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Mixed Earnings News May Lead To Choppy Trading On Wall Street

The major U.S. index futures are pointing to a mixed opening on Thursday, with stocks likely to show a lack of direction following yesterday's rally.

A mixed reaction to a slew of earnings news from big-name companies may contribute to choppy trading early in the session.

Shares of General Electric (GE) are moving notably higher in pre-market trading after the conglomerate reported fourth quarter earnings that missed analyst estimates but better than expected revenues.

GE also announced a $1.5 billion settlement with the Justice Department related to its now-defunct subprime mortgage business WMC, consistent with the prior reserve for this matter.

On the other hand, shares of Microsoft (MSFT) are seeing significant pre-market weakness after the software giant reported fiscal second quarter earnings that came in slightly above expectations but on revenues that missed estimates.

Traders also continue to react to the Federal Reserve's monetary policy announcement on Wednesday, as the central bank indicated it would be patient regarding further interest rate hikes.

The statement has eased worries about the outlook for rates but may raise worries about what the Fed is seeing regarding the outlook for the economy.

With traders reacting positively to the Federal Reserve's monetary policy announcement, stocks moved sharply higher over the course of the trading session on Wednesday. With the rally on the day, the major averages reached their best closing levels in nearly two months.

The major averages pulled back off their highs of the session in the final hour of trading but remained firmly positive. The Dow surged up 434.90 points or 1.8 percent to 25,014.86, the Nasdaq soared 154.79 points or 2.2 percent to 7,183.08 and the S&P 500 jumped 41.05 points or 1.6 percent to 2,681.05.

Stocks accelerated to the upside after the Fed announced its widely expected decision to leave interest rates unchanged and indicated the central bank will remain patient regarding further rate hikes.

The Fed said following a two-day meeting it has decided to maintain the target range for the federal funds rate at 2.25 to 2.50 percent.

The accompanying statement included some notable changes from last month, including dropping a reference to the Fed's plan for further gradual rate increases.

The central bank also removed a sentence describing the risks to the economic outlook as "roughly balanced."

Instead, the Fed said still sees a sustained expansion of economic activity, strong labor market conditions, and inflation near its symmetric 2 percent objective as the most likely outcomes but also pointed to global economic and financial developments and muted inflation pressures.

The Fed subsequently said it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support those outcomes.

Fed Chairman Jerome Powell noted in his press conference that the "case for raising rates has weakened somewhat."

Similar to the decision to raise interest rates last month, the Fed's decision to leave interest rates unchanged was unanimous.

The next Fed meeting is scheduled for March 19th and 20th, with CME Group's FedWatch tool currently indicating a 98.7 percent chance the central bank will once again leave rates unchanged.

"A March hike was all but ruled out before this meeting, but a hike in the second quarter now appears to be in serious doubt," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "With financial conditions easing over recent weeks and the economic data still solid, we still on balance expect one more rate hike from the Fed, either at the April/May or June meeting."

The positive sentiment generated by the Fed statement added to the buying interest generated in reaction to earnings news from big-name companies like Boeing (BA) and Apple (AAPL).

Shares of Boeing moved significantly higher after the aerospace giant reported better than expected fourth quarter results and provided upbeat guidance for full-year 2019.

Tech giant Apple also showed a strong move to the upside after reporting fiscal first quarter results that exceeded analyst estimates, including substantial growth in its services business.

Traders also reacted positively to comments from Apple CEO Tim Cook, who expressed optimism about U.S.-China trade talks.

Meanwhile, traders largely shrugged off mixed economic data showing stronger than expected private sector job growth but an unexpected decrease in pending home sales.

Tobacco stocks turned in some of the market's best performances on the day, resulting in a 6.1 percent spike by the NYSE Arca Tobacco Index. The index skyrocketed to its best closing level in well over a month.

Substantial strength was also visible among steel stocks, which benefited from optimism about the U.S.-China trade talks. The NYSE Arca Steel Index surged up by 3.9 percent to a more than two-month closing high.

Semiconductor stocks also saw considerable strength, with Advanced Micro Devices (AMD) leading the way higher after the chip maker reported mixed fourth quarter results but President and CEO Lisa Su said she expects strong sales growth in 2019.

Software, oil service, and retail stocks also showed significant moves to the upside, moving higher along with most of the other majors sectors.

Commodity, Currency Markets

Crude oil futures are inching up $0.13 to $54.36 a barrel after advancing $0.92 to $54.23 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,324.80, up $14.90 compared to the previous session's close of $1,309.90. On Wednesday, gold ticked up $1.

On the currency front, the U.S. dollar is trading at 108.57 yen compared to the 109.04 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1491 compared to yesterday's $1.1480.

Asia

Asian stocks ended mostly higher on Thursday after the U.S. Federal Reserve left interest rates unchanged, as widely expected, and said it would be patient in lifting borrowing costs.

Chinese shares ended higher even as data showed the country's manufacturing activity contracted for the second consecutive month in January.

The benchmark Shanghai Composite Index rose 9 points or 0.4 percent to 2,584.57, while Hong Kong's Hang Seng Index surged up 1.1 percent to 27,942.47.

Activity in China's vast manufacturing sector continued to contract in January, albeit at a slower pace, the latest survey from the National Bureau of Statistics showed with a PMI score of 49.5.

That beat expectations for a score of 49.3 and was up from 49.4 in December. The non-manufacturing index came in at 54.7, topping forecasts for 53.9 and up from 53.8 in the previous month.

Japanese shares rose sharply after the Fed sounded more dovish. The Nikkei 225 Index rallied 216.95 points or 1.1 percent to finish at 20,773.49, while the broader Topix closed 1.1 percent higher at 1,567.49, the highest closing level since mid-December.

Chip equipment maker Advantest Corp jumped 7.9 percent after raising its annual operating profit forecast. Apple supplier TDK Corp also soared 8.1 percent, but Screen Holdings plunged 10.4 percent after cutting its profit outlook.

Sharp Corp fell 2.4 percent as it lowered its fiscal 2018 group sales and operating profit outlook due to the possible negative effects of the prolonged U.S.-China trade dispute.

Dainippon Sumitomo Pharma slumped almost 17 percent to extend steep losses from the previous session on disappointment over its unsuccessful joint drug clinical trial with SanBio Co.

In economic news, a government report showed that Japanese industrial output fell a seasonally adjusted 0.1 percent sequentially in December. Economists expected output to fall by 0.5 percent following the 1.0 percent drop in November.

Meanwhile, Australian markets fell slightly despite positive cues from offshore markets. The benchmark S&P/ASX 200 Index slid 22 points or 0.4 percent to 5,864.70, while the broader All Ordinaries Index edged down 13.90 points or 0.2 percent to 5,937.30.

The big four banks fell between 1.6 percent and 2.5 percent ahead of the publication of the royal commission findings later this week. On the other hand, oil and gas explorer Beach Energy soared 5.6 percent after raising production guidance.

Mining stocks ended mixed after three sessions of gains. BHP rose 0.7 percent, while Rio Tinto slipped 0.3 percent. Smaller rival Fortescue Metals Group jumped 4.2 percent after it reported a rise in second quarter iron ore shipments.

Europe

European stocks have turned mixed on Thursday as trades digest a dovish turn in the Fed's policy statement, higher oil prices, weak manufacturing data from China and mixed earnings reports.

Meanwhile, U.S.-China trade negotiations enter their second day with a statement expected after the talks conclude.

While the German DAX Index has fallen by 0.5 percent, the French CAC 40 Index is just above the unchanged line and the U.K.'s FTSE 100 Index is up by 0.5 percent.

Spirits maker Diageo has moved sharply higher in London after posting strong first-half results and unveiling a 660 million pound share buyback.

Dairy company Dairy Crest Group has also risen. The company posted good results in its third quarter and said the outlook for the full-year remains in line with expectations.

Royal Dutch Shell has also rallied after its full-year profit surged by more than a third to the highest since 2014. German electronics retailer Ceconomy AG has jumped after appointing a new CEO.

Roche has also advanced. The Swiss drug major posted strong results for 2018, reflecting benefits from U.S. tax reform and higher net financial income.

On the other hand, telecom equipment maker Nokia has come under pressure after it forecast a soft first half due to uncertainty over the timing of 5G rollouts.

Consumer goods giant Unilever has also moved notably lower after warning of a tough year ahead.

Swiss watchmaker Swatch and Swedish retailer Hennes & Mauritz AB have also dropped after reporting weaker than expected results.

Software AG has also slumped after a disappointing trading update with a warning on full-year 2019 margins.

In economic news, German retail sales declined sharply in December, defying expectations for further increase, preliminary data from the Federal Statistical Office showed.

Retail sales fell 2.1 percent year-on-year after a 1.9 percent increase in November. Economists were looking for a 1.5 percent gain. The latest decrease was the biggest since a 3 percent slump in September.

The Federal Statistical Office said the German jobless rate held steady at a seasonally adjusted 5.0 percent in January, matching expectations.

U.S. Economic Reports

After reporting first-time claims for U.S. unemployment benefits at their lowest level in nearly 50 years in the previous week, the Labor Department released a report showing a significant rebound in initial jobless claims in the week ended January 26th.

The report said initial jobless claims surged up to 253,000, an increase of 53,000 from the previous week's revised level of 200,000.

Economists had expected jobless claims to rise to 215,000 from the 199,999 originally reported for the previous week.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 254,000 in September of 2017.

The slightly upwardly revised reading on jobless claims in the previous week was still the lowest since a matching figure in October of 1973.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of January.

The Chicago business barometer is expected to drop to 61.5 in January from 65.4 in December, although a reading above 50 would still indicate growth.

At 10 am ET, the Commerce Department is due to release its delayed reported on new home sales in the month of November. New home sales are expected to rise to an annual rate of 560,000.

Stocks In Focus

Shares of Facebook (FB) are moving sharply higher in pre-market trading after the social media giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Delivery giant UPS Inc. (UPS) is also likely to see initial strength after reporting fourth quarter earnings that beat expectations.

Shares of Qualcomm (QCOM) may also move to the upside after the communications chip maker reported better than expected fiscal first quarter earnings and provided upbeat guidance for the current quarter.

On the other hand, shares of DowDuPont (DWDP) may come under pressure after the chemical giant reported fourth quarter earnings in line with estimates but on weaker than expected revenues.

Online payment company PayPal (PYPL) is also seeing pre-market weakness after reporting mixed fourth quarter results and providing disappointing first quarter revenue guidance.

Shares of Hershey (HSY) may also move to the downside after the chocolate giant reported fourth quarter results that missed analyst estimates on both the top and bottom lines.

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