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Beyond the Numbers

Trump Speech In Focus On Wall Street
11/12/2019 8:53 AM

The major U.S. index futures are pointing to a roughly flat opening on Tuesday, with stocks likely to extend the lackluster performance seen in the previous session.

Traders may remain reluctant to make significant moves ahead of President Donald Trump’s speech at the Economic Club of New York this afternoon.

Trump’s remarks are likely to be closely watched for his assessment of the state of U.S.-China trade talks and signs of progress toward a phase one trade deal.

White House spokesman Judd Deere indicated Trump would tout the strength of the U.S. economy under his administration but provided few details.

“You can expect the president to highlight how his policies of lower taxes, deregulation, and fair and reciprocal trade have supported the longest economic recovery in U.S. history with record low unemployment, rising wages, and soaring consumer confidence,” Deere said.

Optimism about an end to the U.S.-China trade war has contributed to recent strength on Wall Street, lifting the major averages to record highs.

Last week, U.S. and Chinese officials said the two economic superpowers had agreed to roll back existing tariffs as part of a phase one trade deal, but Trump later said he has not agreed to lift the tariffs on China.

Stocks recovered from an initial move to the downside but showed a lack of direction over the course of the trading session on Monday. The major averages eventually closed mixed, with the Dow inching up to a new record closing high.

While the Dow crept up 10.25 points or less than a tenth of a percent to 27,691.49, the Nasdaq edged down 11.04 points or 0.1 percent to 8,464.28 and the S&P 500 slipped 6.07 points or 0.2 percent to 3,087.01.

Profit taking contributed to the initial weakness on Wall Street, as some traders looked to cash in on last week's strong gains.

Uncertainty about a potential U.S.-China trade deal weighed on the markets along with worsening tensions in Hong Kong after the arrest of three pro-democracy lawmakers.

Nonetheless, selling pressure waned shortly after the start of trading, with the Veterans Day holiday keeping some traders on the sidelines.

The economic calendar was also quiet due to the holiday, although reports on consumer and producer prices, retail sales and industrial production may attract attention in the coming days.

Traders are also likely to keep an eye on President Donald Trump's speech at the Economic Club of New York on Tuesday as well as Federal Reserve Chairman Jerome Powell's testimony before the Congressional Joint Economic Committee on Wednesday.

The Dow benefited from a sharp jump by shares of Boeing (BA), with the aerospace giant surging up by 4.6 percent after revealing it expects to resume deliveries of its 737 Max planes as early as next month.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Natural gas stocks showed a substantial move to the downside, however, with the NYSE Arca Natural Gas Index plunging by 3.2 percent.

The sell-off by natural gas stocks came amid a steep drop by the price of the commodity, as natural gas for December delivery tumbled $0.152 or 5.4 percent to $2.637 per million BTUs.

Biotechnology, steel and utilities stocks also saw some weakness on the day, while housing stocks moved higher over the course of the session.

Commodity, Currency Markets

Crude oil futures are rising $0.26 to $57.12 a barrel after falling $0.38 to $56.86 a barrel on Monday. Meanwhile, after sliding $5.80 to $1,457.10 an ounce in the previous session, gold futures are dropping $5.70 to $1,451.40 an ounce.

On the currency front, the U.S. dollar is trading at 109.15 yen compared to the 109.05 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1018 compared to yesterday’s 1.1033.

Asia

Asian stocks ended broadly higher on Tuesday despite lingering uncertainty about a potential U.S.-China trade deal and an escalation of violence in Hong Kong. Caution ruled ahead of a speech by U.S. President Donald Trump at the Economic Club of New York later in the day.

Chinese stocks closed slightly higher as bank lending data put additional pressure on policymakers to boost stimulus. The benchmark Shanghai Composite Index inched up 4.85 points, or 0.2 percent, to 2,914.82, while Hong Kong's Hang Seng Index ended up 0.5 percent at 27,065.28 despite rising pro-democracy unrest in the city.

China's bank lending declined notably in October, figures from the People's Bank of China showed. Banks lent CNY 661.3 billion in loans in October compared to CNY 1.69 trillion in September. Lending was forecast to fall to CNY 800 billion.

Japanese shares rose as the yen lingered near a five-month low versus the dollar, helping lift shares of companies that export a lot of goods. The Nikkei 225 Index gained 188.17 points, or 0.8 percent, to finish at 23,520.01 points, while the broader Topix closed 0.3 percent higher at 1,709.67.

Electronics maker Sony rose 1.3 percent and chip equipment maker Advantest jumped 3.5 percent, but Mitsui Mining & Smelting shares slumped 13.2 percent.

Meanwhile, Australian stocks fell slightly as uncertainty continued to hang over U.S.-China trade talks. The benchmark S&P/ASX 200 Index dropped 19.50 points, or 0.3 percent, to 6,753, while the broader All Ordinaries Index ended down 19.90 points, or 0.3 percent, at 6.857.10.

Lender Westpac Banking Corp tumbled 3.5 percent on going ex-dividend. Commonwealth gained 1 percent despite reporting a near 10 percent drop in first-quarter cash profit.

Mining heavyweights BHP and Rio Tinto ended narrowly mixed on lower commodity prices, while smaller rival Fortescue Metals Group lost 2.1 percent.

Nine Entertainment Co. plunged 5.7 percent. The media network reported a 6.4 percent decrease in TV ad revenue in the first quarter and forecast revenue for the second quarter to drop by almost as much.

Fertilizer and explosives maker Incitec Pivot declined 1.7 percent after reporting a 27.8 percent decrease in full-year net profit and cutting its final dividend.

On the data front, Australian business confidence and conditions improved slightly in October but remained below average, survey data from National Australia Bank showed today.

Seoul stocks rose notably as investors lapped up shares of chipmakers on expectations of higher demand. Samsung Electronics advanced 1.9 percent and SK Hynix added 2.3 percent, helping the benchmark Kospi end up by 16.83 points, or 0.8 percent, at 2,140.92.

Europe

European stocks have moved higher on Tuesday after ECB Executive Board member Yves Mersch added his voice to a call for more supportive fiscal policy.

Underlying sentiment remains cautious, however, as investors await a speech by U.S. President Donald Trump at the Economic Club of New York later in the day for clues on the status of the U.S.-China trade talks.

The British pound inched higher as investors awaited further developments out of the ongoing general election campaign.

Nigel Farage said on Monday his Brexit party would not contest seats currently held by the Conservative Party of Boris Johnson.

While the German DAX Index has risen by 0.5 percent, the U.K.’s FTSE 100 Index is up by 0.4 percent and the French CAC 40 Index is up by 0.3 percent.

Dialog Semiconductor has moved sharply higher after lifting its underlying gross margin and underlying operating margin forecasts.

Infineon Technologies has also soared. The company forecast slower growth in the year ahead after reporting a rise in fourth quarter profit in spite of macroeconomic uncertainty.

Post and logistics group Deutsche Post DHL has also jumped after it reported an almost tripling of its third quarter operating profit.

British credit data firm Experian has also moved notably higher after the company upgraded its organic revenue growth target.

On the other hand, automotive supplier and tire manufacturer Continental has dropped as it slipped to a loss in the third quarter.

Discounter B&M European Value Retail has also come under pressure. The company has undertaken a strategic review to determine the future of its German business after reporting a sharp drop in half-year profits.

U.S. Economic Reports

President Donald Trump is scheduled to speak during a luncheon at the Economic Club of New York beginning around 12 pm ET.

Also at 12 pm ET, Richmond Federal Reserve President Tom Barkin is due to speak about “Getting People off the sidelines: The Ultimate Workforce Development Plan” in Danville, Virginia.

Philadelphia Fed President Patrick Harker is scheduled to speak about “What's Next for the U.S. Economy and the Fed?” at the Society for Advancing Business Editing and Writing Fall Conference in New York at 1 pm ET.

At 6 pm ET, Minneapolis Fed President Neel Kashkari is slated to speak in a moderated discussion at the Center for Research on the Wisconsin Economy in Madison, Wisconsin.

Stocks In Focus

Shares of Rockwell Automation (ROK) are moving significantly higher in pre-market trading after the maker of industrial automation systems reported better than expected fiscal fourth quarter earnings and provided upbeat guidance.

Homebuilder D.R. Horton (DHI) is also likely to see initial strength after reporting fiscal fourth quarter results that exceeded analyst estimates and forecasting 2020 home sales above expectations.

On the other hand, shares of Advance Auto Parts (AAP) may come under pressure after the auto parts retailer reported weaker than expected third quarter same-store sales.

Meat producer Tyson Foods (TSN) could also see early weakness after reporting fiscal fourth quarter results that missed estimates on both the top and bottom lines.
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