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Beyond the Numbers

Stocks May Open Flat As Trade Digest Whistleblower Complaint
9/26/2019 9:03 AM

The major U.S. index futures are pointing to a pointing to a roughly flat opening on Thursday, suggesting stocks may show a lack of direction in early trading.

Traders may be reluctant to make significant moves as they digest the whistleblower complaint that sparked the impeachment inquiry into President Donald Trump.

The document outlines concerns about Trump “using the power of his office to solicit interference from a foreign country in the 2020 U.S. election.”

After initially showing a lack of direction, stocks climbed firmly into positive territory over the course of the trading session on Wednesday. The advance on the day came on the heels of the significant downturn seen in the previous session.

The major averages pulled back off their highs going into the close but held on to notable gains. The Dow climbed 162.94 points or 0.6 percent to 26,970.71, the Nasdaq jumped 83.76 points or 1.1 percent to 8,077.39 and the S&P 500 rose 18.27 points or 0.6 percent to 2,984.87.

Stocks moved to the upside in reaction to the release of the transcript of Trump's controversial call with Ukrainian President Volodymyr Zelensky.

The transcript confirms Trump discussed a possible investigation of former Vice President and Democratic frontrunner Joe Biden in the call with Zelensky, although he does not directly link the issue to U.S. aid.

The release of the transcript comes amid claims Trump threatened to withhold military aid from Ukraine unless Zelensky conducted an investigation of Biden and his son Hunter.

Traders seemed relieved the evidence contained in the transcript does not appear to be enough to convince Republicans to jump ship and potentially derail Trump's pro-business presidency.

A day before the release of the transcript, House Speaker Nancy Pelosi, D-Calif., announced the Democrat-controlled House is moving forward with an official impeachment inquiry of Trump.

Pelosi said she is directing six House committees to proceed with their investigations under the umbrella of the impeachment inquiry, saying Trump "must be held accountable" and "no one is above the law."

The speaker accused Trump of a breach of his constitutional responsibilities by calling upon a foreign power to intervene in the upcoming election.

On the U.S. economic front, the Commerce Department released a report showing U.S. new home sales rebounded strongly in the month of August following a sharp pullback in the previous month.

The Commerce Department said new home sales surged up by 7.1 percent to an annual rate of 713,000 in August after plunging by 8.6 percent to a revised rate of 666,000 in July.

Economists had expected new home sales to jump by 3.9 percent to a rate of 660,000 from the 635,000 originally reported for the previous month.

Tobacco stocks showed a significant move to the upside on the day, driving the NYSE Arca Tobacco Index up by 1.9 percent. The index rebounded from its lowest closing level in nearly eight months.

Philip Morris (PM) led the tobacco sector higher, surging up by 5.2 percent after ending merger talks with Altria (MO).

Considerable strength also emerged among steel stocks, as reflected by the 1.9 percent gain posted by the NYSE Arca Steel Index.

Semiconductor, computer hardware, and networking stocks have also moved notably higher, contributing to the jump by the tech-heavy Nasdaq.

On the other hand, gold stocks moved sharply lower along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 3.5 percent.

Commodity, Currency Markets

Crude oil futures are falling $0.35 to $56.14 a barrel after sliding $0.80 to $56.49 a barrel on Wednesday. Meanwhile, after plunging $27.90 to $1,512.30 an ounce in the previous session, gold futures are inching up $1.70 to $1,514 an ounce.

On the currency front, the U.S. dollar is trading at 107.60 yen compared to the 107.77 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0946 compared to yesterday’s $1.0943.

Asia

Asian stocks ended mixed on Thursday as U.S. President Donald Trump's comments suggesting a trade deal with China could happen sooner than expected helped push market concerns about U.S. political risks into the background.

Meanwhile, the U.S. and Japan have signed a limited trade deal, under which Japan will open new markets to about $7 billion in U.S. agricultural products.

Chinese shares fell as mixed signals from Washington and Beijing on the trade front kept underlying sentiment cautious ahead of the weeklong National Day holiday.

The benchmark Shanghai Composite Index dropped 26.35 points, or 0.9 percent, to 2,929.09, while Hong Kong's Hang Seng Index ended up 96.58 points, or 0.4 percent, at 26,041.93.

Japanese shares rose slightly, with automakers and China-related stocks surging after the U.S. and Japan signed a limited trade deal and Trump’s comments about a deal with China.

The Nikkei 225 Index inched up 28.09 points, or 0.1 percent, to 22,048.24, while the broader Topix closed 0.2 percent higher at 1,623.27.

Robot maker Fanuc advanced 2.4 percent and automaker Toyota Motor gained 1.1 percent. Advantest, the world's biggest maker of chip inspection equipment, fell 2.1 percent.

Australian markets fell amid heightened global uncertainties especially concerning trade. The benchmark S&P/ASX 200 Index dropped 32.60 points, or 0.5 percent, to finish at 6,677.60, while the broader All Ordinaries Index ended down 29.10 points, or 0.4 percent, at 6,785.60.

Mining heavyweights BHP and Rio Tinto ended on a flat note as investors remained skeptical about a U.S.-China deal happening anytime soon.

Gold miners Evolution and Newcrest fell around 4 percent after gold prices logged their biggest daily decline in nearly three weeks on Wednesday, pressured by strength in the dollar.

Energy stocks such as Woodside Petroleum, Oil Search and Santos dropped over 1 percent each after oil prices fell more than 1 percent on Wednesday in the wake of bearish inventory data and reports that Saudi Arabia maintained a faster-than-expected recovery of its oil production.

Australia's job vacancies declined in the August quarter, a government report showed today. The number of job vacancies fell by seasonally adjusted 1.9 percent sequentially in the August quarter, following a 1.6 percent drop in May. On a yearly basis, job vacancies declined 1.9 percent in the three months to August.

Seoul stocks ended marginally higher after survey results from Bank of Korea revealed that the country's consumer confidence improved for the first time in five months in September. However, households' inflation expectations eased to the lowest on record.

Europe

European stocks are moving higher on Thursday as traders react positively to the headlines concerning U.S.-China and U.S.-Japan ties as well as solid consumer confidence data from Germany.

A day after delivering a stinging rebuke to China's trade practices at the United Nations General Assembly, U.S. President Donald Trump said that a deal to end a nearly 15-month trade war with China could happen sooner than people think.

Trump's positive comments on trade talks helped push market concerns about U.S. political risks into the background.

Meanwhile, the U.S. and Japan have signed a limited trade deal, under which Japan will open new markets to about $7 billion in U.S. agricultural products.

In economic news, German consumer sentiment is set to improve in October as stimulus measures announced by the European Central Bank boost the propensity to buy, survey data from market research group GfK showed.

The forward-looking consumer sentiment index rose to 9.9 in October from 9.7 in September. The score was forecast to drop to 9.6.

Markets shrugged off a Bloomberg report suggesting that the World Trade Organization will authorize the U.S. to impose tariffs on nearly $8 billion of European goods.

While the U.K.’s FTSE 100 Index has surged up by 1.2 percent, the French CAC 40 Index is up by 0.7 percent and the German DAX Index is up by 0.5 percent.

The British pound traded lower as MPs returned to parliament following the Supreme Court's ruling that the suspension of parliament was unlawful.

Aviva has advanced after the insurer announced the appointment of Jason Windsor as Chief Financial Officer and Executive Director with effect from September 26.

Metro AG has also moved to the upside after saying it plans to divest the hypermarket business, resulting reduced company size.

Meanwhile, Imperial Brands has moved sharply lower after a warning that the backlash against vaping and e-cigarettes in the U.S. will weigh on its revenues this year.

Publishing and education company Pearson has also slumped after the company warned of a weaker than expected third-quarter performance at its key U.S. higher-education courseware segment.

IAG shares have also shown a notable move to the downside as the British Airways owner warned of a 6 percent drop in annual profits.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits crept slightly higher in the week ended September 21st, according to a report released by the Labor Department.

The report said initial jobless claims inched up to 213,000, an increase of 3,000 from the previous week's revised level of 210,000.

Economists had expected initial jobless claims to tick up 212,000 from the 208,000 originally reported for the previous week.

Separately, the Commerce Department released its final report on U.S. gross domestic product in the second quarter on Thursday, showing the pace of GDP growth was unrevised from the previous estimate.

The report said real GDP increased at an annual rate of 2.0 in the second quarter, unchanged from the previous estimate and in line with economist estimates.

The unrevised 2.0 percent GDP growth in the second quarter still reflects a notable slowdown compared to the 3.1 percent jump in the first quarter.

The Commerce Department said downward revisions to consumer spending and non-residential fixed investment were primarily offset by upward revisions to state and local government spending and exports and a downward revision to imports.

Dallas Federal Reserve President Robert Kaplan is scheduled to give opening remarks at a Dallas Fed conference on trade and immigration in Dallas, Texas, at 9:30 am ET.

At 10 am ET, the National Association of Realtors is due to release its report on pending home sales in the month of August. Pending home sales are expected to climb by 0.9 percent in August after tumbling by 2.5 percent in July.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

St. Louis Fed President James Bullard is also slated to give opening remarks at the “Banking and the Economy: A Forum for Minorities in Banking” event in St. Louis, Missouri, at 10 am ET.

At 11:45 am ET, Fed Vice Chairman Richard Clarida and San Francisco Fed President Mary Daly are due to speak at a Fed Listens event in San Francisco, California.

The Treasury Department is scheduled to release the results of its auction of $32 billion worth of seven-year notes at 1 pm ET.

At 2 pm ET, Minneapolis Fed President Neel Kashkari is slated to speak at a town hall in Billings, Montana.

Stocks In Focus

Shares of Beyond Meat (BYND) are moving sharply higher in pre-market trading after fast food giant McDonald’s (MCD) said it will be testing a new sandwich made with a Beyond Meat plant-based patty in 28 restaurants in Canada.

Drug store chain Rite Aid (RAD) is also likely to see initial strength after reporting fiscal second quarter earnings that exceeded analyst estimates.

On the other hand, shares of Accenture (ACN) may move to the downside after the consulting firm reported better than expected fiscal fourth quarter earnings but provided disappointing current quarter revenue guidance.
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