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Beyond the Numbers

Upbeat Earnings News May Generate Early Buying Interest
4/23/2019 8:54 AM

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

Early buying interest is likely to be generated in reaction to upbeat earnings news from a number of big-name companies, including Dow components United Technologies (UTX) and Coca-Cola (KO).

United Technologies and Coca-Cola are both moving notably higher in pre-market trading after reporting better than expected first quarter results.

Fellow Dow components Procter & Gamble (PG) also reported first quarter results that exceeded estimates, although the consumer products giant is seeing pre-market weakness.

Stocks recovered from an initial move to the downside but showed a lack of direction over the remainder of the trading session on Monday. The major averages spent most of the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session mixed. While the Dow dipped 48.49 points or 0.2 percent to 26,511.05, the Nasdaq rose 17.21 points or 0.2 percent to 8,015.27 and the S&P 500 inched up 2.94 points or 0.1 percent to 2,907.97.

The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the release of a slew of earnings news from big-name companies in the coming days.

The Easter Monday holiday, which kept many overseas markets closed on the day, also contributed to light trading activity.

On the U.S. economic front, the National Association of Realtors released a report showing a significant pullback in existing home sales in the month of March.

NAR said existing home sales plunged by 4.9 percent to an annual rate of 5.21 million in March after soaring by 11.2 percent to a revised rate of 5.48 million in February.

Economists had expected existing home sales to tumble by 3.8 percent to a rate of 5.30 million from the 5.51 million originally reported for the previous month.

The bigger than expected pullback came after existing home sales reached their highest level in almost a year in February.

"It is not surprising to see a retreat after a powerful surge in sales in the prior month," said NAR chief economist Lawrence Yun. "Still, current sales activity is underperforming in relation to the strength in the jobs markets."

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

Energy stocks moved sharply higher over the course of the session, however, benefiting from a sharp increase by the price of crude oil.

On the other hand, gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 1.9 percent. The weakness among gold stocks came despite an uptick by the price of the precious metal.

Steel, computer hardware, and housing stocks also saw notable weakness, with the disappointing existing home sales data weighing on the housing sector.

Commodity, Currency Markets

Crude oil futures are inching up $0.08 to $65.63 barrel after jumping $1.70 to $65.70 a barrel on Monday. Meanwhile, after rising $1.60 to $1,277.60 ounce in the previous session, gold futures are sliding $4 to $1,273.60 an ounce.

On the currency front, the U.S. dollar is trading at 111.92 yen compared to the 111.94 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1229 compared to yesterday’s $1.1257.

Asia

Asian stocks ended broadly higher on Tuesday as a surge in crude oil prices to nearly six-month highs boosted energy stocks. Chinese and Hong Kong markets bucked the uptrend on concerns that the Chinese government may slow down monetary easing.

Mainland Chinese shares extended losses for a second straight session on expectations that China's central bank is unlikely to cut the reserve requirement ratio anytime soon.

The benchmark Shanghai Composite Index dropped 16.45 points or 0.5 percent to 3,198.59, while Hong Kong's Hang Seng Index ended marginally lower at 29,963.24.

Meanwhile, Japanese shares eked out modest gains, with oil-related stocks pacing the gainers after oil prices hit 2019 highs. The benchmark Nikkei 225 Index rose 41.84 points or 0.2 percent to 22,259.74, and the broader Topix closed 0.3 percent higher at 1,622.97.

Japan Petroleum Exploration rose 1.3 percent, Idemitsu Kosan gained 1.7 percent and Inpex Corp rallied 2.8 percent. On the other hand, Yaskawa Electric lost 2.9 percent on profit taking after recent strong gains.

Australian markets hit their best level in nearly eight months as higher commodity and oil prices boosted resource stocks.

The benchmark S&P/ASX 200 Index jumped 59.60 points or 1 percent to 6,319.40 as trading resumed after a four-day Easter weekend. The broader All Ordinaries Index ended up 61.20 points or 1 percent at 6,411.10.

Energy stocks such as oil Search, Origin Energy, Santos, Beach Energy and Woodside Petroleum rallied 2-4 percent after oil prices jumped to 2019 highs on expectations that the U.S. decision not to renew waivers on Iranian oil import sanctions would further squeeze supply.

Mining heavyweight BHP rose 0.3 percent and Rio Tinto added 1.5 percent, while smaller rival Fortescue Metals Group surged up 3.5 percent.

Gold miners Newcrest and Evolution dropped over 1 percent despite an increase in gold prices overnight. Banks ANZ, Commonwealth and Westpac all ended up over 1 percent.

Seoul stocks edged up as investors awaited earnings results from large-cap companies this week. The benchmark Kospi rose 3.86 points or 0.2 percent to 2,220.51.

Fears surrounding higher fuel costs sent airline stocks lower, with Asiana Airlines plunging 6 percent. Korean Air Lines shed 1.4 percent and Jeju Air dropped 2 percent.

Europe

European stocks are mixed in cautious trading on Tuesday as traders return to their desks following the long holiday weekend.

After China's GDP expanded at a steady 6.4 percent pace in the first quarter, defying expectations for a further slowdown, investors now have a reason to worry that Beijing will slow the pace of further policy easing.

While the U.K.’s FTSE 100 Index has climbed by 0.5 percent, the French CAC 40 Index is down by 0.1 percent and the German DAX Index is down by 0.2 percent.

Fears surrounding higher fuel costs sent airline stocks lower, with easyJet, International Consolidated Airlines and Lufthansa posting notable losses.

Renault has also dropped on a Nikkei report indicating Nissan Motor will reject a management integration proposal from its French partner.

German payments firm Wirecard has tumbled after market regulator Bafin ended a controversial ban on investors making bets against the company's shares.

Belgian battery maker Umicore has also slumped after it warned of lower earnings growth in 2020.

On the other hand, Thomas Cook has soared on reports the travel company has received bids for parts of its business and the company as a whole.

Automotive supplier Faurecia has also risen after reporting flat first quarter sales and confirming its full-year guidance.

Swiss healthcare company Roche has moved to the upside after launching Ventana HER2 Dual ISH DNA Probe Cocktail assay, a new diagnostic test, to detect the HER2 biomarker in breast and gastric cancers.

U.S. Economic Reports

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

New home sales are expected to drop by 2.5 percent to an annual rate of 650,000 in March after jumping to a rate of 667,000 in February.

The Treasury Department is due to announce the results of its auction of $40 billion worth of two-year notes at 1 pm ET.

Stocks In Focus

Shares of Hasbro (HAS) are moving sharply higher in pre-market trading after the toy maker unexpectedly turned a profit in the first quarter on better than expected revenues.

Appliance maker Whirlpool (WHR) is also likely to jump after reporting first quarter earnings that exceeded analyst estimates on higher prices and lower costs.

Shares of Twitter (TWTR) are also seeing significant pre-market strength after the social media giant reported better than expected first quarter earnings, revenue, and user growth.

On the other hand, shares of Waters Corp. (WAT) may come under pressure after the laboratory equipment maker reported first quarter results that missed estimates and provided disappointing guidance.
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