Market Analysis

Beyond the Numbers

Bargain Hunting May Contribute To Rebound On Wall Street
5/24/2019 8:58 AM

The major U.S. index futures are currently pointing to a higher opening on Friday, with stocks likely to regain ground following the substantial weakness seen in the previous session.

Bargain hunting may contribute to early strength on Wall Street as some traders look to pick up stocks at reduced levels following Thursday’s steep losses.

The markets may also benefit from easing trade concerns as President Donald Trump said he remains hopeful of a U.S.-China trade deal, noting he will meet with Chinese President Xi Jinping at the G20 summit next month.

“And I think things, probably, are going to happen with China fast because I can’t imagine that they can be thrilled with thousands of companies leaving their shores for other places,” Trump said in remarks to farmers impacted by the escalating trade dispute.

Trading activity may be somewhat subdued, however, as some traders may be reluctant to make significant moves ahead of the long Memorial Day weekend.

Uncertainty about the outlook for Brexit may also keep some traders on the sidelines following news of the resignation of U.K. Prime Minister Theresa May.

Stocks saw significant weakness during trading on Thursday, extending the moderate downward move seen in the previous session. With the steep drop on the day, the tech-heavy Nasdaq ended the session at its lowest closing level in over two months.

The major averages climbed well off their worst levels late in the trading day but still closed sharply lower. The Dow tumbled 286.14 points or 1.1 percent to 25,490.47, the Nasdaq plunged 122.56 points or 1.6 percent to 7,628.28 and the S&P 500 slumped 34.03 points or 1.2 percent to 2,822.24.

Lingering trade concerns contributed to the sell-off on Wall Street amid further indications of rising tensions between the U.S. and China.

During a weekly briefly, Chinese Commerce Ministry spokesman Gao Feng said the Trump administration must "show sincerity and correct their wrong actions" if the U.S. wants trade talks to continue.

"Negotiations can only continue on the basis of equality and mutual respect," Gao said, noting that China is closely monitoring developments and preparing a necessary response.

U.S. and China trade talks collapsed earlier this month as President Donald Trump followed through on a threat to raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

The Trump administration also blocked U.S. companies from doing business with Chinese telecom giant Huawei but recently gave the company a 90-day reprieve.

With both sides seemingly unwilling to back down, traders are becoming increasingly wary of the impact of the trade dispute on the global economy.

In U.S. economic news, the Labor Department released a report showing initial jobless claims unexpectedly edged lower in the week ended May 18th.

The report said initial jobless claims dipped to 211,000, a decrease of 1,000 from the previous week's unrevised level of 212,000. Economists had expected initial jobless claims to inch up to 215,000.

A separate report from the Commerce Department showed new home sales pulled back by much more than anticipated in the month of April.

The Commerce Department said new home sales plunged by 6.9 percent to an annual rate of 673,000 in April after spiking by 8.1 percent to an upwardly revised rate of 723,000 in March.

Economists had expected new home sales to drop by about 2.5 percent to a rate of 675,000 from the 692,000 originally reported for the previous month.

Energy stocks turned in some of the market's worst performances on the day amid a steep drop by the price of crude oil, which plummeted amid concerns about the outlook for global demand.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 5.8 percent, while the NYSE Natural Gas Index and the NYSE Arca Oil Index tumbled by 3.7 percent and 3.4 percent, respectively.

Substantial weakness was also visible among computer hardware stocks, as reflected by the 2.6 percent nosedive by the NYSE Arca Computer Hardware Index.

Data storage company NetApp (NTAP) posted a steep loss after reporting weaker than expected fiscal fourth quarter results and providing disappointing guidance.

Steel, networking, banking and semiconductor stocks also moved notably lower on the day amid broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are climbing $0.70 to $58.61 a barrel after plummeting $3.51 to $57.91 a barrel on Thursday. Meanwhile, after jumping $11.20 to $1,285.40 an ounce in the previous session, gold futures are slipping $2.50 to $1,282.90 an ounce.

On the currency front, the U.S. dollar is trading at 109.53 yen versus the 109.61 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1192 compared to yesterday’s $1.1181.


Asian stocks turned in a mixed performance during trading on Friday amid lingering worries about the ongoing U.S.-China trade dispute.

U.S. President Donald Trump said on Thursday that Washington's complaints against Huawei Technologies might be resolved within the framework of a U.S.-China trade deal. At the same time, he called the Chinese telecommunications giant "very dangerous."

China's Shanghai Composite Index ended little changed with a positive bias, while Hong Kong's Hang Seng Index ended up 86.80 points or 0.3 percent at 27,353.93.

During a weekly briefing, Chinese Commerce Ministry spokesman Gao Feng said the Trump administration must "show sincerity and correct their wrong actions" if the U.S. wants trade talks to continue.

"Negotiations can only continue on the basis of equality and mutual respect," Gao said, noting that China is closely monitoring developments and preparing a necessary response.

Japanese shares ended slightly lower, with a sharp drop in oil prices and fears of a technology cold war between the U.S. and China weighing on investors' risk appetite.

The Nikkei 225 Index ended down 33.92 points or 0.2 percent at 21,117.22, posting its third consecutive weekly loss. The broader Topix finished marginally higher at 1,541.21.

Panasonic shares declined 1.8 percent after the company said it would stop supplying some components to Huawei to comply with U.S. regulations. Canon tumbled 3.5 percent and Tokyo Electron lost 2.5 percent.

Oil & gas firm Inpex slumped 4.7 percent and oil refiner Idemitsu Kosan plunged 3.9 percent after oil prices plummeted nearly 6 percent to a ten-week low on Thursday.

In economic news, overall nationwide consumer prices in Japan rose an annual 0.9 percent in April, a government report showed. That was in line with expectations and up from 0.5 percent in March.

Australian markets fell notably, dragged down by financials and energy companies on rising U.S.-China trade tensions.

The benchmark S&P/ASX 200 Index dropped 35.80 points or 0.6 percent to 6,456.00, while the broader All Ordinaries Index ended down 38.70 points or 0.6 percent at 6,545.60.

The big four banks ended narrowly mixed after sharp gains earlier in the week. Mining heavyweights BHP and Rio Tinto eked out modest gains amid record high iron ore prices.

Woodside Petroleum, Santos, Origin Energy, Oil Search and Beach Energy slumped 3-5 percent as oil headed for its biggest weekly drop since December.

Seoul stocks ended lower on concerns that a prolonged U.S.-China trade dispute could weigh on economic growth and hurt corporate profits. The benchmark Kospi slid 14.28 points or 0.7 percent to 2,045.31.


European stocks have bounced back on Friday after a sharp sell-off in the previous session on worries that the U.S.-China trade conflict was spiraling into a technology cold war.

Underlying sentiment was helped by U.S. President Donald Trump's comments suggesting that there is a "good possibility" of including Huawei in a trade deal to end their conflict. Trump also said that he looks forward to seeing Chinese President Xi at the G20 summit.

Meanwhile, investors are keeping a close eye on Brexit developments after British Prime Minister Theresa May announced that she will resign as Conservative leader on Friday 7 June following the backlash against her new Brexit deal.

The U.K.’s FTSE 100 Index, the French CAC 40 Index and the German DAX Index have all advanced by 0.8 percent.

Informa Plc shares have rallied in London. The events and publishing company said it continues to trade according to its plan and remains confident of meeting its fiscal year outlook.

Mining stocks are also moving notably higher after Trump voiced optimism about reaching a trade deal with Beijing.

Embattled retailer Mothercare has jumped more than 10 percent after posting a narrower full-year loss from continuing operations.

Royal Mail, a postal service and courier company, has also soared after Goldman Sachs raised its rating on the stock to Buy.

Casino shares have also spiked in Paris. The retailer said that it is not part of safeguard proceedings relating to its parent company Rallye.

On the other hand, A.P. Moller-Maersk has dropped after the Danish container shipping and logistics giant warned of considerable uncertainties in light of rising trade tensions and slowing global growth.

In economic news, U.K. retail sales remained flat in April after rising 1.2 percent in March, figures from the Office for National Statistics showed.

U.S. Economic Reports

After reporting a notable rebound in new orders for U.S. durable goods in the previous month, the Commerce Department released a report showing durable goods orders pulled back in the month of April.

The report said durable goods orders tumbled by 2.1 percent in April after jumping by a downwardly revised 1.7 percent in March.

Economists had expected orders to slump by 2.0 percent compared to the 2.6 percent spike that had been reported for the previous month.

Excluding a steep drop in orders for transportation equipment, durable goods orders were unchanged in April following a revised 0.5 percent drop in March. Economists had expected a 0.2 percent uptick.

Stocks In Focus

Shares of Deckers Outdoor (DECK) are moving significantly higher in pre-market trading after the footwear maker reported better than expected fiscal fourth quarter results and provided upbeat guidance.

PC and printer maker HP Inc. (HPQ) is also likely to see initial strength after reporting fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Intuit (INTU) may also move to the downside after the fiscal third quarter results that exceeded analyst estimates and forecast better than expected fiscal fourth quarter results.

On the other hand, shares of Autodesk (ADSK) are likely to come under pressure after the design software company reported fiscal first quarter results that missed expectations.
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