Market Analysis

Beyond the Numbers

Upbeat Earnings News May Generate Early Buying Interest
1/16/2019 8:52 AM

The major U.S. index futures are pointing to a higher opening on Wednesday, with stocks likely to add to the gains posted in the previous session.

Early buying interest may be generated in reaction to upbeat earnings news from financial giants Bank of America (BAC) and Goldman Sachs (GS).

Shares of Bank of America are moving notably higher in pre-market trading after the company reported fourth quarter results that beat analyst estimates on both the top and bottom lines.

Goldman Sachs is also seeing pre-market strength after reporting fourth quarter earnings and revenues that exceeded expectations.

Meanwhile, traders have largely shrugged off the widely anticipated defeat of U.K. Prime Minister Theresa May’s Brexit plan.

After ending Monday’s trading mostly lower, stocks moved back to the upside during the trading day on Tuesday. The major averages fluctuated as the day progressed but maintained a positive bias throughout most of the session.

The major averages all closed notably higher, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq soared 117.92 points or 1.7 percent to 7,023.83, the S&P 500 jumped 27.69 points or 1.1 percent to 2,610.30 and the Dow climbed 155.75 points or 0.7 percent to 24,065.59.

The Nasdaq benefited from a significant advance by shares of Netflix (NFLX), with the video streaming giant surging up by 6.5 percent.

The jump by Netflix came after the company revealed the biggest increase in subscription prices since launching its service twelve years ago.

Tech giant Apple (AAPL) also posted a notable gain on news a German court has thrown out a parent lawsuit filed against the company by chipmaker Qualcomm (QCOM).

Meanwhile, traders were also digesting mixed earnings news from financial giants JPMorgan Chase (JPM) and Wells Fargo (WFC).

JPMorgan reported fourth quarter earnings that missed analyst estimates on weaker than expected bond-trading revenue, while Wells Fargo reported better than expected fourth quarter earnings but its revenues for the quarter came in below expectations.

On the U.S. economic front, a report released by the Labor Department showed a modest decrease in producer prices in the month of December.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in December after inching up by 0.1 percent in November. Economists had expected prices to slip by 0.1 percent.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in December after climbing by 0.3 percent in November. Core prices had been expected to rise by 0.2 percent.

A separate report released by the Federal Reserve Bank of New York showed New York manufacturing activity grew at its slowest pace in over a year in the month of January.

The New York Fed said its general business conditions index slumped to 3.9 in January after tumbling to a revised 11.5 in December.

A positive reading still indicates growth, although economists had expected the index to show a much more modest decrease to 10.8.

Biotechnology stocks showed a substantial move to the upside over the course of the trading session, resulting in a 2.5 percent spike by the NYSE Arca Biotechnology. With the jump, the index reached its best closing level in well over a month.

Exelixis (EXEL) posted a standout gain after the FDA approved the biotech company's Cabometyx tablets for patients with hepatocellular carcinoma who have been previously treated with sorafenib.

Significant strength was also visible among software stocks, with the Dow Jones Software Index surging up by 2.3 percent to a one-month closing high.

Healthcare, retail, and networking stocks also saw considerable strength on the day moving higher along with most of the other major sectors.

Meanwhile, gold stocks bucked the uptrend, dragging the NYSE Arca Gold Bugs Index down by 2.7 percent. The weakness in the sector came amid a decrease by the price of gold.

Commodity, Currency Markets

Crude oil futures are falling $0.52 to $51.59 a barrel after surging up $1.60 to $52.11 a barrel on Tuesday. Meanwhile, after slipping $2.90 to $1,288.40 an ounce in the previous session, gold futures are rising $2 to $1,290.40 an ounce.

On the currency front, the U.S. dollar is trading at 108.80 yen compared to the 108.68 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1389 compared to yesterday’s $1.1413.


Asian shares ended mostly higher on Wednesday even after the U.K. House of Commons voted down Prime Minister Theresa May's Brexit deal by a crushing margin, stoking fresh uncertainty. Japanese stocks bucked the uptrend.

Investors now focus on a no-confidence vote on May's government by Britain's parliament later in the day.

Chinese shares ended little changed, with the benchmark Shanghai Composite Index inched up 0.08 points to 2,570.42 amid the political turmoil surrounding Brexit. Hong Kong's Hang Seng Index edged up 0.3 percent to 26,902.10.

Meanwhile, Japanese shares dropped from a four-week high, as the dollar remained defensive against the yen amid a partial government shutdown in the U.S. and the "very uncertain and unstable" political situation in the U.K.

The Nikkei 225 Index fell 112.54 points or 0.6 percent to 20,442.75, while the broader Topix closed 0.3 percent lower at 1,537.77.

China-related shares were among the hardest hit, with Shiseido declining 2.4 percent after sharp gains the previous day. Hitachi lost 2.6 percent on profit taking after soaring 16 percent over the two previous sessions.

In economic news, Japanese core machinery orders, considered a leading indicator of capital spending, held largely unchanged month-on-month in November, well below forecasts for an increase of 3.0 percent and the 7.6 percent jump in October.

Australian stocks eked out modest gains, led by banks. The benchmark S&P/ASX 200 Index rose 20.60 points or 0.4 percent to 5,835.20, and the broader All Ordinaries Index ended up 21.90 points or 0.4 percent at 5,893.70.

Banks ANZ, NAB and Westpac rose between 0.3 percent and 0.9 percent, while mining heavyweights BHP and Rio Tinto dropped around half a percent.

Gold miners Evolution, Newcrest and Northern Star shed 1-2 percent as a firmer dollar and a rebound in equities dented demand for the precious metal.

Energy stocks turned in a mixed performance despite a more than 3 percent increase in crude oil prices.

Tech stocks followed their U.S. counterparts higher, with Appen and WiseTech global climbing 3-4 percent.

On the economic front, a measure of Australian consumer confidence dropped to 99.6 in January from 104.4 in December.

Seoul stocks rose on hopes of more Chinese stimulus measures after China's central bank made its biggest daily net cash injection via reverse repo operations on record. The benchmark Kospi gained 8.92 points or 0.4 percent to close at 2,106.10.


European stocks are trading mixed on Wednesday after a crushing defeat for U.K. Prime Minister Theresa May's EU withdrawal agreement. May faces a vote of no confidence today, which, if successful, could topple the government and spark a general election.

While the French CAC 40 Index is up by 0.1 percent, the German DAX Index is just below the unchanged line and the U.K.’s FTSE 100 Index is down by 0.6 percent.

Oslo-listed Norsk Hydro has jumped after Brazil's northern state of Para lifted a production embargo on one of its aluminum refineries.

Danish logistics giant DSV has also rallied after it launched an unsolicited bid to buy Swiss rival Panalpina for around 4 billion Swiss francs ($4.04 billion).

UniCredit has also moved notably higher. The Italian lender said that its non-performing exposure portfolio dropped to 4.3 percent in the third quarter of 2018.

JCDecaux has advanced after it signed an 11-year contract with Rotterdam for analogue and digital advertising street furniture.

On the other hand, ThyssenKrupp has fallen in Frankfurt after the European Commission reportedly restarted its investigation into the proposed merger of Tata and ThyssenKrupp's steel operations.

Pearson shares have plunged in London. The publishing and education company said it would deliver a full-year adjusted operating profit in line with guidance.

Consumer goods giant Reckitt Benckiser has also fallen after Chief Executive Officer Rakesh Kapoor indicated his intention to retire by the end of 2019 after more than 8 years as CEO and 32 years at the company.

In economic news, German consumer price inflation eased for a second straight month in December to its lowest level in eight months, the latest figures from the Federal Statistical Office confirmed.

The consumer price index rose 1.7 percent year-on-year following a 2.3 percent increase in November. The latest inflation figure was the lowest since April, when price growth was 1.6 percent.

Britain's annual inflation dropped to 2.1 percent in December, the least in almost two years, from 2.3 percent in November, official data showed.

U.S. Economic Reports

Reflecting a continued nosedive in fuel prices, the Labor Department released a report showing another steep drop in U.S. import prices in the month of December.

The Labor Department said import prices tumbled by 1.0 percent in December after plunging by a revised 1.9 percent in November.

Economists had expected import prices to plummet by 1.3 percent compared to the 1.6 percent slump originally reported for the previous month.

The report said export prices also fell by 0.6 percent in December after sliding by a revised 0.8 percent in November. The drop in export prices matched economist estimates.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of January. The housing market index is expected to come in unchanged after slumping to 56 in December.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended January 11th at 10:30 am ET. Crude oil inventories are expected to drop by 1.5 million barrels.

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

Stocks In Focus

Shares of United Continental (UAL) are moving significantly higher in pre-market trading after the airline reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Bank of New York Mellon (BK) is also seeing pre-market strength after reporting better than expected fourth quarter adjusted earnings.

Shares of Pinnacle Financial (PNFP) may also move to the upside after the regional bank reported fourth quarter results that beat expectations.

On the other hand, shares of Snap (SNAP) are likely to come under pressure on news of the resignation of the Snapchat parent’s CFO Tim Stone.

Department store chain Nordstrom (JWN) is also moving sharply lower in pre-market trading after reporting weaker than expected holiday sales.

Shares of Ford (F) may also see initial weakness after the auto giant forecast fourth quarter earnings below analyst estimates.
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