Market Analysis

Beyond the Numbers

Upbeat Earnings, Economic News May Generate Early Buying Interest
5/16/2019 9:06 AM

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to extend the rebound seen over the two previous sessions.

The markets may benefit from a positive reaction to upbeat earnings news from Walmart (WMT), with the retail giant climbing by 3 percent in pre-market trading.

The advance by Walmart comes after the company reported fiscal first quarter earnings that exceeded analyst estimates on better than expected comparable store sales growth.

Positive sentiment may also be generated in reaction to a batch of upbeat economic news, including a report from the Labor Department showing initial jobless claims dropped more than expected in the week ended May 11th.

A separate report from the Commerce Department showed a substantial increase in new residential construction in the month of April.

The upbeat news may offset lingering trade concerns after President Donald Trump signed an executive order declaring a national emergency with respect to the threats against information and communications technology and services.

After recovering from an initial move to the downside, stocks moved mostly higher over the course of the trading session on Wednesday. With the turnaround on the day, the major averages continued to rebound from the sell-off seen on Monday.

The major averages ended the session off their best levels of the day but still firmly in positive territory. The Dow rose 115.97 points or 0.5 percent to 25,648.02, the Nasdaq jumped 87.65 points or 1.1 percent to 7,822.15 and the S&P 500 climbed 16.55 points or 0.6 percent to 2,850.96.

The strength that emerged on Wall Street reflected a positive reaction to reports President Donald Trump plans to delay imposing steep tariffs on auto imports.

Media reports indicated Trump plans to delay imposing the auto tariffs by up to six months in order to allow negotiations to continue.

Trump faces a May 18th deadline to decide whether to slap a tariff of as much as 25 percent on imported cars and parts due to national security concerns.

The turnaround by stocks in reaction to the reports reflects the markets' intense sensitivity to trade-related news in light of the escalating trade dispute between the U.S. and China.

Stocks initially came under pressure following the release of a report from the Commerce Department showing an unexpected pullback in U.S. retail sales in the month of April.

The Commerce Department said retail sales edged down by 0.2 percent in April after spiking by an upwardly revised 1.7 percent in March.

Economists had expected retail sales to rise by 0.2 percent compared to the 1.6 percent jump originally reported for the previous month.

Excluding a steep drop in auto sales, retail sales inched up by 0.1 percent in April after surging up by 1.3 percent in March, although ex-auto sales had been expected to climb by 0.7 percent.

Negative sentiment was also generated in reaction to a Federal Reserve report showing an unexpected decrease in industrial production in April.

The Fed said industrial production fell by 0.5 percent in April following a revised 0.2 percent uptick in March. Economists had expected production to come in unchanged.

Meanwhile, a separate report from the National Association of Home Builders showed homebuilder confidence has improved by much more than anticipated in the month of May.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 66 in May from 63 in April, while economists had expected the index to inch up to 64.

Following declines in late 2018 due to higher interest rates and concerns over slower growth, the index has reached its highest level since October of 2018.

Computer hardware stocks turned in some of the market's best performances on the day, driving the NYSE Arca Computer Hardware Index up by 1.6 percent.

With the advance, the index continued to rebound after ending Monday's trading at its lowest closing level in well over a month.

Significant strength also emerged among oil service stocks, as reflected by the 1.2 percent gain posted by the Philadelphia Oil Service Index.

Semiconductor, retail, and software stocks also saw notable strength on the day, while some weakness was visible among financial stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.86 to $62.88 a barrel after rising $0.24 to $62.02 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,290.80, down $7 compared to the previous session's close of $1,297.80. On Wednesday, gold edged up $1.50.

On the currency front, the U.S. dollar is trading at 109.75 yen compared to the 109.60 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1187 compared to yesterday’s $1.1201.


Asian stocks ended mixed on Thursday as trade worries persisted despite reports U.S. President Donald Trump plans to delay imposing tariffs on auto imports by up to six months in order to allow negotiations to continue.

Trade concerns lingered after Trump declared a national emergency over threats against American technology in a move seen as targeting Chinese tech giant Huawei.

China's Shanghai Composite Index rose 17.03 points or 0.6 percent to 2,955.71 on expectations the government will roll out measures to support growth amid external uncertainties. Hong Kong's Hang Seng Index finished marginally higher at 28,275.07.

Meanwhile, Japanese shares fell, with weak U.S and Chinese data as well as continued U.S.-China trade friction weighing on sentiment.

The Nikkei 225 shed 125.58 points or 0.6 percent to close at 21,062.98, while the broader Topix dropped 6.60 points or 0.4 percent to 1,537.55.

Exporters closed broadly lower as the yen strengthened. Toyota Motor and Panasonic fell over 1 percent. Japan Display tumbled 3.2 percent after the supplier for tech giant Apple reported a ninth consecutive quarterly loss and said it will cut about 1,000 jobs.

Banks came under heavy selling pressure, with Mitsubishi UFJ Financial losing 3.6 percent and Mizuho Financial declining 1.5 percent.

Chip-related shares lost ground after Trump issued an executive order aimed at banning Chinese telecommunications giant Huawei. Screen Holdings, Advantest and Taiyo Yuden declined 5-8 percent.

Australian markets finished modestly higher as disappointing wage and jobs data supported expectations for a central bank rate cut.

The benchmark S&P/ASX 200 Index climbed 43.60 points or 0.7 percent to 6,327.80, while the broader All Ordinaries Index ended up 46.60 points or 0.7 percent at 6,417.50.

The April jobs report showed the unemployment rate crept to 5.2 percent, exceeding forecasts for 5.0 percent and up from the upwardly revised 5.1 percent in March. Full-time employment decreased by 6,300 to 8,792,700 persons.

Energy stocks such as Origin Energy, Oil Search, Woodside Petroleum and Santos jumped 2-4 percent on the back of an uptick in oil prices.

Mining heavyweights BHP and Rio Tinto rose around 1 percent, while smaller rival Fortescue Metals Group rallied 3.2 percent. Gold miners Evolution, Newcrest Mining and Northern Star Resources jumped about 2 percent.

In the banking sector, Westpac tumbled 3.9 percent on going ex-dividend. Accounting software company Xero soared 10.8 percent after narrowing its full-year loss.

Seoul stocks tumbled amid selling by foreign investors as the Trump administration escalated its trade conflict with China. The benchmark Kospi slumped 25.09 points or 1.2 percent to 2,067.69.


European stocks have moved higher over the course of the trading day on Thursday after falling early in the session as the U.S. hit Huawei with severe sanctions, adding to prevailing uncertainty over trade.

On the data front, the French unemployment rate declined in the first quarter to the lowest level since 2009, figures from the statistical office Insee showed. The average ILO jobless rate fell to 8.7 percent from 8.8 percent in the fourth quarter of 2018.

Separately, Eurostat data showed the euro area trade surplus fell to a seasonally adjusted 17.9 billion euros in March from 20.6 billion euros in February. The surplus was below the forecast of 19.4 billion euros.

The British pound drifted lower as Prime Minister Theresa May faces a showdown with the 1922 committee over timetable for her resignation.

While the German DAX Index has advanced by 0.6 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are up by 0.3 percent and 0.2 percent, respectively.

Premier Oil has moved sharply higher in London after the oil company raised its full-year production guidance.

Anglo American has also jumped after the mining giant announced Debmarine Namibia has approved construction of a new custom-built diamond recovery vessel.

Thyssenkrupp has soared on a Reuters report that Finland's Kone might bid for the German conglomerate's 14 billion euro ($15.7 billion) elevators division.

Südzucker has also moved to the upside after the sugar producer said it expects improvement in prices from October.

On the other hand, National Grid has come under pressure after its fiscal year statutory earnings declined from prior year due to exceptional charges.

Luxury fashion house Burberry has also moved sharply lower on the day after reporting lackluster full-year profit and revenue.

Tour operator Thomas Cook Group has plunged as much as 23.1 percent after its first-half loss widened from last year.

U.S. Economic Reports

New residential construction in the U.S. showed a substantial increase in the month of April, according to a report released by the Commerce Department.

The Commerce Department said housing starts surged up by 5.7 percent to an annual rate of 1.235 million in April after climbing by 1.7 percent to a revised rate of 1.168 million in March.

Economists had expected housing starts to jump by 5.8 percent to a rate of 1.205 million from the 1.139 million originally reported for the previous month.

The report said building permits also rose by 0.6 percent to a rate of 1.296 million in April after edging down by 0.2 percent to a revised rate of 1.288 million in March.

Building permits, an indicator of future housing demand, had been expected to climb by 1.7 percent to a rate of 1.290 million from the 1.269 million originally reported for the previous month.

A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits dropped more than expected in the week ended May 11th.

The report said initial jobless claims slid to 212,000, a decrease of 16,000 from the previous week’s unrevised level of 228,000. Economists had expected jobless claims to dip to 220,000.

The Philadelphia Federal Reserve also released a report a significant acceleration in the pace of growth in regional manufacturing activity in May.

The Philly Fed said its diffusion index for current general activity jumped to 16.6 in May after falling to 8.5 in April, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to inch up to 9.0.

At 12:05 pm ET, Minneapolis Federal Reserve President Neel Kashkari is scheduled to speak at the Santa Barbara County Economic Summit on interest rates, monetary policy, and the economy.

Stocks In Focus

Shares of Agios Pharmaceuticals (AGIO) are spiking in pre-market trading after the drug maker said a Phase 3 trial of its cancer medication Tibsovo in previously treated cholangiocarcinoma patients with an isocitrate dehydrogenase 1 mutation met its primary endpoint.

Networking giant Cisco Systems (CSCO) is also likely to see initial strength after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Dillard’s (DDS) may move to the downside after the department store operator reported fiscal first quarter earnings that met analyst estimates but on weaker than expected revenues and same-store sales.

Luxury online retailer Farfetch (FTCH) is also likely to come under pressure after reporting a wider than expected first quarter loss.
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