Market Analysis

Beyond the Numbers

Mixed Batch Of Earnings News Likely To Drive Trading
4/17/2019 9:00 AM

The major U.S. index futures are pointing to a modestly higher opening on Wednesday as traders digest the latest batch of earnings news.

The markets may initially benefit from a positive reaction to upbeat earnings news from companies like Morgan Stanley (MS) and PepsiCo (PEP).

The financial and snack and beverage giants both reported quarterly results that exceeded analyst estimates on both the top and bottom lines.

Early buying interest may be somewhat subdued, however, as traders also react to disappointing results from companies like Netflix (NFLX) and IBM Corp. (IBM).

Netflix and IBM both reported better than expected earnings but on weaker than expected revenues and provided disappointing guidance.

Stocks fluctuated late in the trading session on Tuesday but managed to finish the day modestly higher. With the uptick on the day, the Dow and the Nasdaq ended the session at their best closing levels in over six months.

The S&P 500 briefly dipped into negative territory in late-day trading but ended the session up 1.48 points or 0.1 percent at 2,907.06. The Dow climbed 67.89 points or 0.3 percent to 26,452.66 and the Nasdaq rose 24.21 points or 0.3 percent to 8,000.23.

Early buying interest was generated in reaction to earnings news from Dow components Johnson & Johnson (JNJ) and UnitedHealth (UNH).

Healthcare giant Johnson & Johnson ended the day up by 1.1 percent after reporting first quarter results that exceeded analyst estimates and boosting its forecast for full-year sales growth.

On the other hand, shares of UnitedHealth pulled back after an initial jump even though the health insurer reported better than expected first quarter results and raised its full-year earnings guidance.

Financial giant Bank of America (BAC) ended the day little changed after reporting first quarter earnings that beat estimates but weaker than expected revenues.

The early buying interest was partly offset by a report from the Federal Reserve showing industrial production unexpectedly edged lower in the month of March.

The report said industrial production dipped by 0.1 percent in March after inching up by 0.1 percent in February. Economists had expected production to rise by 0.2 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted the dip in industrial production in March completed a "weak first quarter in which industrial production contracted by 0.3% annualized, as the U.S. factory sector succumbed to the global manufacturing malaise."

Meanwhile, a separate report from the National Association of Home Builders showed a modest improvement in U.S. homebuilder confidence in the month of April.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 63 in April after holding at 62 in March, with the uptick matching expectations.

"Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots," said NAHB Chairman Greg Ugalde.

Semiconductor stocks moved sharply higher over the course of the trading session, driving the Philadelphia Semiconductor Index up by 3.2 percent to a record closing high.

Communications chip maker Qualcomm (QCOM) spiked in afternoon trading after settling a royalty dispute with Apple (AAPL).

Significant strength also emerged among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index climbing by 1.6 percent and 1.5 percent, respectively.

Oil service stocks also move notably higher on the day, while commercial real estate, gold, and healthcare stocks showed substantial moves to the downside.

Commodity, Currency Markets

Crude oil futures are rising $0.38 to $64.43 a barrel after climbing $0.65 to $64.05 a barrel on Tuesday. Meanwhile, after tumbling $14.10 to $1,277.20 an ounce in the previous session, gold futures are inching up $0.80 to $1278 an ounce.

On the currency front, the U.S. dollar is trading at 111.99 yen compared to the 112 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1305 compared to yesterday’s $1.1281.


Asian stocks ended mixed on Wednesday even as upbeat Chinese economic data helped ease worries about a global economic slowdown.

China’s benchmark Shanghai Composite Index gained 9.52 points or 0.3 percent to finish at 3,263.12, its highest closing level in over a year. Hong Kong's Hang Seng Index ended little changed at 30,124.68.

On the economic front, Chinese GDP grew an annual 6.4 percent in the first quarter of 2019, unchanged from the fourth quarter and beating forecasts for 6.3 percent.

Retail sales climbed 8.7 percent year-on-year in March - beating expectations for an increase of 8.4 percent and up from 8.2 percent in February.

Fixed asset investment rose 6.3 percent in the first quarter, in line with expectations and up from 6.1 percent in the previous quarter.

Japanese shares rose for a fifth straight session as the yen held largely flat and Chinese GDP data topped forecasts.

Closer to home, a government report showed that Japanese exports fell an annual 2.4 percent in March, beating expectations for a decline of 2.6 percent following the 1.2 percent drop in the previous month.

The Nikkei 225 Index rose 56.31 points or 0.3 percent to 22,277.97, while the broader Topix closed 0.3 percent higher at 1,630.68.

China-related Komatsu gained 1.9 percent, and exporters Honda Motor and Toyota climbed 1-2 percent. In the tech sector, chip equipment maker Advantest surged up 5.5 percent.

On the other hand, Nippon Paint Holdings lost 3.6 percent after the paint company made a A$3.8 billion acquisition proposal for Australian paint and homeware company DuluxGroup.

Australian markets ended modestly lower as mining giant BHP slashed its full-year iron ore production guidance. The benchmark S&P/ASX 200 Index dropped 21 points or 0.3 percent to 6,256.40, while the broader All Ordinaries Index ended down 22 points or 0.4 percent at 6,350.30.

BHP tumbled 2.7 percent as it reported declines in petroleum, iron ore, and metallurgical coal production during the third quarter. Rio Tinto slumped 4.7 and smaller rival Fortescue Metals Group plunged 8.3 percent after iron ore prices weakened overnight.

DuluxGroup soared 27 percent after its board unanimously backed the takeover bid from Nippon Paint. Telstra rallied 2.1 percent on a brokerage upgrade.

Gold miners Newcrest and Evolution dropped 1-2 percent after gold prices fell more than 1 percent overnight.

The big four banks rose between 0.8 percent and 1.5 percent. Oil & gas producer Santos gained 0.6 percent after it posted record first quarter production.

Seoul stocks paused for breath after rising for 13 consecutive sessions. The benchmark Kospi edged down 2.74 points or 0.1 percent to 2,245.89.

Asiana Airlines slumped 15.7 percent on profit taking after recent strong gains on news that its parent will sell shares in the country's No. 2 air carrier.

Meanwhile, automakers surged, with Hyundai Motor, Kia Motor and Hyundai Mobis adding 1-2 percent.


European stocks are trading mixed on Wednesday as positive GDP data from China was offset by disappointing quarterly updates from U.S. tech giants IBM and Netflix.

While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index are up by 0.3 percent and 0.4 percent, respectively.

ASML Holding has advanced after the semiconductor equipment maker reported better than expected first quarter earnings and maintained a bullish outlook.

Apple supplier Dialog Semiconductor has also risen after Apple and Qualcomm decided to settle their royalty dispute.

Swiss engineering firm ABB has also jumped after unveiling its first-quarter results and naming an interim chief.

Swedish networking and telecommunications company Ericsson has rallied after it turned a profit in the first quarter.

Commerzbank has also jumped on reports that Dutch bank ING approached the German lender about a possible tie-up.

On the other hand, French food group Danone has fallen after its underlying sales rose by a relatively modest 0.8 percent in the first quarter.

British outsourcing group Bunzl has also slumped after flagging slowing quarterly revenue growth. Real estate investment trust Segro has also declined after its new headline rent dropped in its first quarter.

In economic news, Eurozone headline inflation slowed in March and core price growth eased to its lowest level in a year, as initially estimated, the latest data from Eurostat confirmed.

Headline inflation slowed to 1.4 percent from 1.5 percent in February. In January, price growth was 1.4 percent.

Separately, the Eurozone trade surplus increased in February to its highest level in nearly a year, figures from Eurostat showed.

The seasonally adjusted trade surplus rose to 19.5 billion euros from 17.4 billion euros in January. The surplus was the biggest since hitting 20.4 billion euros in March 2018.

U.K. consumer price inflation was unchanged in March, defying expectations for a modest acceleration, preliminary data from the Office for National Statistics showed.

The consumer price index rose 1.9 percent year-on-year, the same as in February. Economists had expected inflation of 2 percent.

Meanwhile, house price inflation eased sharply to 0.6 percent in February, which was the lowest rate since September 2012.

U.S. Economic Reports

A report released by the Commerce Department showed the U.S. trade deficit unexpectedly narrowed in the month of February amid a jump in the value of exports.

The Commerce Department said the trade deficit narrowed to $49.4 billion in February from $51.1 billion in January, while economists had expected the deficit to widen to $53.5 billion.

The narrower deficit came as the value of exports surged up by 1.1 percent to $209.7 billion in February from $207.4 billion in January.

The report also showed a more modest increase in the value of imports, which rose by 0.2 percent to $259.1 billion in February from $258.5 billion in the previous month.

At 10 am ET, the Commerce Department is due to release a separate report on wholesale inventories in the month of February. Wholesale inventories are expected to rise by 0.5 percent.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 12th at 10:30 am ET.

Crude oil inventories are expected to jump by 7.3 million barrels after surging up by 7.0 million barrels in the previous week.

At 12:30 pm ET, St. Louis Federal Reserve President James Bullard is due to deliver a presentation on the U.S. economy and monetary policy at the 28th Annual Hyman P. Minsky Conference at the Levy Economics Institute of Bard College in Annandale-on-Hudson, New York.

Philadelphia Fed President Patrick Harker is also scheduled to deliver a speech about the economic outlook at the Greater Vineland Chamber of Commerce Luncheon in Vineland, New Jersey, at 12:30 pm ET.

At 2 pm ET, the Fed is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

Stocks In Focus

Shares of United Continental (UAL) are moving notably higher in pre-market trading after the airline reported first quarter earnings that exceeded analyst estimates and reiterated its full-year guidance.

Railroad operator CSX Corp. (CSX) is also likely to see initial strength after reporting better than expected first quarter earnings.

On the other hand, Sprint (S) and T-Mobile (TMUS) are seeing considerable pre-market weakness after a report from the Wall Street Journal said Justice Department staff told the telecom companies their planned merger is unlikely to be approved as currently structured

Shares of BNY Mellon (BK) may also come under pressure after the bank reported first quarter earnings that missed expectations.
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