Market Analysis

Beyond the Numbers

Futures Pointing To Roughly Flat Open On Wall Street
2/4/2019 8:55 AM

The major U.S. index futures are pointing to a roughly flat opening on Monday following the strong upward move seen last week.

Traders may be reluctant to make significant moves after the recent strength on Wall Street lifted the major averages to their best levels in nearly two months.

Uncertainty about trade talks between the U.S. and China may keep some traders on the sidelines along with the potential for another government shutdown amid an ongoing impasse over President Donald Trump’s border wall.

The economic calendar for the week is also relatively light, although traders are likely to keep an eye on reports on service sector activity international trade, and labor productivity and costs.

Traders may also look ahead to this week’s batch of earnings news, including the release of Google parent Alphabet’s (GOOGL) fourth quarter results after the close of today’s trading.

Stocks fluctuated over the course of the trading session on Friday before eventually ending the day mixed. Despite the choppy trading, the Dow and the S&P 500 reached their best closing levels in nearly two months.

The major averages finished the session on opposite sides of the unchanged line. While the Nasdaq fell 17.87 points or 0.3 percent to 7,263.87, the Dow rose 64.22 points or 0.3 percent to 25,063.89 and the S&P 500 inched up 2.43 points or 0.1 percent to 2,706.53.

Despite the mixed performance on the day, the major averages all moved sharply higher for the week. The Dow jumped by 1.3 percent, while the Nasdaq and the S&P 500 surged up by 1.4 percent and 1.6 percent, respectively.

The Dow benefited from strong gains by Merck (MRK), Exxon Mobil (XOM), and Chevron (CVX), which moved higher after reporting better than expected fourth quarter earnings.

On the other hand, a steep drop by Amazon (AMZN) weighed on the Nasdaq after the online retail giant reported fourth quarter results that exceeded analyst estimates but forecast weaker than expected first quarter revenues.

Traders were also digesting a report from the Labor Department showing much stronger than expected job growth in the month of January but also an uptick in the unemployment rate

The Labor Department said non-farm payroll employment surged up by 304,000 jobs in January compared to economist estimates for an increase of about 165,000 jobs.

However, the report also showed the spike in employment in the previous month was downwardly revised to 222,000 jobs from the initially reported 312,000 jobs.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the jump in employment in January still provides "further evidence that economic growth remains solid and that the government shutdown had little impact."

Traders largely shrugged off the unexpected increase in the unemployment rate to 4.0 percent, as the uptick reflected a rise in workers on temporary layoff as a result of the government shutdown.

A separate report from the Institute for Supply Management showed growth in the manufacturing sector unexpectedly reaccelerated in January after seeing a substantial slowdown in December.

The ISM said its purchasing managers index climbed to 56.6 in January from a revised 54.3 in December, with a reading above 50 indicating growth in the manufacturing sector.

Economists had expected the manufacturing index to edge down to 54.0 from 54.1 originally reported for the previous month.

Oil service stocks showed a significant move to the upside over the course of the trading session, driving the Philadelphia Oil Service Index up by 1.6 percent. The strength in the oil service sector came amid a sharp increase by the price of crude oil.

Considerable strength also emerged among networking stocks, as reflected by the 1.6 percent advance by the NYSE Arca Networking Index. The index reached a nearly four-month closing high.

Semiconductor, brokerage, and housing stocks also saw notable strength, while substantial weakness was visible among retail and steel stocks.

Commodity, Currency Markets

Crude oil futures are sliding $0.53 to $54.73 a barrel after jumping $1.47 to $55.26 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,316.40, down $5.70 from the previous session’s close of $1,322.10. On Friday, gold fell $3.10.

On the currency front, the U.S. dollar is trading at 109.96 yen compared to the 109.50 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1449 compared to last Friday’s $1.1456.


Asian stocks ended mostly higher on Monday as upbeat U.S. jobs data helped investors shrug off worries over U.S.-China trade tensions. Investors also took weak service sector data from China in stride.

The Chinese market remain closed for a week for the Spring Festival. Seoul markets were also closed for the Lunar New Year holidays.

Hong Kong's Hang Seng Index rose 59.47 points or 0.2 percent to 27,990.21 even as data showed activity in China's service sector moderated in January.

The Caixin services PMI fell to 53.6 from 53.9 in December even though new export sales grew at the fastest pace in more than a year.

Japanese shares closed higher, with a weaker yen on the back of solid U.S. jobs data and a surge in crude oil prices helping underpin investor sentiment.

The Nikkei 225 Index gained 95.38 points or 0.5 percent to finish at 20,883.77, while the broader Topix closed 1.1 percent higher at 1,581.33.

Exporters Canon and Panasonic both rose about 1 percent. Nissan Motor gained 0.9 percent after it decided not to build the X-Trail model at its existing U.K. plant. Mitsubishi Electric rallied 2.5 percent despite cutting its full-year forecast.

Meanwhile, Sony lost over 8 percent after the tech giant forecast lower full-year sales due to weaker than expected sales in the semiconductors, mobile communications and imaging products segments.

Australian markets finished modestly higher, led by banking stocks as investors braced for the fallout from Kenneth Hayne's financial services report released by the government shortly after the close.

The benchmark S&P/ASX 200 Index rose 28.40 points or 0.5 percent to 5,891.20, and the broader All Ordinaries Index ended up 27.70 points or 0.5 percent at 5,963.

The big four banks rose between 0.8 percent and 1.2 percent, while wealth manager AMP fell 1.3 percent. Energy stocks finished broadly higher, with Origin Energy climbing 3 percent.

Mining stocks ended on a subdued note, with Rio Tinto falling over 1 percent despite a surge in iron ore prices over the weekend.

Boral slumped 7.9 percent after the building materials provider cut its domestic outlook.

The Aussie dollar slipped after data showed the total number of building approvals issued in Australia fell a seasonally adjusted 8.4 percent in December.


European stocks are turning in a mixed performance on Monday as the euphoria over stronger than expected U.S. jobs data has faded a little and investors await further developments on Brexit and the U.S.-China trade dispute.

U.S.-China trade negotiations ended without concrete results last week, though both countries claimed progress after two days of "candid, specific and fruitful" discussions in Washington.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to China in mid-February for the next round of talks, according to Xinhua.

On the Brexit front, U.K. MPs will meet Brexit Secretary Steve Barclay today to discuss an alternative arrangement to the Irish backstop.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is down by 0.3 percent and the French CAC 40 Index is down by 0.6 percent.

Swiss private banking group Julius Baer has moved significantly lower after its full-year profit missed expectations.

Denmark's logistics company DSV has also tumbled after its $4 billion-plus bid for Panalpina hit a roadblock.

Miner and commodities trader Glencore has also dropped on reports that it is nearing a $500 million deal to buy iron ore from Brazil's Companhia Siderurgica Nacional.

Low-cost airline Ryanair Holdings has also slumped after it posted a third quarter loss on higher revenues.

On the other hand, budget carrier Flybe Group is soaring in London after it agreed to a demand from its largest shareholder to call a general meeting to remove chairman Simon Laffin.

Digital payments company Wirecard has also jumped after recent steep losses as it rebutted reports by the Financial Times of alleged financial irregularities.

In economic news, Sentix research group said its investor sentiment index for the eurozone dropped to -3.7 in February from -1.5 in the previous month. The latest score marked the lowest level in more than four years.

U.K. construction activity hit a 10-month low in January amid Brexit uncertainty, the latest survey report from Markit Economics showed.

U.S. Economic Reports

At 10 am ET, the Commerce Department is scheduled to release its report on factory orders in the month of November. Factory orders are expected to rise by 0.2 percent in November after tumbling by 2.1 percent in October.

Cleveland Federal Reserve President Loretta Mester is due to deliver a speech on the economic outlook and monetary policy at a 50 Club of Cleveland meeting in Cleveland, Ohio, at 7:30 pm ET.

Stocks In Focus

Shares of Alexion Pharmaceuticals (ALXN) are moving sharply higher in pre-market trading after the drug maker reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Consumer products maker Clorox (CLX) is also likely to see initial strength after reporting fiscal second quarter earnings that came in above expectations.

Shares of Bristol-Myers Squibb (BMY) may also move to the upside after a report from Bloomberg said activist hedge fund Starboard Value has taken a stake in the drug giant.

On the other hand, shares of Bristol-Myers’ acquisition target Celgene (CELG) are seeing pre-market weakness on the heels of the news.

Online dating service operator Match Group (MTCH) may also come under pressure after Goldman Sachs initiated coverage of the company’s stock with a Sell rating.
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