Market Analysis

Beyond the Numbers

Renewed Optimism About Trade Deal May Generate Early Buying Interest
11/15/2019 9:02 AM

The major U.S. index futures are currently pointing to a higher opening on Friday, with stocks likely to move to the upside after ending the previous session nearly flat.

The upward momentum on Wall Street comes amid renewed optimism about a U.S.-China trade deal following comments from White House officials.

White House economic adviser Larry Kudlow said Thursday that U.S. and Chinese negotiators are in contact every single day and are “getting close” to a phase one trade deal.

“It’s not done yet, but there has been very good progress and the talks have been very constructive,” Kudlow said at an event at the Council on Foreign Relations.

In an appearance on the Fox Business Network on Friday, Commerce Secretary Wilbur Ross said the talks are “down to the last details” and a deal will be completed “in all likelihood.”

Adding to the positive sentiment, China has lifted a nearly five-year ban on imports of U.S. poultry in a goodwill gesture that could lead to more than $1 billion in annual shipments to China.

With traders seemingly reluctant to make any significant moves, stocks showed a lack of direction over the course of the trading session on Thursday. The choppy trading on the day extended the lackluster performance seen throughout the past week.

The major averages eventually ended the day mixed, with the S&P 500 inching up 2.59 points or 0.1 percent to a new record closing high of 3,096.63. The Dow edged down 1.63 points or less than a tenth of a percent to 27,781.96 and the Nasdaq slipped 3.08 points or less than a tenth of a percent to 8,479.02.

Traders stuck to the sidelines as they expressed some concerns as U.S.-China trade talks drag on but remain wary of missing out on any further upside.

The markets have recently shown intense reactions to reports about the trade talks, and an upbeat report could send stocks surging to record highs once again.

With earnings season largely in the rearview mirror and the Federal Reserve signaling interest rates will remain on hold for the foreseeable future, traders are looking the next catalyst for the markets.

The long-awaited completion of a phase one U.S.-China trade deal could help drive the markets, although the talks could also still fall apart.

Traders may also start paying closer attention to the latest economic data, with reports on U.S. retail sales and industrial production likely to attract attention on Friday.

The Labor Department released a report this morning showing U.S. producer prices rebounded by slightly more than anticipated in the month of October.

The report said the producer price index for final demand climbed by 0.4 percent in October after falling by 0.3 percent in September. Economists had expected producer prices to rise by 0.3 percent.

Excluding food and energy prices, core producer prices rose by 0.3 percent in October following a 0.3 percent drop in September. Core prices had been expected to edge up by 0.2 percent.

Meanwhile, a separate Labor Department report showed first-time claims for U.S. unemployment benefits increased by much more than expected in the week ended November 9th.

The report said initial jobless claims climbed to 225,000, an increase of 14,000 from the previous week's unrevised level of 211,000. Economists had expected jobless claims to inch up to 215,000.

Reflecting the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.

Notable weakness was visible among energy stocks, however, with the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index falling by 1 percent and 1.2 percent, respectively.

The weakness in the energy sector came amid a downturn by the price of crude oil, as crude for December delivery turned lower after a report showed a bigger than expected weekly increase in crude oil inventories.

Networking stocks also moved lower as Cisco (CSCO) posted a steep loss after providing disappointing guidance, while gold stocks moved higher along with the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are inching up $0.07 to $56.84 a barrel after falling $0.35 to $56.77 a barrel on Thursday. Meanwhile, after climbing $10.10 to $1,473.40 an ounce in the previous session, gold futures are sliding $5.40 to $1,468 an ounce.

On the currency front, the U.S. dollar is trading at 108.67 yen versus the 108.42 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1036 compared to yesterday’s $1.1022.


Asian stocks rose broadly on Friday after White House economic adviser Larry Kudlow said the U.S. and China are communicating "every single day" and the phase one trade deal was close though "not done yet."

Investors also welcomed a goodwill gesture by China lifting a nearly five-year ban on imports of U.S. poultry meat, a move that could lead to more than $1 billion in annual shipments to China.

Chinese shares closed lower, with the benchmark Shanghai Composite Index ending down 0.6 percent at 2,891.34 despite China's central bank unexpectedly adding liquidity to the banking system to help lenders through the tax season.

Investors also ignored data showing Chinese home prices logged moderate growth in October. Hong Kong's Hang Seng Index ended little changed with a positive bias.

Japanese shares closed higher as the yen weakened on reports suggesting that the U.S. and China are making progress in trade talks. Investors also welcomed final data showing Japanese industrial production grew more than initially estimated in September.

Industrial production rose 1.7 percent month-on-month in September. According to the initial estimate, production had increased 1.4 percent.

The Nikkei 225 Index gained 161.77 points, or 0.7 percent, to finish at 23,303.32, while the broader Topix closed 0.7 percent higher at 1,696.67.

FamilyMart UNY Holdings jumped 2.2 percent after the convenience store operator said it would cut about 800 jobs, or about 10 percent of its workforce, as part of its efforts to streamline operations following repeated consolidations.

Australian markets rose sharply, led by material and technology stocks. The benchmark S&P/ASX 200 Index climbed 58.60 points, or 0.9 percent, to 6,793.70, while the broader All Ordinaries Index ended up 58.10 points, or 0.9 percent, at 6,898.90.

Mining heavyweights BHP and Rio Tinto rose around 1.3 percent, while smaller rival Fortescue Metals Group jumped 3.8 percent.

Graincorp surged 11.5 percent after the competition regulator approved the sale of its bulk liquid terminals business. Bellamy's Australia rallied 1.9 percent after Treasurer Josh Frydenberg approved a $1.5 billion takeover offer of the infant formula maker.

Tech stocks extended recent gains, with Afterpay Touch rising 4.3 percent and Appen adding 1.5 percent. Healthcare stocks also extended gains, with CSL climbing 1.9 percent to a record high.

Meanwhile, National Australia Bank shed 0.6 percent after the lender said 1,700 of its staff failed to meet risk expectations during the last financial year.

Seoul stocks rallied to hit a six-month high on revived hopes of a U.S.-China trade deal. The benchmark Kospi recovered from a weak start to end the session up 22.95 points, or 1.1 percent, at 2,162.18. Market heavyweight Samsung Electronics advanced 1.7 percent and chipmaker SK Hynix jumped 2.2 percent.


European stocks have moved mostly higher on Friday and remain on course for a sixth straight weekly gain as White House economic adviser Larry Kudlow's comments on trade helped revive hopes of a U.S.-China deal and China's central bank unexpectedly added liquidity to the banking system to help lenders through the tax season.

Investors also welcomed a goodwill gesture by China lifting a nearly five-year ban on imports of U.S. poultry meat, a move that could lead to more than $1 billion in annual shipments to China.

While the U.K.’s FTSE 100 Index has bucked the uptrend and dipped by 0.2 percent, the German DAX Index is up by 0.2 percent and the French CAC 40 Index is up by 0.4 percent.

Chipmaker Infineon Technologies, STMicroelectronics and ASML Holding have moved to the upside after Applied Materials beat Wall Street's targets for its fiscal fourth quarter and raised its outlook.

Orange shares have also rallied. The French telecoms operator said it is preparing to split its mobile towers unit into a separate company.

BT shares are fluctuating after Labour leader Jeremy Corbyn said his party would nationalize parts of the company's network if he wins next month's election.

Construction, services and property group Kier Group has moved higher after saying it is trading in line with the Board's expectations.

Carpetright has surged after it agreed to be acquired by its largest shareholder Meditor, in a deal which values the company at 15.19 million pounds.

U.S. Economic Reports

After reporting an unexpected drop in retail sales in the previous month, the Commerce Department released a report showing U.S. retail sales rose by slightly more than expected in the month of October.

The Commerce Department said retail sales climbed by 0.3 percent in October, reversing the 0.3 percent drop in September. Economists had expected retail sales to rise by 0.2 percent.

Excluding a rebound in auto sales, the report said retail sales rose by 0.2 percent in October after edging down by 0.1 percent in September. Ex-auto sales had been expected to increase by 0.4 percent.

A separate report released by the Labor Department showed import prices in the U.S. fell by much more than expected in the month of October.

The Labor Department said import prices slid by 0.5 percent in October after inching up by a revised 0.1 percent in September.

Economists had expected import prices to dip by 0.2 percent compared to the 0.2 percent uptick originally reported for the previous month.

Meanwhile, the report said export prices edged down by 0.1 percent in October after dipping by 0.2 percent in September. The modest decrease matched economist estimates.

A report released by the Federal Reserve Bank of New York on Friday unexpectedly showed a modest slowdown in the pace of growth in regional manufacturing activity in the month of November.

The New York Fed said its headline general business conditions index edged down to 2.9 in November from 4.0 in October, although a positive reading still indicates an increase in regional manufacturing activity. Economists had expected the index to inch up to 5.0.

Looking ahead, the report said indexes assessing the six-month outlook suggest optimism about future conditions remains subdued.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of October. Industrial production is expected to decrease by 0.4 percent in October, matching the drop seen in September.

The Commerce Department is due to release its report on business inventories in the month of September at 10 am ET. Economists expect business inventories to inch up by 0.1 percent.

Stocks In Focus

Shares of J.C. Penney (JCP) are moving sharply higher in pre-market trading after the department store operator reported a narrower than expected third quarter loss.

Semiconductor equipment maker Applied Materials (AMAT) may also see initial strength after reporting better than expected fiscal fourth quarter results and providing upbeat guidance.

On the other hand, shares of Aurora Cannabis (ACB) may come under pressure after the cannabis producer reported a steep drop in fiscal first quarter revenues and scaled back its expansion plans.
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