Market Analysis

Beyond the Numbers

Upward Momentum May Be Sustained Amid Light Trading
12/23/2014 9:07 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks poised to extend the upward trend seen over the past few sessions. The markets seem likely to benefit from an upward revision to third quarter GDP growth, although trading activity may be somewhat subdued as investors get a head start on the holidays.

Stocks moved mostly higher during trading on Monday, extending the upward move triggered by the Federal Reserve’s monetary policy statement last Wednesday. The gains on the day further offset the sharp pullback seen earlier this month, with the Dow and the S&P 500 reaching new record closing highs.

The major averages ended the session just off their best levels of the day. The Dow jumped 154.64 points or 0.9 percent to 17,959.44, the Nasdaq rose 16.04 points or 0.3 percent to 4,781.42 and the S&P 500 climbed 7.89 points or 0.4 percent to 2,078.54.

Stocks have moved solidly higher in recent sessions as traders focus on the central bank’s pledge to remain “patient.” Optimism about the outlook for the U.S. economy may also have generated some buying interest.

Meanwhile, traders largely shrugged off a report from the National Association of Realtors showing that existing home sales pulled back by much more than expected in the month of November.

NAR said existing home sales tumbled 6.1 percent to a seasonally adjusted annual rate of 4.93 million in November after climbing 1.4 percent to 5.25 million in October. Economists had expected existing home sales to edge down to 5.20 million.

With the bigger than expected decrease, existing home sales fell to their lowest annual rate since hitting 4.91 million in May.

Semiconductor stocks showed a strong move to the upside over the course of the trading day, driving the Philadelphia Semiconductor Index up by 1.5 percent. Considerable strength was also visible among railroad, commercial real estate, electronic storage, and networking stocks.

On the other hand, gold stocks saw substantial weakness amid a notable decrease by the price of the precious metal. Energy stocks also moved lower along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are climbing $1.12 to $56.38 after tumbling $1.87 to $55.26 a barrel on Monday. An ounce of gold is currently trading at $1,177.70, down $2.10 from the previous session’s close of $1,179.80. On Monday, gold slid $16.20 an ounce.

Among currencies, the U.S dollar is currently trading at 120.42 yen compared to the 120.05 yen it fetched at the close of New York trading on Monday. Against the euro, the greenback is valued at $1.2189 versus Monday’s $1.2230.


Asian stocks ended mostly lower in relatively thin trading on Tuesday, with the Japanese markets closed on the day due to the Emperor's Birthday.

Volatile commodity prices and a sell-off in Chinese shares dampened investor sentiment heading into the Christmas break.

Chinese shares fell the most in two weeks as investors took profits in banking and infrastructure stocks amid concerns recent sharp gains were overdone. Falling from a four-year high, the Shanghai Composite index ended the session down 94.83 points or 3.03 percent at 3,032.61.

Hong Kong's Hang Seng index dropped 74.88 points or 0.32 percent to finish at 23,333.69, erasing early gains.

Australian stocks also came under pressure, dragged down by miners and energy companies after commodity prices dropped notably overnight. The All Ordinaries Index dropped 57.70 points or 1.07 percent to 5,356.40.

Mining giant BHP Billiton tumbled 3.5 percent on profit taking after recent sharp gains, while Rio Tinto lost 3.3 percent and smaller rival Fortescue Metals Group plummeted 5.2 percent.

Shares of Telstra fell 0.7 percent after the telecom giant said it would buy Asian telecommunications and services provider Pacnet Ltd. in a deal valued at $697 million.

On the economic front, a leading index for China's economy climbed 0.9 percent in November after a revised 0.8 percent gain in the previous month, a survey from the Conference Board revealed.

Separately, figures from the State Administration of Foreign Exchange showed that China's foreign service trade deficit widened to $20.8 billion in November from $17.2 billion in the previous month.


The major European markets have all moved to the upside on the day, although trading activity has remained relatively light.

While the French CAC 40 Index has surged up by 1.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both rising by 0.4 percent.

Data released by Insee showed that the French economy expanded as expected in the third quarter. Gross domestic product grew 0.3 percent sequentially after edging down 0.1 percent in the second quarter. The figures matched the estimate released last month.

A separate report showed that France's domestic producer prices dropped in November. The producer price index for the French market dropped 2.0 percent year-on-year, and slid 0.1 percent month-on-month.

U.S. Economic Reports

The Commerce Department released a report this morning showing that U.S. gross domestic product increased by more than previously estimated in the third quarter.

The Commerce Department said its final reading on third quarter GDP showed a 5.0 percent increase compared to the previously estimated 3.9 percent growth. Economists had expected the pace of GDP growth to be upwardly revised to 4.3 percent.

The stronger than expected growth reflected upward revisions to consumer spending, non-residential fixed investment and private inventory investment.

Meanwhile, a separate report from the Commerce Department showed an unexpected drop in durable goods orders in the month of November.

The report said durable goods orders fell by 0.7 percent in November compared to the 0.3 increase that was reported for October. The pullback came as a surprise to economists, who had expected orders to surge up by 3.0 percent.

Excluding orders for transportation equipment, durable goods orders still fell by 0.4 percent in November after edging down by 0.1 percent in October.

The flood of data continues after the start of trading on Wall Street, with Thomson Reuters and the University of Michigan scheduled to release their revised report on consumer sentiment in the month of December at 9:55 am ET.

Economists expect the consumer sentiment index to be downwardly revised to 93.0 from the mid-month reading of 93.8.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of November. New home sales are expected to inch up to an annual rate of 460,000 in November after edging up 0.7 percent to a rate of 458,000 in October.

The Commerce Department is also due to release a separate report on personal income and spending at the same time. Economists expect both income and spending to increase by 0.5 percent in November.

Stocks in Focus

Shares of Walgreen (WAG) are moving higher in pre-market trading after the drugstore chain reported adjusted first quarter earnings and revenues that exceeded analyst estimates. The company also reported a 5.7 percent increase in same-store sales for the quarter.

Energy producer Chesapeake Energy (CHK) could also see early strength after announcing a $1 billion common stock repurchase program as well as the completion of a $5 billion asset sale.

Steelcase (SCS) may also be in focus after the office furniture maker reported better than expected third quarter earnings but on weaker than expected revenues.

Meanwhile, Keurig Green Mountain (GMCR) may come under pressure on news the company is recalling 6.6 million of its Mini Plus Brewing Systems because of reported burns.
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