Market Analysis

Beyond the Numbers

Bargain Hunting May Lead To Rebound On Wall Street
1/31/2018 9:03 AM

The major U.S. index futures are pointing to a sharply higher opening on Wednesday, with stocks likely to regain ground after moving notably lower over the two previous sessions.

Traders may look to pick up stocks at somewhat reduced levels following the steep drops seen on Monday and Tuesday.

Buying interest may also be generated by a report from payroll processor ADP showing stronger than expected private sector job growth in the month of January.

Trading activity may be somewhat subdued, however, as some traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates unchanged but may provide clues about potential rate hikes in the future.

Following the pullback seen on Monday, stocks saw further downside during trading on Tuesday. With the drop on the day, the major averages pulled back further off the record closing highs set last Friday.

The major averages ended the day firmly in negative territory. The Dow plunged 362.59 points or 1.4 percent to 26,076.89, the Nasdaq slid 64.02 points or 0.9 percent to 7,402.48 and the S&P 500 slumped 31.10 points or 1.1 percent to 2,822.43.

The weakness on Wall Street was partly due to profit taking, with traders cashing in on the recent strength of the markets.

Traders were also looking ahead to the Federal Reserve's monetary policy announcement on Wednesday.

On the U.S. economic front, the Conference Board released a report showing consumer confidence in the U.S. rebounded by more than expected in the month of January.

The Conference Board said its consumer confidence index climbed to 125.4 in January from an upwardly revised 123.1 in December.

Economists had expected the consumer confidence index to rise to 123.6 from the 122.1 originally reported for the previous month.

Energy stocks showed a substantial move to the downside on the day, moving lower along with the price of crude oil.

Healthcare, semiconductor, and biotechnology stocks also saw considerable weakness amid a broad based sell-off on Wall Street.

Commodity, Currency Markets

Crude oil futures are slipping $0.29 to $64.21 a barrel after tumbling $1.06 to $64.50 a barrel on Tuesday. Meanwhile, after falling $5.10 to $1,340 an ounce in the previous session, gold futures are climbing $8.40 to $1,348.40 an ounce.

On the currency front, the U.S. dollar is trading at 108.89 yen compared to the 108.78 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2466 compared to yesterday’s $1.2402.


Asian stocks ended mixed on Wednesday as investors digested a slew of regional data and looked ahead to cues from the U.S. Federal Reserve meeting for any indications on interest rates.

Underlying sentiment remained cautious in the wake of falling oil prices, rising bond yields and U.S. President Donald Trump's tough rhetoric on immigration and North Korea during his first State of the Union address.

China's Shanghai Composite Index dipped 6.50 points or 0.2 percent to 3,481.51 after a government report showed activity in China's vast manufacturing sector expanded at a slower pace in January. The official PMI slipped to 51.3 from December's 51.6.

Growth in the services sector picked up pace, with the corresponding PMI rising to 55.3 from 55 in December.

Meanwhile, Hong Kong's Hang Seng Index advanced 279.98 points or 0.9 percent to 32,887.27.

Japanese shares fell for the sixth straight session as the yen rose against the dollar on concerns over political wrangling on U.S. immigration policy. Investors largely ignored positive readings on the country's industrial production and consumer confidence.

The Nikkei 225 Index fell 193.68 points or 0.8 percent to 23,098.29, while the broader Topix index closed 1.2 percent lower at 1,836.71. While mining companies and steelmakers led the losses, Advantest jumped 5.7 percent after raising its profit forecast.

NEC Corp rallied 3.8 percent after the electronics maker said it was seeking to reduce its domestic workforce by 3,000 people.

Australian shares reversed early declines to close higher, led by realty stocks. The benchmark S&P/ASX 200 Index rose 14.90 points or 0.3 percent to 6,037.70, while the broader All Ordinaries Index ended 0.2 percent higher at 6,146.50.

Miners Rio Tinto and Fortescue Metals Group fell over 2 percent after the release of disappointing Chinese manufacturing data.

Commonwealth Bank eased 0.3 percent after it was sued for alleged rate rigging by the nation's securities regulator. Westpac ended marginally lower, while ANZ and NAB rose 0.4 percent and 0.2 percent, respectively.

Energy majors Santos and Oil Search dropped 1-2 percent as oil extended losses for a third straight session on signs of rising U.S. crude output.

Property developer Scentre Group rallied 2.7 percent and Stockland Corp advanced 1.4 percent after both headline and core inflation figures for the December quarter came in slightly below expectations.

Cancer treatment specialist Sirtex Medical soared as much as 46 percent after it accepted a $1.6 billion takeover offer from Varian Medical Systems.


European shares are turned in a mixed performance on Wednesday as investors digest mixed earnings and economic releases and look ahead to the outcome of the Federal Reserve's latest two-day monetary policy meeting concluding later in the day.

Some economists expect the central bank to raise its economic assessment at Fed Chair Janet Yellen's final meeting.

In economic news, Eurozone inflation slowed as expected in January, flash data from Eurostat revealed. Inflation came in at 1.3 percent, in line with expectations, but lower than December's 1.4 percent.

The Eurozone jobless rate held steady at an almost 9-year low of 8.7 percent in December, while Germany's unemployment extended its decline at the start of the year.

German retail sales fell 1.9 percent year-on-year in December, in contrast to November's 4.3 percent increase. French consumer inflation increased to 1.4 percent in January on higher services and energy prices.

While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the German DAX Index is up by 0.2 percent and the French CAC 40 Index is up by 0.4 percent.

Home appliance manufacturer Electrolux has soared after announcing plans to close its St. Cloud facility.

Dairy Crest Group shares have also jumped after the British dairy products company kept its full-year outlook after reporting revenue for the nine months ended December 31, 2017 that was well ahead of the previous year.

Meanwhile, H&M Group shares have tumbled after the Swedish fashion giant reported a drop in fourth quarter sales and profits following a bout of heavy price cutting and reduced footfall to its stores.

Telecom equipment maker Ericsson has also come under pressure after reporting a wider than expected loss for the fourth quarter.

Lonza has moved lower after the Swiss drug ingredients maker issued a cautious outlook for 2018 after posting strong organic sales growth and higher margins for fiscal 2017.

Embattled outsourcing group Capita has plummeted after warning on profits, announcing a rights issue and suspending dividend.

U.S. Economic Reports

Private sector employment in the U.S. increased by much more than anticipated in the month of January, according to a report released by payroll processor ADP.

ADP said employment in the private sector spiked by 234,000 jobs in January after surging up by a revised 242,000 jobs in December.

Economists had expected an increase of about 185,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month.

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 64.1 in January from 67.8 in December, although a reading above 50 would still indicate growth.

The National Association of Realtors is due to release its report on pending home sales in the month of December at 10 am ET. Economists expect pending home sales to rise by 0.4 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended January 26th.

Crude oil inventories are expected to edge up by 126,000 barrels after falling by 1.1 million barrels in the previous week.

Following a two-day meeting, the Federal Reserve is scheduled to announce it latest monetary policy decision at 2 pm ET.
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