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Futures Pointing To Early Strength On Wall Street

The major U.S. index futures are pointing to a higher opening on Wednesday after ending the previous session modestly lower. After disappointing earnings news from Goldman Sachs (GS) weighed on the markets on Tuesday, the markets may benefit from upbeat news from Morgan Stanley (MS).

Overall trading activity on the day may be somewhat subdued, however, with lingering geopolitical uncertainty keeping some traders on the sidelines.

Stocks saw modest weakness during trading on Tuesday following the rally seen on Monday. The major averages came under pressure in morning trading but regained some ground as the day progressed.

While the major averages closed in negative territory, they were well off their worst levels of the day. The Dow fell 113.64 points or 0.6 percent to 20,523.28, the Nasdaq edged down 7.32 points or 0.1 percent to 5,849.47 and the S&P 500 dipped 6.82 points or 0.3 percent to 2,342.19.

Negative sentiment was generated in reaction to quarterly results from Goldman Sachs (GS), as the financial giant reported weaker than expected first quarter earnings on disappointing trading revenue.

Shares of Goldman Sachs moved notably lower on the news, slumping by 4.7 percent to their lowest closing level in well over four months.

Geopolitical concerns also generated some selling pressure after North Korean Vice-Foreign Minister Han Song-ryol told the BBC the communist nation plans to conduct weekly missile tests.

Han also warned that the U.S. would face "all out war" if it responded to the continued missile tests with military action.

Vice President Mike Pence has said "all options are on the table" to address North Korea's missile and nuclear testing programs, declaring that "the era of strategic patience is over."

Uncertainty about the outcome of the French presidential election also weighed on the markets ahead of the first round of voting on Sunday.

News that U.K. Prime Minister Theresa May has called for early elections has added to the political uncertainty in Europe.

On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in new residential construction in the month of March.

The report said housing starts plunged by 6.8 percent to an annual rate of 1.215 million in March from an upwardly revised 1.303 million in February. Economists had expected housing starts to drop by 2 percent.

Meanwhile, the Commerce Department said building permits, an indicator of future housing demand, jumped by 3.6 percent to a rate of 1.260 million in March from a revised 1.216 million in February. Building permits had been expected to climb by 3.1 percent.

A separate report from the Federal Reserve showed that industrial production increased in line with economist estimates in March, reflecting a substantial rebound in utilities output.

The report said industrial production climbed by 0.5 percent in March after inching up by 0.1 percent in February. The increase in production matched the consensus estimate.

Biotechnology stocks showed a significant move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.3 percent. The index gave back ground after closing higher in the three previous sessions.

Within the biotech sector, Arena Pharmaceuticals (ARNA) posted a steep loss after pricing an underwritten public offering of 60, million shares of its common stock at $1.15 per share.

Considerable weakness was also visible among pharmaceutical stocks, as reflected by the 1.3 percent drop by the NYSE Arca Pharmaceutical Index. With the decline, the index fell to a two-month closing low.

Healthcare giant Johnson & Johnson (JNJ) led the way lower after reporting better than expected first quarter earnings but on revenues that came in below estimates.

Energy, steel, and banking stocks saw also some weakness on the day, while most of the other major sectors ended the session showing more modest moves.

Commodity, Currency Markets

Crude oil futures are inching up $0.01 to $52.42 a barrel after slipping $0.24 to $52.41 a barrel on Tuesday. Gold futures, which rose $2.20 to $1,294.10 an ounce in the previous session, are sliding $9.40 to $1,284.70 an ounce.

On the currency front, the U.S. dollar is trading at 108.95 yen compared to the 108.43 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.0721 compared to yesterday's $1.0730.

Asia

Asian stocks fell broadly on Wednesday as lingering geopolitical tensions coupled with political uncertainty in Europe sent investors fleeing from riskier assets. A spate of tepid corporate earnings from the U.S also weighed on the markets.

Britain's parliament votes today on holding a snap election in June after Prime Minister Theresa May said she had decided "with reluctance" that an election was needed to strengthen the government's hand as the country commences Brexit negotiations.

France heads to the first round of presidential elections on Sunday, with opinion polls suggesting increased uncertainty regarding who will become the next president.

Chinese shares hit their lowest level in two months and closed lower for the fourth straight session, as commodity prices fell and investors remained skeptical about the prospects for faster economic growth.

China's Shanghai Composite Index fell 26.03 points or 0.81 percent to 3,170.69, while Hong Kong's Hang Seng Index slid 98.66 points or 0.41 percent to 23,825.88.

The IMF on Tuesday raised its economic growth forecast for China for this year and next but warned of serious longer-term problems unless it reduces its reliance on credit.

Australian shares extended losses from the previous session as weakness in oil prices persisted and a weekly survey compiled by ANZ Bank and Roy Morgan Research showed Australia's consumer sentiment weakened during the week ended April 16th.

The benchmark S&P/ASX 200 Index dropped 32.70 points or 0.56 percent to 5,804, while the broader All Ordinaries Index closed 28.80 points or 0.49 percent lower at 5,839.90.

The big four banks fell over 1 percent each on concerns over rising housing market risks. Woodside Petroleum and Oil Search lost 1-2 percent as oil prices lingered near two-week lows on concerns over increasing U.S. supplies.

Yowie Group plummeted 7.7 percent as the confectionery maker slashed its full-year sales growth forecast for the second time in two months.

Miners bucked the weak trend, with Rio Tinto rising 1.6 percent while smaller rival Fortescue Metals Group rallied 3 percent. Logistics firm Brambles soared nearly 6 percent after a solid third-quarter update.

Meanwhile, Japanese shares closed marginally higher as the yen weakened slightly, helping lift exporters. The Nikkei 225 Index inched up 13.61 points or 0.07 percent to 18,432.20, although the broader Topix index closed marginally lower at 1,471.42.

Europe

European stocks are turning in a mixed performance on Wednesday. While the U.K.'s FTSE 100 Index is down by 0.3 percent, the German DAX Index and the French CAC 40 Index are up by 0.2 percent and 0.3 percent, respectively.

While worries over North Korea appeared to ease somewhat, opinion polls showed centrist independent Emmanuel Macron is leading the first round of French presidential election.

In economic news, Eurozone inflation slowed as initially estimated to a three-month low of 1.5 percent in March after a 2 percent increase in February, the latest data from Eurostat showed.

Another report showed that the Eurozone trade surplus increased more than expected in February, as exports rose and imports fell.

Investors waited for a parliamentary vote after British Prime Minister Theresa May said she had decided "with reluctance" that an election was needed to strengthen the government's hand as the country commences Brexit negotiations.

Associated British Foods has risen after the company, which owns discount fashion chain Primark, lifted its interim dividend after reporting a sharp increase in first half profits.

French cosmetics and beauty products giant L'Oreal has also moved higher after reporting an 8 percent increase in first-quarter revenue, boosted by strong sales in Asia and North America.

Automakers BMW, Volkswagen, Peugeot and Renault have rallied after industry data showed Europe's passenger car registrations grew for the fifth successive month in March and at an accelerated pace.

Total passenger car registrations surged 11.2 percent from a year earlier, much faster than the February's 2.2 percent rise

On the other hand, Luxury group Burberry has fallen after the company's quarterly sales missed analyst estimates as tough conditions in the U.S. overshadowed an "exceptional" performance in its home market.

U.S. Economic Reports

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 14th. Crude oil inventories are expected to drop by 1.47 million barrels.

Boston Federal Reserve President Eric Rosengren is due to at the 26th Annual Hyman P. Minsky Conference at the Levy Economics Institute of Bard College in Annandale-on-Hudson, New York, at 12:30 pm ET.

At 2 pm ET, the Fed is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

The Beige Book may shed some additional light on the outlook for interest rates ahead of the Fed's monetary policy meeting early next month.

Stocks In Focus

Shares of Morgan Stanley (MS) are moving to the upside in pre-market trading after the financial services giant reported better than expected first quarter results.

Chip maker Lam Research (LRCX) is also likely to see early strength after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Yahoo (YHOO), which is in the process of selling its core internet business to Verizon (VZ), also reported better than expected first quarter results.

Shares of Ultragenyx Pharmaceutical (RARE) are moving sharply higher in pre-market trading after the biopharmaceutical company released positive Phase 3 results for its drug to treat x-linked hypophosphatemia.

On the other hand, tech giant IBM Corp. (IBM) may come under pressure after reporting first quarter earnings that beat analyst estimates but on weaker than expected revenues.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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