Market Analysis

Beyond the Numbers

Upbeat Earnings News May Generate Early Buying Interest
4/16/2019 8:55 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to move back to the upside following the modest weakness seen in the previous session.

The markets are likely to benefit from a positive reaction to earnings news from Dow components UnitedHealth (UNH) and Johnson & Johnson (JNJ).

Shares of UnitedHealth and Johnson & Johnson are moving notably higher in pre-market trading after both companies reported better than expected quarterly results and provided upbeat guidance.

On the other hand, shares of Bank of America (BAC) may move to the downside after the financial giant reported first quarter earnings that beat estimates but weaker than expected revenues.

Stocks saw modest weakness throughout much of the trading session on Monday, but the major averages ended the day well off their worst levels.

The major averages finished the session just below the unchanged line. The Dow slipped 26.53 points or 0.1 percent to 26,384.77, the Nasdaq dipped 8.15 points or 0.1 percent to 7,976.01 and the S&P 500 edged down 1.83 points or 0.1 percent to 2,905.58.

The modest weakness on Wall Street partly reflected a negative reaction to earnings news from Goldman Sachs (GS), with the financial giant slumping by 3.8 percent.

The drop by Goldman Sachs comes after the company reported better than expected first quarter earnings but revenues that missed expectations.

Shares of Citigroup (C) also closed just below the unchanged line even though the company reported first quarter earnings that exceeded analyst estimates.

Nonetheless, traders seemed reluctant to make more significant moves ahead of the release of quarterly results from a slew of other big-name companies in the coming days.

Bank of America (BAC), Johnson & Johnson (JNJ), IBM (IBM), Morgan Stanley (MS), PepsiCo (PEP), and American Express (AXP) are among the companies due to report their results this week.

The impending release of data on industrial production, retail sales, and housing starts also kept some traders on the sidelines along with the holiday on Friday.

In economic news, the New York Federal Reserve released a report showing growth in regional manufacturing activity picked up somewhat in April but remained fairly subdued.

The New York Fed said its headline general business conditions index climbed to 10.1 in April after falling to 3.7 in March, with a positive reading indicating growth in regional manufacturing activity.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Banking, energy, and transportation stocks saw some weakness, however, contributing to the modestly lower close by the major averages.

On the other hand, significant strength was visible among computer hardware stocks, with the NYSE Arca Computer Hardware Index surging up by 2.8 percent to a six-month high.

Digital imaging company Electronics For Imaging (EFII) soared by 29.2 percent after agreeing to be acquired by an affiliate of Siris Capital in an all-cash transaction valued at approximately $1.7 billion.

Commodity, Currency Markets

Crude oil futures are rising $0.33 to $63.73 barrel after falling $0.49 to $63.40 a barrel on Monday. Meanwhile, after sliding $3.90 to $1,291.30 ounce in the previous session, gold futures are tumbling $10 to $1,281.30 an ounce.

On the currency front, the U.S. dollar is trading at 111.99 yen compared to the 112.04 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1299 compared to yesterday’s $1.1304.


Asian stocks advanced on Tuesday as the U.S. and Japan kicked off their first round of trade talks in Washington aimed at creating a bilateral trade framework.

Bank of Japan Governor Haruhiko Kuroda said in an interview with CNBC that "some sort of protectionism" around global trade is the biggest threat to global economic growth.

Chinese shares hit their highest level in nearly 13 months after data showed housing prices in 70 major Chinese cities increased an average of 10.6 percent year-on-year in March, signaling an economic rebound.

The benchmark Shanghai Composite Index surged up 75.81 points or 2.4 percent to 3,253.60, marking the biggest single-day gain for the index in more than two weeks and the highest closing level since March 22, 2018. Hong Kong's Hang Seng Index jumped 319.15 points or 1.1 percent to 30,129.87.

Japanese shares hit a fresh four-month high as the yen held close to 2019 lows against the dollar and NTT Docomo Inc. announced its new mobile phone charge plans.

The Nikkei 225 Index rose 52.55 points or 0.2 percent to 22,221.66, while the broader Topix ended marginally lower at 1,626.46.

NTT Docomo jumped 3.6 percent after it announced smaller-than-feared price cuts. KDDI Corp. soared 5.9 percent and SoftBank Corp. added 1.3 percent on hopes that lower fees will help stimulate consumer spending.

Australian stocks ended modestly higher, with gold miners and financials pacing the gainers. The benchmark S&P/ASX 200 Index climbed 26.00 points or 0.4 percent to 6,277.40, while the All Ordinaries Index ended up 24.40 points or 0.4 percent at 6,372.30.

Rio Tinto gained half a percent despite the mining giant cutting its full-year iron ore guidance. Rival BHP shed 0.4 percent ahead of its quarterly production report on Wednesday, while Fortescue Metals Group declined 0.6 percent.

Energy stocks such as Oil Search, Santos and Woodside Petroleum fell between 0.4 and 0.9 percent as oil extended losses on fears about oversupply after a Russian minister said the nation and OPEC might boost crude output to fight the United States for market share. Beach Energy dropped 1.4 percent.

The big four banks rose between 0.6 percent and 1.3 percent despite underwhelming earnings from Goldman Sachs and Citigroup.

Gold miners surged after three days of losses. Newcrest climbed 1.9 percent and Northern Star advanced 0.6 percent.

Lynas Corp., which is fending off a takeover bid from conglomerate Wesfarmers, gained 1 percent after it reported a more than 32 percent increase in production of rare earths oxides during the March quarter.

Vitamin maker Blackmores lost 1.6 percent after its profit for the first nine months of the year declined 14 percent amid softening demand from China.

Minutes from the Reserve Bank of Australia's April 2nd policy meeting showed that there is no strong case for a near-term move in interest rates.

Seoul stocks closed higher for the higher for 13th consecutive session as foreign investors lapped up large-cap shares amid easing worries of a significant slowdown in global growth. The benchmark Kospi inched up 5.75 points or 0.3 percent to 2,248.63.

Shares of Asiana Airlines jumped 16.1 percent after climbing as much as 30 percent the previous day. SK Networks jumped 7.5 percent on news that its parent group could possibly take over Asiana Airlines.


European shares haven risen on Tuesday as trade talks between the U.S. and China appeared to be nearing their conclusion and a report showed new home prices in China grew slightly faster in March.

China will publish first quarter GDP growth figures tomorrow, along with monthly industrial output and retail sales numbers.

Closer to home, the German ZEW economic sentiment index rebounded to 3.1 in April, versus 0.8 expected and -3.6 last month.

Official data showed the U.K. unemployment rate held at a 44-year low of 3.9 percent in February compared to expectations for an uptick to 4 percent.

While the French CAC 40 Index has inched up by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.5 percent and the German DAX Index is up by 0.7 percent.

Italian lender UniCredit has moved notably higher. The bank and its two subsidiaries have agreed to pay penalties totaling approximately $1.3 billion after reaching settlement agreements with U.S. and New York authorities.

Steel pipe maker Tenaris has also rallied as an Argentine court reversed a decision against the company's chief executive and chairman.

Zalando shares have also jumped after the German e-commerce company said it posted an operating profit in the first quarter.

JD Sports Fashion has rallied in London after reporting better than expected full-year earnings.

Ashmore Group has also moved sharply higher after its assets under management for the quarter ended March 31 increased 11.2 percent.

On the other hand, Recruiter Hays has slumped after its quarterly net fee growth fell short of market expectations.

U.S. Economic Reports

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of March. Industrial production is expected to rise by 0.2 percent in March after revised data showed no change in February.

The National Association of Homebuilders is due to release its report on homebuilder confidence in the month of April at 10 am ET. The housing market index is expected to inch up to 63 in April from 62 in March.

At 2 pm ET, Dallas Federal Reserve President Robert Kaplan is scheduled to participate in a moderated Q&A session at the Community Forum hosted by the Dallas Fed in El Paso, Texas.

Stocks In Focus

Shares of UnitedHealth (UNH) are moving notably higher in pre-market trading after the health insurer reported better than expected first quarter results and raised its full-year earnings guidance.

Healthcare giant Johnson & Johnson (JNJ) may also see initial strength after reporting first quarter results that exceeded analyst estimates and boosting its forecast for full-year sales growth.

Shares of Netflix (NFLX) are also seeing pre-market strength ahead of the release of the video streaming giant’s quarterly results after the close of trading, as Deutsche Bank upgraded its rating on the stock to Buy from Hold.

On the other hand, shares of J.B. Hunt (JBHT) are likely to come under pressure after the trucking company reported weaker than expected first quarter results.
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