logo

Market Analysis

mail
Share
Beyond the Numbers

Profit Taking May Lead To Pullback On Wall Street
3/22/2019 8:58 AM

The major U.S. index futures are currently pointing to a lower opening on Friday, with stocks likely to give back ground following the rally seen in the previous session.

Profit taking may contribute to initial weakness on Wall Street after the strong upward move seen on Thursday lifted the Nasdaq and the S&P 500 to new five-month closing highs.

Lingering uncertainty about trade talks between the U.S. and China may also weigh on the markets ahead of another round of high-level negotiations next week.

Meanwhile, traders continue to digest the Federal Reserve’s dovish monetary policy announcement earlier in the week.

The Fed’s decision to move away from plans to continue raising interest rates this year has been described by some analysts as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

The central bank has also been accused of bending to pressure from President Donald Trump, who has claimed U.S. economic growth would be even stronger if the Fed had not raised rates last year.

Chairman Jerome Powell has continually touted the Fed’s independence, however, suggesting the dovish tone could also reflect legitimate concerns about the economic outlook.

After recovering from an initial move to the downside, stocks moved sharply higher over the course of the trading session on Thursday. With the rally on the day, the Nasdaq and the S&P 500 reached their best closing levels in well over five months.

The major averages ended the day firmly in positive territory but off their highs of the session. The Dow climbed 216.84 points or 0.8 percent to 25,962.51, the Nasdaq surged up 109.99 points or 1.4 percent to 7,838.96 and the S&P 500 jumped 30.65 points or 1.1 percent to 2,854.88.

Technology stocks helped to lead the substantial upward move on Wall Street, contributing to the significant advance by the tech-heavy Nasdaq.

Apple (AAPL) posted a standout gain, jumping by 3.7 percent after Needham upgraded its rating on the company's stock to Strong Buy from Buy, citing "value upside" in Apple's ecosystem.

The rally on Wall Street also came as a batch of largely upbeat U.S. data offset economic concerns raised by the Federal Reserve no longer forecasting interest rate hikes this year.

Before the start of trading, the Labor Department released a report showing a bigger than expected drop in initial jobless claims in the week ended March 16th.

The report said initial jobless claims dropped to 221,000, a decrease of 9,000 from the previous week's revised level of 230,000.

Economists had expected jobless claims to dip to 225,000 from the 229,000 originally reported for the previous week.

A separate report from the Philadelphia Federal Reserve showed regional manufacturing activity rebounded more than expected in March after an unexpected contraction in February.

Additionally, the Conference Board also released a report showing a slightly bigger than expected increase by its reading on leading U.S. economic indicators.

The Conference Board said its leading economic index edged up by 0.2 percent after revised data showed no change in January. Economists had expected the index to inch up by 0.1 percent.

Semiconductor stocks have moved substantially higher over the course of the trading session, driving the Philadelphia Semiconductor Index up by 3.5 percent to a one-year closing high.

Chipmaker Micron (MU) led the sector higher after reporting fiscal second quarter results that beat expectations on both the top and bottom lines.

Considerable strength was also visible among computer hardware stocks, as reflected by the 3.1 percent jump by the NYSE Arca Computer Hardware Index. The index reached its best closing level in over four months.

Housing stocks also moved significantly higher on the day, with the Philadelphia Housing Sector Index surging up by 2.4 percent.

Software, networking, commercial real estate, and transportation stocks also saw notable strength, while banking stocks were among the few groups to buck the uptrend.

Commodity, Currency Markets

Crude oil futures are slumping $0.86 to $59.12 a barrel after slipping $0.25 to $59.98 on Thursday. Meanwhile, after climbing $5.60 to $1,307.30 an ounce in the previous session, gold futures are rising $3.60 to $1,310.90 an ounce.

On the currency front, the U.S. dollar is trading at 110.25 yen compared to the 110.82 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1308 compared to yesterday’s $1.1374.

Asia

Asian stocks ended on a muted note Friday as the initial euphoria over the Fed's dovish stance faded and investors looked ahead to a new round of high-level U.S.-China trade negotiations beginning in Beijing next week. Brexit developments also remained in the spotlight after EU leaders agreed on a plan to delay the Article 50 process.

Chinese shares showed little change as investors looked forward to another round of U.S.-China trade talks next week. The benchmark Shanghai Composite Index crept up 2.69 points or 0.1 percent to 3,104.15, while Hong Kong's Hang Seng Index inched up 41.80 points or 0.1 percent to 29,113.36.

Japanese shares ended roughly flat even as chipmakers rallied amid the buzz that Apple is preparing to release the AirPower sometime soon. The Nikkei 225 Index fluctuated before finishing up by 18.42 points or 0.1 percent at 21,627.34. The broader Topix rose 0.2 percent to 1,617.11.

Eisai plummeted 16.6 percent after announcing it would end its Alzheimer drug trials. Astellas Pharma tumbled 3.5 percent and Takeda Pharma declined 0.7 percent.

Dai-ichi Life Holdings and T&D Holdings fell over 1 percent as U.S. yields declined in the wake of the Fed's dovish surprise. Advantest Corp jumped 6.2 percent and Tokyo Electron climbed 5.2 percent.

On the economic front, the latest survey from Nikkei revealed that the manufacturing sector in Japan continued to contract at a steady pace in March, with a manufacturing PMI score of 48.9. That's unchanged from the February reading.

Another report showed that overall nationwide inflation in Japan rose an annual 0.2 percent in February, shy of expectations for an increase of 0.3 percent and unchanged from the January reading.

Australian markets advanced, with banks and healthcare companies leading the way higher. The benchmark S&P/ASX 200 Index rose 28.00 points or 0.5 percent to 6,195.20, while the broader All Ordinaries Index ended up 0.4 percent at 6,280.90.

The big four banks rose between 0.3 percent and 0.7 percent after recent declines. Insurer Suncorp Group rallied 1.9 percent as it announced a special dividend.

In the healthcare sector, heavyweight CSL advanced 1.5 percent, while Cochlear added 1.3 percent. Tech stocks such as Altium and Afterpay Touch rose 1-2 percent.

Mining heavyweights BHP and Rio Tinto ended on a mixed note. Newcrest shed 0.8 percent and Evolution lost 2.7 percent as gold extended losses to move further away from a three-week peak hit in the previous session.

St Barbara slumped 29.3 percent after reducing its gold production target at the Gwalia mine in Western Australia. Adult education provider Navitas gained 2.5 percent as it agreed to a A$2.09 billion (S$2 billion) takeover offer by a consortium.

Seoul stocks ended little changed with a positive bias as institutions booked some profits after sharp gains in the previous session. The benchmark Kospi crept up 2.07 points or 0.1 percent to 2,186.95.

Trading in Asiana Airlines' shares was suspended after its auditor said it had not obtained "sufficient and appropriate audit evidence" on the recognition and measurement of doubtful debts.

Europe

European stocks have moved mostly lower during trading on Friday as weak eurozone economic data has rekindled growth worries.

A gauge of eurozone manufacturing activity dropped further to a 71-month low of 47.6 in March versus the 49.5 that was expected and 49.3 in the previous month.

The services PMI also dipped to 52.7 from 52.8, raising concerns that the economic downturn is gaining momentum.

Meanwhile, traders remain focused on Brexit developments as well as the next round of U.S.-China trade talks beginning next week following a series of conflicting reports over the progress of negotiations.

While the German DAX Index has slid by 0.8 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index have tumbled by 1.3 percent and 1.4 percent, respectively.

Travel firm Thomas Cook has after announcing new measures to streamline its U.K. retail network as part of an ongoing program to address changing customer behavior.

Postal service Royal Mail has also shown a notable move to the downside after appointing Keith Williams as its new Chairman.

On the other hand, engineering company Smiths Group has advanced on news it plans to spin off its medical devices business as a new U.K.-listed company.

Aggreko, the world's largest temporary power provider, has also moved significantly higher following a brokerage upgrade.

Infineon Technologies and STMicroelectronics are also moving higher after Apple and other technology companies led a surge in U.S. shares overnight.

U.S. Economic Reports

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of February.

Economists expect existing home sales to surge up by 3.2 percent to a rate of 5.10 million in February after tumbling by 1.2 percent to a three-year low of 4.94 million in January.

The Commerce Department is also due to release its report on wholesale inventories in the month of January at 10 am ET. Wholesale inventories are expected to rise by 0.2 percent.

At 9:30 pm ET, Atlanta Federal Reserve President Raphael Bostic is scheduled to deliver a speech about the economic outlook and monetary policy at the San Francisco Fed’s Macroeconomics and Monetary Policy Conference.

Stocks In Focus

Shares of Nike (NKE) are moving considerably lower in pre-market trading after the athletic equipment maker reported fiscal third quarter earnings that exceeded analyst estimates but weaker than expected North American sale growth.

Uniform rental company Cintas (CTAS) could also see initial weakness after reporting better than expected fiscal third quarter earnings but on revenues that missed estimates.

Shares of Zuora (ZUO) may also come under pressure after the cloud-based subscription management company provided disappointing guidance.

On the other hand, shares of Hibbett Sports (HIBB) are moving sharply higher in pre-market trading after the sporting goods retailer reported better than expected fourth quarter results and provided upbeat guidance.

Hibbett Sports also announced the planned retirement of President and CEO Jeff Rosenthal, who will remain at the company in his CEO capacity until a successor is named.
Follow RTT
Tomorrows Potential Movers
Company
Symbol
Name
Up
Down
News