logo

Market Analysis

mail
Share
Beyond the Numbers

Futures Pointing To Initial Rebound Amid Earnings Optimism
7/22/2019 9:00 AM

The major U.S. index futures are currently pointing to a higher opening on Monday, with stocks likely to move back to the upside following the pullback seen last week.

Optimism about earnings news may generate early buying interest, as a slew of big-name companies are due to report their quarterly results this week.

Amazon (AMZN), Coca-Cola (KO), AT&T (T), Boeing (BA), Caterpillar (CAT), Facebook (FB), Alphabet (GOOGL), Intel (INTC), McDonald's (MCD), and Twitter (TWTR) are just a few of the companies due to report their quarterly results.

According to FactSet data, 79 percent of S&P 500 companies have reported better than expected quarterly earnings so far this earnings season.

The looming deluge of earnings reports may keep some traders on the sidelines today, with just a few companies reporting their results before the start of trading.

Logitech (LOGI), TD Ameritrade (AMTD) and Whirlpool (WHR) are among the companies due to report their results after the close.

Traders may also be reluctant to make significant moves amid a quiet day on the U.S. economic front, looking ahead to on new and existing home sales, durable goods orders, and second quarter GDP in the coming days.

After ending Thursday’s trading modestly higher, stocks moved mostly lower over the course of the trading day on Friday. The major averages failed to sustain an initial upward move and slid firmly into negative territory as the day progressed.

The major averages showed a notable move to the downside in late-day trading, hitting new lows for the session. The Dow fell 68.77 points or 0.3 percent to 27,154.20, the Nasdaq slid 60.75 points or 0.7 percent to 8,146.49 and the S&P 500 dropped 18.50 points or 0.6 percent to 2,976.61.

With the downturn on the day, the major averages also moved lower for the week. The Dow slumped by 0.7 percent, while the Nasdaq and the S&P 500 both tumbled by 1.2 percent.

The initial strength in Wall Street partly reflected a positive reaction to upbeat earnings news from Microsoft (MSFT), as the software giant reported fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Buying interest waned shortly after the start of trading, however, as traders looked ahead to the slew of earnings news due to be released next week.

Traders were also digesting the New York Federal Reserve's efforts to walk back comments President John Williams made Thursday that seemed to endorse a near-term interest rate cut.

Williams said it "pays to act quickly to lower rates at the first sign of economic distress," arguing it is "better to take preventative measures than to wait for disaster to unfold."

However, a New York Fed spokesman later claimed Williams' remarks were based on years of research and not specifically about potential policy actions at the upcoming Fed meeting.

On the U.S. economic front, the University of Michigan released a report on Friday showing a slight improvement in U.S. consumer sentiment in the month of July.

The preliminary report showed the consumer sentiment index inched up to 98.4 in July from the final June reading of 98.2. Economists had expected the index to edge up to 98.5.

"Consumer sentiment remained largely unchanged in early July from June, remaining at quite favorable levels since the start of 2017," said Surveys of Consumers chief economist Richard Curtin.

Biotechnology stocks showed a significant move to the downside over the course of the session, dragging the NYSE Arca Biotechnology Index down by 1.9 percent.

Considerable weakness also emerged among gold stocks, which pulled back following the rally seen in the previous session.

The NYSE Arca Gold Bugs Index tumbled by 1.6 percent after spiking by 3.2 percent to a nearly two-year closing high on Thursday.

The pullback by gold stocks came as the price of gold for August delivery dipped after surging to a six-year high of $1,454.40 an ounce earlier in the session.

Interest rate-sensitive commercial real estate and utilities stocks also moved to the downside on the day, while notable strength was visible among steel stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.74 to $56.37 a barrel after rising $0.33 to $55.63 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,427.40, up $0.70 from the previous session’s close of $1,426.70. On Friday, gold dipped $1.40.

On the currency front, the U.S. dollar is trading at 107.94 yen compared to the 107.71 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1216 compared to last Friday’s $1.1221.

Asia

Asian stocks ended mostly lower on Monday as hopes for an aggressive rate reduction by the U.S. central bank faded and tensions between Britain and Iran rose in the Persian Gulf.

Chinese stocks closed lower as a Nasdaq-style technology board on the Shanghai Stock Exchange marked its debut. The benchmark Shanghai Composite Index tumbled 37.23 points or 1.3 percent to 2,886.97, while Hong Kong's Hang Seng Index plunged 394.14 points or 1.4 percent to 28,371.26.

Japanese shares fell modestly as investors scaled back expectations of a 50 basis point rate cut at the July 30-31 Fed meeting. Prime Minister Shinzo Abe's ruling bloc won a solid majority in Japan's upper house election on Sunday, helping limit the downside to some extent.

The Nikkei 225 Index ended down 50.20 points or 0.2 percent at 21,416.79, while the broader Topix closed 0.5 percent lower at 1,556.37.

Canon fell 1.2 percent and Nidec gave up 0.9 percent ahead of their earnings results due this week.

Asahi Group Holdings slumped 8.9 percent after the brewer said it would issue up to 200 billion yen (approx. $1.85 billion) of shares to fund its planned purchase of Anheuser Busch InBev's Australian operations.

On the other hand, chip-related firms such as Advantest, Taiyo Yuden Co and Screen Holdings climbed 2-3 percent after Taiwan's TSMC forecast that robust demand for 5G chips would drive a stronger second-half.

Australian markets edged down slightly as expectations for a smaller-than-expected U.S. rate cut curbed investor appetite for riskier assets.

The benchmark S&P/ASX 200 Index slipped 9.10 points or 0.1 percent to 6,691.20, while the broader All Ordinaries Index ended marginally lower at 6,781.20.

Higher iron ore prices helped lift miners, with BHP and Rio Tinto rising 0.7 percent and 0.8 percent, respectively. Smaller rival Fortescue Metals Group rallied 2.3 percent ahead of its quarterly output results due on Thursday.

Santos, Origin Energy and Oil Search climbed between 0.7 percent and 1.7 percent as oil prices rose on concerns that Iran's seizure of a British tanker last week may lead to supply disruptions in West Asia.

Beach Energy soared 5.3 percent after beginning construction work on a $22 million redevelopment of the Katnook gas-processing plant near Penola.

The big four banks ended narrowly mixed, while healthcare stocks such as CSL and Cochlear ended down over 1 percent.

Seoul stocks finished little changed with a negative bias after the release of weak trade data showing that the country's exports for the first 20 days of this month fell a sharp 13.6 percent from a year earlier. Investors also took a cautious stance ahead of the corporate earnings season.

Europe

European stocks have risen on Monday as Italy's fractious coalition partners geared up for a showdown to avoid the collapse of the government following a series of clashes.

Meanwhile, as hopes fade for aggressive Fed rate cuts in July, investors await the outcome of tomorrow's U.K. leadership election and Thursday's ECB meeting for further direction.

While the German DAX Index has climbed by 0.5 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.3 percent.

Shares of Philips Electronics NV have soared in Amsterdam after the Dutch consumer electronics giant reported a significantly higher profit in its second quarter, reflecting a narrower loss from discontinued operations and higher sales.

Swiss private bank Julius Baer has also rallied. After reporting a drop in first-half profits, the bank said that client activity and asset valuations have recovered substantially compared to the second half of 2018.

Energy stocks have also jumped as oil prices rise on worries that Iran's seizure of a British tanker last week may lead to supply disruptions in the energy-rich Gulf.

Metro Bank shares have also advanced after the troubled high street lender confirmed media reports it is in talks "regarding the potential sale of a loan portfolio".

Ted Baker has also soared on a report that its founder Ray Kelvin could back a private equity buyout of the retailer, months after he resigned.

On a light day on the economic front, survey data from IHS Markit showed that British households' expectations towards future finances remained positive in July.

The headline household finance index rose for the second straight month in July, to 44.3 from 43.9 in June. The score signaled the weakest level of pessimism among households towards their finances since January.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today, although reports on new and existing home sales, durable goods orders, and second quarter GDP are likely to attract attention in the coming days.

Stocks In Focus

Shares of Peak Resorts (SKIS) are spiking in pre-market trading after the ski resort owner and operator agreed to be acquired by Vail Resorts (MTN) for $11 per share in cash.

Dialysis services provider DaVita (DVA) is also likely to see initial strength after raising its full-year adjusted operating income guidance.

On the other hand, shares of Cal-Main Foods (CALM) may come under pressure after the egg producer reported a wider than expected fiscal fourth quarter loss.
Follow RTT
Top Movers
Company
Symbol
Name
Up
Down
News





>