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Beyond the Numbers

Lingering Uncertainty May Lead To Choppy Trading On Wall Street
3/14/2019 8:59 AM

The major U.S. index futures are pointing to a roughly flat opening on Thursday following the strength seen in the previous session.

Traders may take a breather following recent volatility on Wall Street, with the upward move seen over the past few sessions largely offsetting the pullback seen last week.

Uncertainty about Brexit may keep traders on the sidelines, with members of parliament due to vote later today on delaying Brexit after they rejected the idea of leaving the European Union without a deal.

Nonetheless, renewed concerns about a potential trade deal between the U.S. and China may weigh on the markets after a report from Bloomberg said a meeting between President Donald Trump and Chinese President Xi Jinping has been pushed back.

Citing three people familiar with the matter, Bloomberg said the meeting to sign an agreement to end the U.S.-China trade war won’t occur this month and is more likely to happen in April at the earliest.

The report from Bloomberg comes after Trump told reporters on Wednesday that he is in “no rush” to complete a trade deal with China.

Stocks fluctuated late in the session but managed to remain firmly positive throughout most of the trading day on Wednesday. With the upward move, the Nasdaq and the S&P 500 ended the session at their best closing levels in five and four months, respectively.

The major averages all moved to the upside on the day after ending Tuesday’s trading mixed. The Dow rose 148.23 points or 0.6 percent to 25,702.89, the Nasdaq advanced 52.37 points or 0.7 percent to 7,643.41 and the S&P 500 climbed 19.40 points or 0.7 percent to 2,810.92.

The strength on Wall Street partly reflected a positive reaction to a Commerce Department report showing an unexpected increase in durable goods orders in the month of January.

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.

However, the increase in durable goods orders was largely due to a continued surge in orders for transportation equipment, which could nosedive in the comings months as aerospace giant Boeing (BA) deals with the second crash of one of its 737 Max 8 jets in less than six months.

Excluding the jump 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.

Meanwhile, the Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched indicator of business spending, climbed by 0.8 percent in January after slumping by 0.9 percent in December.

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 months. Core prices were also expected to increase by 0.2 percent.

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.

"The rebound in underlying capital goods orders in January stands out as a positive amid the recent flood of downbeat activity data, but it is still consistent with a gradual slowdown in business equipment investment growth in the first quarter," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "And with the February producer price figures showing that pipeline inflationary pressures remain subdued, there is still a strong case for the Fed to remain patient."

Biotechnology stocks showed a substantial move to the upside over the course of the trading session, driving the NYSE Arca Biotechnology Index up by 2.1 percent.

Cara Therapeutics (CARA) helped lead the biotech sector higher after reporting a narrower than expected fourth quarter loss on revenues that exceeded expectations.

Significant strength was also visible among energy stocks, which moved sharply higher along with the price of crude oil.

Steel, healthcare, and transportation stocks also saw considerable strength on the day but managed to remain firmly in positive territory.

Commodity, Currency Markets

Crude oil futures are rising $0.35 to $58.61 a barrel after jumping $1.39 to $58.26 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,298.40, down $10.90 compared to the previous session's close of $1,309.30. On Wednesday, gold surged up $11.20.

On the currency front, the U.S. dollar is trading at 111.65 yen compared to the 111.17 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1306 compared to yesterday’s $1.1327.

Asia

Asian stocks turned in a mixed performance on Thursday after British lawmakers rejected a possible no-deal Brexit, forcing Prime Minister Theresa May to give members of parliament another chance to vote on delaying Brexit.

Chinese data signaled further weakness in the world's second biggest economy but at the same time raised hopes for more policy support.

Chinese shares fell as mixed economic readings rekindled growth worries. China's Shanghai Composite Index slumped 36.27 points or 1.2 percent to 2,990.68, although Hong Kong's Hang Seng Index finished 43.93 points or 0.2 percent higher at 28,851.39.

China's industrial output grew an annual 5.3 percent in the first two months of 2019, a government report showed. This marked the slowest pace of growth in 17 years and fell short of expectations for an increase of 5.5 percent.

At the same time, retail sales climbed 8.2 percent and fixed asset investment rose 6.1 percent in the same period, beating expectations.

Japanese shares ended slightly lower after a slew of Chinese data proved to be a mixed bag. The Nikkei 225 Index gave up early gains to end marginally lower at 21,287.02. The broader Topix slipped 0.2 percent to 1,588.29.

Shipping firms paced the declines, with Kawasaki Kisen tumbling 3.1 percent. Semiconductor equipment maker Samco Inc. plunged 10.5 percent after cutting its net profit forecast.

On the other hand, index heavyweight SoftBank Group gained 1.3 percent after reports that a consortium that includes SoftBank is in late-stage talks to invest $1 billion or more in the self-driving vehicle unit of Uber Technologies Inc's.

Australian markets eked out modest gains as higher commodity prices helped lift resource stocks. The benchmark S&P/ASX 200 Index rose 18.40 points or 0.3 percent to 6,179.60, while the broader All Ordinaries index ended up 20.80 points or 0.3 percent at 6,266.80.

Mining heavyweight BHP advanced 0.8 percent and Rio Tinto climbed 1 percent after zinc prices hit an eight-month high on the London Metal Exchange (LME).

Energy stocks Woodside Petroleum, Oil Search, Origin Energy and Santos jumped 1-2 percent as Brent crude oil prices hit their highest level so far this year on data showing an unexpected drop in U.S. crude inventories.

Meanwhile, Commonwealth Bank edged down 0.2 percent after it shelved preparations to float its wealth management, mortgage broking, and financial planning businesses. The other three big banks fell between 0.2 percent and 0.7 percent.

Seoul stocks gained ground after U.K. lawmakers rejected a no-deal Brexit, paving the way for a vote that could delay Brexit until the end of June.

The benchmark Kospi rose 7.27 points or 0.3 percent to 2,155.68, led by refiners SK Innovation and S-Oil. Automakers tumbled, with Hyundai Motor, Kia Motors and Hyundai Mobis losing 1-3 percent.

Europe

European stocks are mostly higher on Thursday as Brexit-related worries ease and investors digest mixed data from China. British MPs will vote later today on delaying Brexit after they rejected the idea of leaving the EU without a deal.

While the French CAC 40 Index has advanced by 0.6 percent, the U.K.’s FTSE 100 Index and the German DAX Index are up by 0.5 percent and 0.4 percent, respectively.

Swiss watch and jewelry maker Swatch Group has moved notably higher after its net income for fiscal year 2018 increased 14.8 percent from last year.

Italy's top insurer Generali has also moved to the upside after it reported an increase in 2018 profit and raised its dividend.

Balfour Beatty has also climbed after being selected as the preferred bidder for Network Rail's 1.5 billion pound Central Track Alliance contract.

On the other hand, retirement services specialist Just Group has moved sharply lower in London on equity dilution worries.

French retailer Casino Group has also dropped after it reported a net loss for the full year of 54 million euros compared to a year-ago net profit of 101 million euros.

Deutsche Lufthansa has also slumped in Frankfurt after its fourth quarter net profit fell and the airline cut is growth plans.

Specialty chemicals company Lanxess has also moved to the downside as it posted flat operating earnings in the fourth quarter.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits increased by more than expected in the week ended March 9th, according to a report released by the Labor Department.

The report said initial jobless claims rose to 229,000, an increase of 6,000 from the previous week’s unrevised level of 223,000. Economists had expected jobless claims to edge up to 225,000.

A separate report released by the Labor Department showed U.S. import and export prices both rose by more than anticipated in the month of February.

The Labor Department said import prices climbed by 0.6 percent in February after inching up by a revised 0.1 percent in January.

Economists had expected import prices to rise by 0.3 percent compared to the 0.5 percent drop originally reported for the previous month.

The report said export prices also increased by 0.6 percent in February after falling by a revised 0.5 percent in January.

Export prices had been expected to tick up by 0.1 percent compared to the 0.6 percent decrease originally reported for the previous month.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of January.

New home sales are expected to edge down to an annual rate of 620,000 in January after climbing to a rate of 621,000 in December.

Stocks In Focus

Shares of Dollar General (DG) are moving significantly lower in pre-market trading after the discount retailer reported weaker than expected fourth quarter earnings and forecast fiscal 2019 earnings below analyst estimates.

Retail holding company Tailored Brands (TLRD) is also seeing substantial pre-market weakness after reporting a narrower than expected fiscal fourth quarter loss but providing disappointing fiscal first quarter guidance.

On the other hand, database company MongoDB (MDB) is also likely to see initial strength after reporting fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines and providing upbeat guidance.
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