerm (NDRM) is also likely to see early strength after agreeing to be acquired by Mitsubishi Tanabe Pharma for $1.1 billion in cash.

Shares of PetMed (PETS) are also likely to see upside after the pet pharmacy company reported better than expected fiscal first quarter results.

On the other hand, shares of Hibbett Sports (HIBB) may come under pressure after the athletic special retailer warned of weaker than expected second quarter results.

Toy maker Hasbro (HAS) is also moving lower in pre-market trading despite reporting better than expected second quarter results.

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