Market Analysis

Beyond the Numbers

Traders May Look To Pick Up Stocks At Somewhat Reduced Levels
11/22/2019 9:03 AM

The major U.S. index futures are currently pointing to a higher opening on Friday, with stocks likely to regain some ground after moving mostly lower over the past few sessions.

Traders may look to pick up stocks at somewhat reduced levels following the recent pullback, although buying interest is likely to be relatively subdued amid lingering uncertainty about a U.S.-China trade deal.

Recent reports have suggested the signing of a phase one trade deal could be delayed until next year as U.S. and Chinese officials struggle to reach agreement on core issues.

The next round of U.S. tariffs on Chinese goods is set to take effect on December 15th, potentially complicating efforts to reach an agreement.

In remarks at Bloomberg’s New Economy Forum in Beijing, Chinese President Xi Jinping said China wants to work toward a phase one agreement on the basis of mutual respect and equality but will fight back if necessary.

Xi met with former U.S. Secretary of State Henry Kissinger at the forum, reportedly describing U.S.-China relations as being at a critical juncture

“China and the United States should step up communication on strategic concerns to avoid misjudgment and enhance mutual understanding,” Xi told Kissinger, according to China’s state-run Xinhua News Agency.

Meanwhile, President Donald Trump said in an interview on Fox News this morning that a trade agreement with China is “very close” and that the two economic superpowers have a “very good chance to make a deal.”

After moving to the downside early in the session, stocks fluctuated over the course of the trading day on Thursday but largely maintained a negative bias. The major averages eventually ended the day modestly lower, adding to the losses posted on Wednesday.

The major averages finished the session in negative territory but off their worst levels of the day. The Dow slipped 54.80 points or 0.2 percent to 27,766.29, the Nasdaq dipped 20.52 points or 0.2 percent to 8,506.21 and the S&P 500 edged down 4.92 points or 0.2 percent to 3,103.54.

The continued weakness on Wall Street partly reflected renewed uncertainty about the U.S. and China finalizing a phase one trade deal.

On Wednesday, a report from Reuters said completion of a phase one U.S.-China trade deal could slide into next year.

Trade experts and people briefed on the talks told Reuters a deal is still elusive and negotiations may be getting more complicated.

Reuters said the delay in signing the deal comes as China presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.

President Donald Trump told reporters on Wednesday that he has not made a trade deal with China yet because Beijing is not "stepping up to the level that I want."

Meanwhile, a report from the Wall Street Journal said China's chief trade negotiator has invited his American counterparts to Beijing for a new round of face-to-face talks.

Citing people briefed on the matter, the WSJ said Chinese Vice Premier Liu He extended the invitation to U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin during a phone call late last week.

In U.S. economic news, the Labor Department released a report showing first-time claims for U.S. unemployment benefits came in unchanged in the week ended November 16th.

The report said initial jobless claims came in at 227,000, unchanged from the previous week's revised level. Economists had expected jobless claims to dip to 219,000 from the 225,000 originally reported for the previous week.

With the unchanged figure, jobless claims are hovering at their highest level since hitting 229,000 in the week ended June 22.

A separate report released by the National Association of Realtors showed existing home sales in the U.S. rebounded by more than expected in the month of October.

NAR said existing home sales jumped by 1.9 percent to an annual rate of 5.46 million in October after tumbling by 2.5 percent to a revised rate of 5.360 million in September.

Economists had expected existing home sales to surge up by 1.4 percent compared to the 2.2 percent slump originally reported for the previous month.

Gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.2 percent. The sell-off by gold stocks came amid a notable decrease by the price of the precious metal.

Considerable weakness was also visible among commercial real estate stocks, as reflected by the 1.4 percent drop by the Dow Jones U.S. Real Estate Index.

Semiconductor, computer hardware and housing stocks also moved notably lower, while energy stocks moved to the upside amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are slipping $0.24 to $58.34 a barrel after spiking $1.57 to $58.58 a barrel on Thursday. Meanwhile, after sliding $10.60 to $1,463.60 an ounce in the previous session, gold futures are climbing $6.50 to $1,470.10 an ounce.

On the currency front, the U.S. dollar is trading at 108.61 yen versus the 108.63 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is unchanged compared to yesterday’s $1.1059.


Asian stocks turned in a mixed performance on Friday after the Organization for Economic Co-operation and Development (OECD) trimmed its outlook for the global economy, saying the world was headed for its weakest economic growth since the 2007-2008 financial crisis amid trade conflicts, weak business investment and political uncertainty.

On the trade front, China said both sides still maintain communication channels, helping ease worries over the possible delay of a preliminary trade deal between the United States and China.

A report from the Wall Street Journal said China's chief trade negotiator has invited his American counterparts to Beijing for a new round of face-to-face talks.

Chinese stocks fell, with the benchmark Shanghai Composite Index closing down 18.35 points, or 0.6 percent, at 2,885.29 as China upwardly revised its nominal gross domestic product estimate for 2018 by 2.1 percent, reflecting more complete measures of the services sector and assets. Hong Kong's Hang Seng Index climbed 0.5 percent to 26,595.08.

Japanese shares closed higher on bargain hunting following three straight days of losses. Risk sentiment improved a little on fresh hopes that the world's top two economies may delay their plans to roll out new tariffs, originally slated for December 15.

The Nikkei 225 Index rose 74.30 points, or 0.3 percent, to 23,112.88, while the broader Topix inched up 0.1 percent higher to 1,691.34. Exporters finished mostly higher as the yen edged lower against the dollar.

Panasonic fell 1.5 percent after saying it would end all production of liquid crystal display panels by 2021 amid stiff competition from foreign rivals.

On the data front, Japan's private sector continued to contract in November but moved closer to stagnation, survey data from IHS Markit showed. The Jibun Bank flash composite output index rose to 49.9 from 49.1 in October.

Separately, official data showed that overall consumer prices in Japan were up 0.2 percent year-on-year in October. That was unchanged from the September reading, although it was shy of estimates for a gain of 0.3 percent.

Australian markets rebounded from two straight days of losses, with material and energy stocks leading the surge. The benchmark S&P/ASX 200 Index advanced 36.90 points, or 0.6 percent, to 6,709.80, while the broader All Ordinaries Index ended up 38.80 points, or 0.6 percent, at 6,816.50.

Mining heavyweights BHP and Rio Tinto gained 1.3 percent and 0.8 percent, respectively after commodity prices ticked higher overnight. Smaller rival Fortescue Metals Group jumped 3.9 percent.

Energy stocks such as Woodside Petroleum, Santos, Oil Search, Beach Energy and Origin Energy climbed 1-2 percent after oil prices hit a two-month high on reports that OPEC and its allies are likely to extend output cuts until mid-2020.

Westpac Banking Corp lost 1.6 percent after Investment bank Goldman Sachs cut its target price amid alleged breaches of money laundering laws and associated risks.

Mayne Pharma shares slumped 11 percent after the drug maker reported that its gross profit for the first four months of the year dropped 33 percent.

Australia's private sector saw a renewed contraction in November following no change in October, survey results from IHS Markit showed today. The corresponding index fell to 49.5 from 50.0 in October.

Seoul stocks snapped their four-day losing streak after reports suggested that China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing.

The benchmark Kospi rose 5.36 points, or 0.3 percent, to 2,101.96, led by technology stocks. Samsung Electronics climbed 1.2 percent and SK Hynix added 1 percent.


European stocks have steadied on Friday after a bout of selling earlier this week on concerns that U.S. legislation on Hong Kong could increase tensions between the United States and Beijing.

China said both sides still maintain communication channels, helping ease worries over the possible delay of a preliminary trade deal.

Separately, a report from the Wall Street Journal said China's chief trade negotiator has invited his American counterparts to Beijing for a new round of face-to-face talks.

While the U.K.’s FTSE 100 Index has surged up by 1.4 percent, the French CAC 40 Index and the German DAX Index are up by 0.3 percent and 0.2 percent, respectively.

British property website operator Rightmove has moved to the upside after announcing the appointment of Andrew Fisher as non-executive Chairman, effective 1 January 2020.

Vonovia has also edged higher. The German residential property company said that it currently controls 72.3 percent of the votes in Hembla.

On the other hand, Aryzta shares have tumbled after the Swiss-Irish baker said its organic revenue fell 2.5 percent during the first quarter of its financial year.

Hochschild Mining has also fallen. The company said it remains firmly on track to meet the company's 2019 output guidance of 457,000 gold equivalent ounces or 37.0 million silver equivalent ounces.

On the data front, investors shrugged off flash data from IHS Markit showing that the euro area private sector remained close to stagnant for a third consecutive month in November.

The composite output index unexpectedly fell to 50.3 in November from 50.6 in October. The reading signaled the second slowest growth across manufacturing and services since the current upturn began in July 2013.

The U.K. services purchasing managers index fell to a 40-month low in November, while the manufacturing PMI slipped to a two-month low.

Meanwhile, the European Central Bank's ultra-loose monetary policy is supporting the euro area economy and will continue to do so to ensure inflation returns to its target, new ECB President Christine Lagarde said.

“The ECB's accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place," Lagarde said in a speech at the Frankfurt European Banking Congress.

U.S. Economic Reports

At 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of November.

The consumer sentiment index for November is expected to be unrevised from the preliminary reading of 95.7, which was up from 95.5 in October.

Stocks In Focus

Shares of Nordstrom (JWN) are moving significantly higher in pre-market trading after the retailer reported better than expected third quarter earnings and raised the lower end of its full-year profit forecast.

Apparel retailer Gap (GPS) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of J.M. Smucker (SJM) may move to the downside after the packaged food maker reported fiscal second quarter earnings that exceeded analyst estimates but lowered its full-year guidance.
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