Market Analysis

Beyond the Numbers

Consolidation Likely Amid Mostly Positive Reaction to Earnings
4/21/2015 9:08 AM

The major U.S. index futures are pointing to higher opening on Tuesday, with sentiment still continuing to be upbeat amid the release of mixed earnings news. Meanwhile, strong earnings lifted the markets across the Atlantic, although a report showing a drop in German economic sentiment has tempered some of the buoyancy. The dollar is still firm, while the price of oil has seen a pullback. However, economic worries linger. With the news emerging out that Greece’s creditors are considering different possibilities, including a Grexit, economic concerns continue unabated. In the absence of any other major economic catalysts, the markets could go through a session of consolidation.

U.S. stocks advanced solidly on Monday, capitalizing on strong corporate results, oil’s extended rally and China’s move to lower the reserve requirement ratio. The major averages opened higher and saw further upside till late morning trading. Thereafter, the average moved roughly sideways before ending notably higher.

The Dow Industrials added 208.63 points or 1.17 percent before ending at 18,035 and the Nasdaq Composite ended up 62.79 points or 1.27 percent at 4,995, while the S&P 500 Index closed at 2,100, up 19.22 points or 0.92 percent.

Twenty-six of the thirty Dow components closed higher, with Apple (AAPL), Boeing (BA), Cisco Systems (CSCO), IBM (IBM) and Microsoft (MSFT) leading the way. On the other hand, General Electric (GE) came under selling pressure.

Among the sectors, transportation, computer hardware, retail, utility and semiconductor stocks rose notably.

Currency, Commodity Markets

Crude oil futures are slipping $0.07 to $56.31 a barrel after rising $0.64 to $56.38 a barrel on Monday. The more actively traded June futures are currently down $0.20 at $57.68 a barrel. Meanwhile, an ounce of gold is currently trading at $1,198.500, up $4.80 from the previous session’s close of $1,193.70. On Monday, gold fell $9.40.

On the currency front, the U.S. dollar is trading at 119.41 yen compared to the 119.18 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0708 compared to yesterday’s $1.0738.


The major Asian markets closed mostly higher, with the Australian, Chinese, Hong Kong, Indonesian, Malaysian, Japanese and Singaporean markets advancing, while the New Zealand, South Korean and Taiwanese markets retreated. The positive close on Wall Street overnight generated strength in the markets.

The Japanese market benefited from the yen’s weakness, with the Nikkei 225 average opening higher and advancing steadily throughout the session. The index ended up 274.60 points or 1.40 percent at 19,909. The market witnessed broad based strength, with financial, transportation, pharma and utility stocks gaining the most.

Australia’s All Ordinaries hovered in positive territory throughout the session before ending 37.20 points or 0.64 percent higher at 5,844. A majority of stocks rose, with the exception of energy stocks. IT and material stocks saw significant strength.

Hong Kong’s Hang Seng Index ended at 27,859, up 755.56 points or 2.79 percent, and China’s Shanghai Composite Index added 76.55 points or 1.82 percent before closing at 4,294.

On the economic front, the minutes of the April monetary policy meeting of the Reserve Bank of Australia showed that the board feels that current monetary policy continues to be appropriate. The members added that the Australian economy continues to grow slightly below trend, although the lower Australian dollar is expected to give the economy a boost.

Final figures released by the Cabinet Office of Japan showed that the leading economic indicators index for Japan was at 104.8 in February compared to 105 in January, downwardly revised from the preliminary reading of 105.3.


European stocks are advancing solidly amid the release of positive domestic earnings, although the buying has been tempered following the release of lackluster German economic confidence reading.

In corporate news, SAP (SAP) reported higher profits for its first quarter, with a weaker euro boosting the top line. The company also confirmed its outlook for 2015.

Paint maker Akzo Noble reported better than expected first quarter results, benefiting from cost control and revamping exercise.

Chipmaker Arm Holdings (ARMH) also reported strong first quarter results. Rio Tinto (RIO) said its first quarter iron ore output rose 12 percent.

Lifted by strong trading revenues, Credit Suisse (CS) reported a strong increase in its first quarter profits.

France’s Schneider Electric reported higher profits for its first quarter and confirmed its 2015 guidance. Strong demand lifted profits of pay TV operator Sky.

On the economic front, German investor confidence deteriorated for the first time since October as global weakness and Greece crisis weighed on domestic prospects, the results of a survey by the Centre for European Economic Research, or ZEW, showed. The indicator of economic sentiment unexpectedly fell by 1.5 points to 53.3 in April. Economists had forecast the index to improve to 55.3.

Meanwhile, the current conditions index, which assesses the current situation rose sharply to 70.2 in April, marking the highest score since July 2011. The indicator was forecast to rise marginally to 56.5.

U.S. Economic Reports

There are no noteworthy economic reports due for release on the day.

Stocks in Focus

IBM (IBM) reported better than expected first quarter adjusted earnings from continuing operations but revenues were shy of estimates. However, the company issued positive operation earnings guidance for 2015.

DuPont (DD) reported better than expected first quarter adjusted earnings, while its revenues were shy of estimates. The company lowered its full year operational earnings per share guidance.

United Technologies (UTX) reported first quarter adjusted earnings that exceeded estimates, while its revenues were slightly shy of estimates.

Kimberly-Clark (KMB) reported better than expected first quarter results and confirmed its 2015 adjusted earnings guidance.

Verizon’s (VZ) first quarter earnings beat estimates, while its revenues were shy of estimates.

Travelers Companies (TRV) reported first quarter earnings that missed estimates by a penny. The company announced an 11 percent increase in its dividend to 61 cents per share and an additional $5 billion stock buyback program.

Harley-Davidson (HOG) reported first quarter results that exceeded estimates but it lowered its shipments guidance for 2015.

Sanmina (SANM) reported second quarter earnings and revenues that trailed estimates and its third quarter guidance also missed expectations.

Rambus (RMBS) reported better than expected first quarter results but forecast weak revenues for the second quarter.

Lam Research’s (LRCX) third quarter earnings were below estimates, while its revenue sneaked past estimates.

Steel Dynamics (STLD) reported below consensus results for its first quarter but said it sees improved results for the current quarter and the remainder of the year due to the anticipated reduction in steel volume imports and lower scrap costs.

Packaging Corp. of America (PKG) reported first quarter earnings and revenues that missed estimates. The company also issued below consensus guidance for the second quarter.

Agilent Technologies (A) recommended that its shareholders reject a mini-tender offer by TRC Capital to purchase up to 2.5 million shares or a 0.75 percent stake in the company at $41.55 per share in cash.

IDEX Corp. (IEX) announced an agreement to acquire 100 percent of the outstanding shares of Novotema, a maker of specialty sealants.

Hyatt (H) announced the appointment of Atish Shah as SVP and interim CFO, pending the company’s selection of a permanent CFO.

Zion Bancorp.’s (ZION) first quarter earnings topped expectations.

Whirlpool (WHR) announced a 20 percent increase in its quarterly dividend to 90 cents per share.

ADTRAN (ADTN), Amgen (AMGN), Chipotle Mexican Grill (CMG), Cree (CREE), Discover Financial Services (DFS), Illumina (ILMN), Stryker (SYK), United Rentals (URI), Vmware (VMW), Yahoo! (YHOO) and YUM! Brands (YUM) are among the major companies due to release their quarterly results after the close of trading.
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