Market Analysis

Beyond the Number

Upbeat Economic Data May Generate Buying Interest
3/13/2019 8:57 AM

The major U.S. index futures are pointing to a higher opening on Wednesday, with the major averages likely to move to the upside after ending the previous session.

Early buying interest may be generated in reaction to a report from the Commerce Department showing an unexpected increase in durable goods orders in the month of January.

Trading activity may be somewhat subdued, however, as traders keep a close eye developments in the U.K. regarding Brexit.

Following the rally seen on Monday, the major averages moved in opposite directions during trading on Tuesday. While the Dow pulled back, the broader Nasdaq and S&P 500 extended Monday’s strong upward move.

The major averages eventually ended the session mixed. The Dow fell 96.22 points or 0.4 percent to 25,554.66, while the Nasdaq climbed 32.97 points or 0.4 percent to 7,591.03 and the S&P 500 rose 8.22 points or 0.3 percent to 2,791.52.

The loss posted by the Dow was largely due to a continued decline by Boeing (BA), with the aerospace giant tumbling by 6.2 percent after slumping by 5.3 percent on Monday.

The continued drop by Boeing came after the European Union, China, the U.K. and other countries grounded the company's 737 MAX jets following the second crash in less than 6 months.

Meanwhile, the broader markets benefited from the release of tame inflation data, which suggests the Federal Reserve will continue to refrain from raising interest rates in the near future.

After reporting no change in consumer prices over the past few months, the Labor Department released a report showing a modest increase in consumer prices in the month of February.

The Labor Department said its consumer price index rose by 0.2 percent in February after coming in unchanged for three straight months. The uptick in consumer prices matched economist estimates.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent in February after rising by 0.2 percent in January. Economists had expected another 0.2 percent increase in prices.

The report also said the annual rate of consume price growth slowed to 1.5 percent in February from 1.6 percent in November, while the annual rate of core consumer price growth edged down to 2.1 percent from 2.2 percent.

With consumer price growth slowing, Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The Fed would appear to be justified in supporting the real economy by being patient and leaving interest rates on hold for a potentially extended period."

Natural gas stocks showed a significant move to the upside over the course of the session, resulting in a 2.5 percent jump by the NYSE Arca Natural Gas Index.

The strength in the natural gas sector came amid an increase by the price of the commodity, with natural gas for April delivery rising $0.012 to $2.784 per million BTUs.

Considerable strength was also visible among oil service stocks, which remained firmly positive even as the price of crude oil pulled back well off its highs. Reflecting the strength in the sector, the Philadelphia Oil Service Index surged up by 2.5 percent.

Gold stocks also saw substantial strength on the day, benefiting from a rebound by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are climbing $0.62 to $57.49 a barrel after inching up $0.08 to $56.87 a barrel on Tuesday. Meanwhile, after rising $7 to $1,298.10 an ounce in the previous session, gold futures are advancing $8.60 to $1,306.70 an ounce.

On the currency front, the U.S. dollar is trading at 111.44 yen compared to the 111.36 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1295 compared to yesterday's $1.1288.


Asian stocks fell broadly on Wednesday after British Prime Minister Theresa May lost a vote on her second Brexit proposal in a parliamentary showdown.

A "free vote" will take place today on a no-deal Brexit. If that fails, a further vote on Thursday will decide whether to extend the Brexit deadline.

Sentiment was also dented after U.S. trade representative Robert Lighthizer said that "major issues" must still be resolved for a successful U.S.-China trade deal.

Chinese shares tumbled as investors waited for signs of progress on the trade dispute with the United States.

The benchmark Shanghai Composite Index slumped 33.36 points or 1.1 percent to 3,026.95, while Hong Kong's Hang Seng Index fell 133.42 points or 0.4 percent to 28,807.45.

Japanese shares ended sharply lower as the yen strengthened amid continuing global uncertainties and a report showed Japanese machinery orders fell at the fastest pace in four months in January.

The total value of core machinery orders in Japan plunged a seasonally adjusted 5.4 percent in January, missing expectations for a decline of 1.5 percent following the downwardly revised 0.3 percent dip in December.

The Nikkei 225 Index fell 213.45 points 1 percent to 21,290.24 after rallying 1.8 percent in the previous session. The broader Topix closed 0.8 percent lower at 1,592.07.

Mitsubishi UFJ Financial, Dai-ichi Life Holdings and Nomura Holdings lost 1-3 percent after U.S. government debt yields fell on tame inflation data.

Canon, Honda Motors and Panasonic dropped 1-2 percent, while tech stocks such as Advantest and Sumco gave up more than 2 percent. Shin-Etsu Chemical climbed 2.1 percent on share buyback news.

Australian stocks fell for the fourth session in a row as Brexit-related uncertainty weighed on the markets and a slide in Westpac's consumer confidence reinforced a deteriorating outlook for the domestic economy.

The benchmark S&P/ASX 200 Index dipped 13.60 points or 0.2 percent to 6,161.20, while the broader All Ordinaries index ended down 14.60 points or 0.2 percent at 6,246.

Banks ended on a subdued note even as the government backed away from a pledge to ban trailing commissions for mortgage brokers.

Mining heavyweights BHP and Rio Tinto ended slightly lower, while gold miners Evolution, Regis Resources and Newcrest rallied 1-3 percent after gold prices rebounded overnight.

Pharmacy operator Sigma Healthcare plunged 12.3 percent after rejecting a takeover offer from Australian Pharmaceutical Industries.

Shares of Yowie Group soared 21.4 percent after the confectionery maker received a A$20 million takeover bid from investment firm Keybridge Capital.

Seoul stocks fell on uncertainties over U.S.-China trade negotiations and Britain's looming exit from the European Union.

The benchmark Kospi declined 8.77 points or 0.4 percent to finish at 2,148.41. Large-cap shares paced the decliners, with SK Hynix, Samsung Electronics and Hyundai Motor falling 1-2 percent.


European stocks are flat to slightly higher on Wednesday as investors keep a close eye on Brexit proceedings.

A "free vote" will take place today on a no-deal Brexit. If that fails, a further vote on Thursday will decide whether to extend the Brexit deadline.

In economic news, Eurostat data showed that Eurozone industrial output rose 1.4 percent in January after dropping by 0.9 percent in December. Analysts had expected a 1 percent increase.

While the German DAX Index is lingering near the unchanged line, the U.K.’s FTSE 100 Index is up by 0.2 percent and the French CAC 40 Index is up by 0.4 percent.

Spanish fashion retailer Inditex has moved notably lower after its annual profits missed forecasts. Avast has also plunged in London on news its CEO will step down in June.

Wirecard has tumbled in Frankfurt after suspending an accounting employee in Singapore until the end of an investigation into allegations of fraud and creative accounting.

Hikma Pharma is also posting a significant loss after its 2018 results narrowly missed forecasts. Utility E.ON has also fallen after its fiscal 2018 net income dropped 18 percent.

On the other hand, Standard Life Aberdeen has advanced after ditching its unusual co-chief executive structure.

U.S. Economic Reports

New orders for U.S. durable goods unexpectedly increased in the month of January, according to a report released by the Commerce Department.

The report said durable goods orders climbed by 0.4 percent in January after spiking by an upwardly revised 1.3 percent in December.

Economists had expected durable goods orders to drop by 0.5 percent compared to the 1.2 percent jump originally reported for the previous month.

However, excluding a continued surge in orders for transportation equipment, durable goods orders edged down by 0.1 percent in January after rising by an upwardly revised 0.3 percent in December.

Ex-transportation orders had been expected to inch up by 0.1 percent, matching the uptick originally reported for the previous month.

A separate report from the Labor Department showed a modest increase in producer prices in the month of February.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in February after edging down by 0.1 percent in January. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices also ticked up by 0.1 percent in February after climbing by 0.3 percent in the previous month. Core prices were also expected to increase by 0.2 percent.

At 10 am ET, the Commerce Department is due to release its report on construction spending in the month of January. Construction spending is expected to rise by 0.4 percent in January after falling by 0.6 percent in December.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 8th at 10:30 am ET.

Crude oil inventories are expected to increase by 2.9 million barrels after jumping by 7.1 million barrels in the previous week.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $16 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Rite Aid (RAD) are seeing significant pre-market strength after the drugstore chain announced a leadership transition plan as well as an organizational restructuring to cut costs that includes the elimination of approximately 400 full-time positions.

Aurora Cannabis (ACB) is also likely to see an initial move to the upside after hiring billionaire activist investor Nelson Peltz as a strategic advisor.

Shares of Cara Therapeutics (CATA) may also move to the upside after the biotechnology company reported a narrower than expected fourth quarter loss on revenues that exceeded expectations.

On the other hand, shares of Express (EXPR) are moving sharply lower in pre-market trading after the apparel retailer reported better than adjusted fiscal fourth quarter earnings but missed revenue estimates and provided disappointing guidance.
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