Market Analysis

Beyond the Number

Mixed Earnings News May Lead To Choppy Trading
10/22/2019 8:55 AM

The major U.S. index futures are pointing to a mixed opening on Tuesday as traders react to the latest batch of earnings news.

The markets may be pulled in opposite directions early on following the release of mixed earnings news from several big-name companies.

Shares of McDonald’s (MCD) may come under pressure after the fast food giant reported third quarter results that missed analyst estimates on both the top and bottom lines.

Delivery giant UPS (UPS) could also see initial weakness after reporting third quarter earnings that beat expectations but on weaker than expected sales.

On the other hand, shares of Procter & Gamble (PG) are likely to see initial strength after the consumer products giant reported better than expected fiscal first quarter results.

Fellow Dow component United Technologies (UTX) may also open higher after reporting third quarter results that beat estimates and raising its full-year guidance.

Meanwhile, Chipotle Mexican Grill (CMG), Snap (SNAP), Texas Instruments (TXN), and Whirlpool (WHR) are among the companies due to report their quarterly results after the close of today’s trading.

Following the mixed performance seen last week, stocks moved mostly higher over the course of the trading session on Monday. With the upward move, the Nasdaq and the S&P 500 reached their best closing levels in a month.

The major averages all closed in positive territory, although the Dow posted a relatively modest gain. While the Dow rose 57.44 points or 0.2 percent to 26,827.64, the Nasdaq advanced 73.44 points or 0.9 percent to 8,162.99 and the S&P 500 climbed 20.52 points or 0.7 percent to 3,006.72.

The strength on Wall Street came amid renewed optimism about the completion of phase one of a U.S.-China trade deal following comments from President Donald Trump and Chinese Vice Premier Liu He.

Trump said last Friday he thought an agreement would be signed by the time the Asia-Pacific Economic Cooperation meetings take place in Chile on November 16 and 17.

At a cabinet meeting earlier today, Trump told reporters that the trade deal is coming along great. He also claimed issues in phase two of the deal would be a lot easier to work out than those in phase one.

Meanwhile, Liu said that China and the United States would work to address each other's core concerns on the basis of equality and mutual respect.

"China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement," Liu said at a tech conference on Saturday, according to Bloomberg News.

The strong corporate results reported last week also made traders hopeful as earnings season gets into full swing in the coming days.

McDonald's (MCD), Procter & Gamble (PG), UPS (UPS), Caterpillar (CAT), eBay (EBAY), Ford (F), Microsoft (MSFT), Tesla (TSLA), Twitter (TWTR), Amazon (AMZN), and Intel (INTC) are just a few of the companies due to report their results this week.

Meanwhile, a steep drop by shares of Boeing (BA) limited the upside for the Dow, with the aerospace giant tumbling by 3.8 percent.

Boeing extended last Friday's sell-off after the aerospace giant expressed regret over the concern caused by leaked messages from a former test pilot revealing he unintentionally misled safety regulators about the grounded 737 MAX jet's control system.

Oil service stocks moved sharply higher over the course of the trading session, driving the Philadelphia Oil Service Index up by 3.4 percent.

Industry giant Halliburton (HAL) led the oil service sector higher after reporting third quarter earnings in line with analyst estimates.

Significant strength also emerged among banking stocks, as reflected by the 1.8 percent jump by the KBW Bank Index. The index ended the session at a nearly three-month closing high.

Semiconductor, computer hardware, and networking stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Meanwhile, gold stocks bucked the uptrend by the broader markets, resulting in a 2.3 percent slump by the NYSE Arca Gold Bugs Index. The weakness among gold stocks came amid a decrease by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are climbing $0.47 to $53.78 a barrel after falling $0.47 to $53.31 a barrel on Monday. Meanwhile, after sliding $6 to $1,488.10 an ounce in the previous session, gold futures are edging down $0.30 to $1,487.80 an ounce.

On the currency front, the U.S. dollar is trading at 108.55 yen compared to the 108.62 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1124 compared to yesterday’s $1.1150.


Asian stocks rose on Tuesday after U.S. President Donald Trump said that negotiations over an initial trade agreement with China are advancing and that the first phase of the deal will be signed in November. Japanese markets were closed for a holiday.

China's Shanghai Composite Index climbed 14.76 points or 0.5 percent, to 2,954.38, while Hong Kong's Seng Index edged up 60.52 points, or 0.2 percent, to 26,786.20.

Official data showed home prices increased in the majority of Chinese cities in September. On a monthly basis, house prices increased in 53 out of 70 cities.

A day after unexpectedly keeping its new benchmark lending rate unchanged, China's central bank today used open-market operations to inject the largest amount of cash into the banking system since May.

Australian markets eked out modest gains as firmer commodity prices on the back of positive news concerning trade talks helped lift miners.

The benchmark S&P/ASX 200 Index rose 19.70 points, or 0.3 percent, to 6,672.20, while the broader All Ordinaries Index ended up 20.90 points, or 0.3 percent, at 6,778.60.

Mining heavyweights BHP and Rio Tinto rose 1.2 percent and 1.5 percent, respectively on the back of gains in copper and iron ore prices

Banks ANZ, NAB and Westpac rose between 0.3 percent and half a percent. Wealth manager AMP rallied 2.3 percent after raising a record $6.2 billion for its fourth infrastructure debt fund.

On the other hand, hearing aid maker Cochlear slumped 5.5 percent after a downbeat annual general meeting update. Super Retail Group plunged 8.6 percent after promotions to attract consumers hit its margins at the start of fiscal year 2020.

Oil and gas explorer Oil Search dropped 1 percent after cutting its 2019 production outlook. Gold miners Newcrest Mining and Evolution Mining fell around 3 percent after gold prices closed lower overnight.

Seoul stocks posted strong gains as investors cheered positive messages regarding the U.S.-China trade talks. The benchmark Kospi jumped 24.02 points, or 1.2 percent, to 2,088.86.

Tech stocks led the surge, with heavyweight Samsung Electronics rising 1.8 percent and chipmaker SK Hynix adding 2.1 percent.


European stocks are seeing modest strength on Tuesday, a day after the Brexit deal faced fresh a blockade from parliament.

Brexit has been a waste of time and energy, European Commission President Jean-Claude Juncker said during a European Parliament debate, where European Council President Donald Tusk warned that a no deal Brexit would always be Britain's fault.

The pound fell as investors awaited two crucial Brexit votes in parliament that will determine whether the United Kingdom can leave the European Union at the end of October.

Lawmakers will vote on Prime Minister Boris Johnson's so-called Withdrawal Agreement Bill and then on the government's tight timetable for approving the legislation.

While the U.K.’s FTSE 100 Index has climbed by 0.5 percent, the German DAX Index and the French CAC 40 Index are both up by 0.1 percent.

Swiss banking giant UBS Group has moved notably higher. The bank is axing high-paying investment banking staff after reporting a 16 percent annual drop in its third-quarter profit.

Drugmaker Novartis has also moved to the upside after reporting better than expected third quarter profits and sales.

Swedish aerospace and defense company has also Saab jumped after its quarterly operating earnings topped forecasts.

Software AG shares have soared after the company reported a 5 percent rise in third quarter revenue and confirmed its 2019 guidance.

Shares of Just Eat have also spiked after Prosus N.V. announced that it has approached the food delivery company with a cash takeover offer valued at about 4.9 billion pounds.

On the other hand, shares of Imerys have come under pressure after the specialty minerals firm cut its outlook for 2019.

Defense firm Thales has also moved to the downside as it reported a 6 percent drop in order intake for the first nine months of the year on an organic basis.

Household goods maker Reckitt Benckiser has also dropped after cutting its full-year sales forecast for the second time this year.

U.S. Economic Reports

The National Association of Realtors is due to release its report on existing home sales in the month of September at 10 am ET. Existing home sales are expected to drop by 0.7 percent in September after jumping by 1.3 percent in August.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $40 billion worth of two-year notes.

Stocks In Focus

Shares of Biogen (BIIB) are moving sharply higher in pre-market trading after the biotechnology company reported better than expected third quarter results and announced plans to pursue FDA approval of its early Alzheimer's drug.

Motorcycle maker Harley-Davidson (HOG) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates and reaffirmed its full-year shipment forecast.

On the other hand, shares of Hasbro (HAS) may come under pressure after the toy maker reported third quarter results that missed expectations due in part the impact of rising tariffs.

Insurance giant Travelers (TRV) could also move to the downside after reporting weaker than expected third quarter earnings.
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