Market Analysis

Beyond the Numbers

Upbeat Economic Data May Generate Initial Buying Interest
4/18/2019 8:59 AM

The major U.S. index futures are pointing to a modestly higher opening on Thursday following the slightly lower close seen in the previous session.

The markets may benefit from the release of a batch of largely upbeat U.S. economic data, including a Commerce Department report showing retail sales rebounded by much more than expected in the month of March.

Traders are also digesting the latest batch of earnings news, although overall trading activity may be somewhat subdued ahead of the long Easter weekend.

Stocks showed a lack of direction over the course of the trading day on Wednesday, extending the volatility seen late in Tuesday’s session. The major averages spent much of the day bouncing back and forth across the unchanged line.

Eventually, the major averages ended the session slightly lower. The Dow edged down 3.12 points or less than a tenth of a percent to 26,449.54, the Nasdaq slipped 4.15 points or 0.1 percent to 7,996.08 and the S&P 500 dipped 6.61 points or 0.2 percent to 2,900.45.

The choppy trading on Wall Street came as traders digested a mixed batch of earnings news from big-name companies such as PepsiCo (PEP), Morgan Stanley (MS), Netflix (NFLX) and IBM Corp. (IBM).

PepsiCo and Morgan Stanley posted notable gains after reporting quarterly results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, Netflix and IBM moved to the downside after both reported better than expected earnings but on weaker than expected revenues and provided disappointing guidance.

The lackluster performance continued as the Federal Reserve's Beige Book said U.S. economic activity expanded at a slight-to-moderate pace in March and early April.

A compilation of anecdotal evidence on economic conditions in the twelve Fed districts, the Beige Book said most districts reported that growth continued at a similar pace as the previous report, while a few districts reported some strengthening.

The Beige Book showed reports from the Fed districts indicated generally positive economic conditions in various sectors but noted some caveats.

For instance, the report said reports on manufacturing activity were favorable, although contacts in many districts noted trade-related uncertainty.

Reports of stronger home sales in most districts were similarly tempered by indications of low demand for higher-priced homes.

Looking ahead, the Fed said there was little change in the economic outlook, with contacts in reporting districts expecting slight-to-modest growth in the months ahead.

The release of the Beige Book comes as the Fed is scheduled to hold its next two-day monetary policy meeting on April 30th and May 1st.

CME Group's FedWatch tool currently indicates a 99.5 percent chance the Fed will leave interest rates unchanged at its next meeting.

Meanwhile, 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.

Biotechnology stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Biotechnology Index down by 5.3 percent to its lowest closing level in over three months.

Substantial weakness was also visible among healthcare and pharmaceutical stocks, with the Dow Jones Health Care Index and the NYSE Arca Pharmaceutical Index slumping by 3.1 percent and 2.1 percent, respectively.

The weakness among healthcare-related stocks as a whole was partly attributed to concerns about the potential impact of Democrats' plans for the healthcare system.

Telecom stocks also saw notable weakness, with Sprint (S) and T-Mobile (TMUS) leading the way sector lower amid worries about approval of their planned merger.

On the other hand, semiconductor stocks extended the strong upward move seen in the previous session, driving the Philadelphia Semiconductor Index up by 1.6 percent to another new record closing high.

Communications chip maker Qualcomm (QCOM) posted another standout gain after settling a royalty dispute with Apple (AAPL).

Commodity, Currency Markets

Crude oil futures are rising $0.20 to $63.96 a barrel after falling $0.29 to $63.76 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is unchanged compared to the previous session's close of $1,276.80. On Wednesday, gold edged down $0.40.

On the currency front, the U.S. dollar is trading at 111.97 yen compared to the 112.06 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1245 compared to yesterday’s $1.1296.


Asian stocks ended broadly lower on Thursday as investors adopted a cautious stance ahead of the Good Friday and Easter holidays.

Chinese shares fell from a 13-month high as investors booked some profits after recent strong gains amid signs of economic stabilization.

The benchmark Shanghai Composite Index gave up 12.92 points or 0.40 percent to finish at 3,250.20, while Hong Kong's Hang Seng Index ended down 161.42 points or 0.5 percent at 29,963.26.

Japanese shares fell from a 4-1/2-month high as treasuries climbed alongside the yen and a Nikkei report said Canon would cut its earnings forecast.

The Nikkei 225 Index fell 187.85 points or 0.8 percent to 22,090.12, while the broader Topix tumbled 1 percent to 1,614.97.

Canon shares fell nearly 4 percent, Sony dropped 1.2 percent and Panasonic shed 0.6 percent. Automakers surged, with Honda Motor rallying 1.4 percent on optimism over U.S.-China trade talks.

Rakuten gained 1.9 percent after the e-commerce giant said that account registrations for trading crypto currencies on Rakuten Wallet are now open.

Pharma stocks paced the declines, with Takeda Pharmaceutical losing 3.5 percent and Astellas Pharma declining 3.2 percent.

Australian markets ended little changed, as healthcare companies and gold miners fell, offsetting gains in the financial sector.

The benchmark S&P/ASX 200 Index ended marginally higher at 6,259.80 after the release of upbeat jobs data for March. The broader All Ordinaries Index ended slightly lower at 6,349.90.

The big four banks rose between 0.1 percent and 0.2 percent. Mining heavyweights ended mixed, with BHP giving up 0.2 percent, while Rio Tinto advanced 1.4 percent and Fortescue Metals Group added 0.7 percent.

Woodside Petroleum gained 1 percent after reporting a 4 percent increase in its first quarter revenue.

Healthcare stocks such as CSL and Cochlear dropped 1-2 percent on a strong Aussie dollar and amid declines in their U.S. peers overnight on regulatory worries.

Gold miner Evolution tumbled 3 percent as gold hit its lowest level since the end of December after the release of upbeat China data.

GrainCorp declined 2.2 percent after its grains business experienced a deterioration of about A$40 million in expected EBITDA for the half-year period up to March 31, 2019.

Seoul stocks fell sharply after a recent string of gains. The benchmark Kospi plunged 32.12 points or 1.4 percent to 2,213.77 as the Bank of Korea cut its economic growth and inflation forecasts while leaving its key interest rate unchanged.


European stocks are trading mixed on Thursday as investors adopt a cautious stance before the Easter weekend. Most European markets will remain closed on Friday and Monday.

Meanwhile, the latest economic reports proved to be a mixed bag. While U.K. retail sales volumes unexpectedly rose in March, sluggish Eurozone PMI prints reignited global growth worries.

The IHS Markit Eurozone PMI Composite index hit a three-month low of 51.3 in April versus 51.6 in March.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the French CAC 40 Index and the German DAX Index are up by 0.2 percent and 0.3 percent, respectively.

Lonza Group, a supplier to the pharmaceutical, healthcare and life science industries, has rallied after maintaining its 2019 outlook.

Food group Nestle has also risen. The company confirmed its 2019 guidance after reporting a 3.4 percent organic sales growth in the first quarter.

Consumer goods giant Unilever has also advanced after the company's first quarter underlying sales grew 3.1 percent, led by emerging market business, which jumped 5.0 percent.

Energy management firm Schneider Electric has jumped after its first quarter revenues rose 8.7 percent on a reported basis.

Moneysupermarket.com has also soared after it reported first quarter revenues of 104.9 million pounds, an increase of 19 percent from 88.3 million pounds in the prior-year quarter.

On the other hand, French luxury goods conglomerate Kering has tumbled amid signs of a slowdown at its Gucci brand.

Osram shares have also slumped on a report that private equity firms Bain Capital and Carlyle Group were losing confidence in their bid for the German lighting group.

U.S. Economic Reports

Retail sales in the U.S. spiked by much more than expected in the month of March, the Commerce Department revealed.

The Commerce Department said retail sales soared by 1.6 percent in March after edging down by 0.2 percent in February. Economists had expected retail sales to climb by 0.9 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales still surged up by 1.2 percent in March following a revised 0.2 percent dip in February.

Ex-auto sales had been expected to increase by 0.7 percent compared to the 0.4 percent drop originally reported for the previous month.

A separate report from the Labor Department showed initial jobless claims unexpectedly edged lower in the week ended April 13th, falling to a nearly 50-year low.

The report said initial jobless claims dipped to 192,000, a decrease of 5,000 from the previous week's revised level of 197,000.

Economists had expected jobless claims to rise to 205,000 from the 196,000 originally reported in the previous week.

With the unexpected decrease, initial jobless claims dropped to their lowest level since hitting 182,000 in September of 1969.

Meanwhile, the Philadelphia Federal Reserve released a report showing the pace of growth in regional manufacturing slowed by more than expected in the month of April following a significant rebound in the previous month.

The Philly Fed said its index for current manufacturing activity in the region dropped to 8.5 in April after jumping to 13.7 in March.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to show a more modest pullback to 10.4.

At 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of February. Inventories are expected to climb by 0.4 percent.

The Conference Board is also due to release its report on leading economic indicators in the month of March at 10 am ET. Economists expect the leading economist index to rise by 0.3 percent.

At 11 am ET, the Treasury Department is scheduled to announce the details of next week’s auctions of two-year, five-year, and seven-year notes.

Stocks In Focus

Shares of Pier 1 Imports (PIR) may come under pressure after the home furnishings retailer reported disappointing fiscal fourth quarter results, announced the abrupt departure of its CFO and said it may close up to 45 stores.

Mattress maker Sleep Number (SNBR) could also see initial weakness after reporting first quarter earnings that exceeded analyst estimates but weaker than expected sales.

Shares of Atlassian (TEAM) are moving sharply lower in pre-market trading after the software company reported better than expected fiscal third quarter earnings but provided disappointing fourth quarter guidance.

On the other hand, shares of E*Trade (ETFC) are likely to move to the upside after the online broker reported first quarter results that beat expectations on both the top and bottom lines.

Casino operator Las Vegas Sands (LVS) may see initial strength after reporting better than expected first quarter results.

Shares of Honeywell (HON) are also moving notably higher in pre-market trading after the conglomerate reported first quarter results that exceeded estimates and raised its full-year guidance.
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