Market Analysis

Beyond the Numbers

Futures Pointing To Modestly Lower Open On Wall Street
12/9/2019 8:56 AM

The major U.S. index futures are currently pointing to a modestly lower opening on Monday following the upward trend seen over the past few sessions.

Some traders may look to cash in on the recent strength in the markets, which helped lift the major averages back within striking distance of the record highs set late last month.

Lingering uncertainty about U.S.-China trade talks may weigh on Wall Street, as new 15 percent tariffs on $165 billion worth of Chinese imports are currently still set to take effect this coming Sunday.

The new round of tariffs could throw a wrench in negotiations over a phase on trade deal, which is reportedly being held up in part by a dispute over how much to roll back existing tariffs.

Rising tensions between the U.S. and North Korea could also lead to some caution among traders after North Korea conducted a “very important test” at a long-range missile launch site.

President Donald Trump warned North Korean leader Kim Jong Un risks losing “everything” if he acts in a hostile way, leading a North Korean official to describe the president as a “heedless and erratic old man.”

Nonetheless, overall trading activity may be somewhat subdued, with a lack of major U.S. economic data keeping some traders on the sidelines.

Traders may look ahead to the Federal Reserve’s monetary policy announcement on Wednesday, although the central bank is widely expected to leave interest rates unchanged.

Stocks moved sharply higher over the course of the trading day on Friday, extending the rebound seen over the two previous sessions. With the advance, the major averages climbed back within striking distance of their record highs.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow soared 337.26 points or 1.2 percent to 28,015.06, the Nasdaq surged up 85.83 points or 1 percent to 8,656.53 and the S&P 500 jumped 28.48 points or 0.9 percent to 3,145.91.

For the week, the major averages showed little change. The Dow and the Nasdaq both edged down by 0.1 percent, while the S&P 500 crept up by 0.2 percent.

The rally on Wall Street came after the Labor Department's closely watched monthly employment report showed much stronger than expected U.S. job growth in the month of November.

The report said non-farm payroll employment surged up by 266,000 jobs in November after climbing by an upwardly revised 156,000 jobs in October.

Economists had expected an increase of about 180,000 jobs compared to the addition of 128,000 jobs originally reported for the previous month.

The Labor Department said notable job gains occurred in healthcare and in professional and technical services, while manufacturing employment also rose as General Motors (GM) workers returned from a strike.

With the stronger than expected job growth, the unemployment rate edged down to 3.5 percent in November from 3.6 percent in October. The unemployment rate was expected to remain unchanged.

Adding to the positive sentiment, preliminary data released by the University of Michigan showed a much bigger than expected improvement in U.S. consumer sentiment in the month of December.

The report said the consumer sentiment index climbed to 99.2 in December from the final November reading of 96.8. Economists had expected the index to inch up to 97.0.

With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 100.0 in May.

Surveys of Consumers chief economist Richard Curtin said nearly all of the improvement in consumer sentiment in December was among upper income households, who reported near record gains in household wealth due to record high stock prices.

Energy stocks turned in some of the market's best performances on the day, benefiting from a notable increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 4.7 percent, the NYSE Arca Natural Gas Index surged up by 3.1 percent and the NYSE Arca Oil Index soared by 2 percent.

Significant strength was also visible among steel stocks, as reflected by the 2.2 percent jump by the NYSE Arca Steel Index. The index ended the day at its best closing level in over four months.

Banking, semiconductor, and transportation stocks also saw considerable strength, while gold stocks were among the few groups to buck the uptrend amid a steep drop by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are sliding $0.61 to $58.59 a barrel after climbing $0.77 to $59.20 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,467.40, up $2.30 from the previous session’s close of $1,465.10. On Friday, gold plunged $18.

On the currency front, the U.S. dollar is trading at 108.44 yen compared to the 108.58 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1073 compared to last Friday’s $1.1060.


Asian stocks ended mostly higher on Monday, although the upside was limited on concerns about an escalation in the U.S.-China trade war after top White House economic adviser Larry Kudlow said that a December 15th deadline is still in place to impose a new round of U.S. tariffs on Chinese consumer goods.

Chinese shares ended little changed with a positive bias after the release of November trade data. Hong Kong shares finished marginally lower.

China's exports shrank for the fourth consecutive month in November, although imports came in better than expected, suggesting that Beijing's stimulus efforts are working.

Japanese shares rose for a third straight session as investors awaited key central bank meetings and the U.K. elections. The Nikkei 225 Index edged up by 76.30 points, or 0.3 percent, to 23,430.70, while the broader Topix closed 0.5 percent higher at 1,722.07.

Market heavyweight SoftBank Group climbed 1.2 percent, while oil-linked Japan Petroleum and Inpex surged 3-4 percent. Exporters ended mixed, with Panasonic surging 2.2 percent and Sony Corp. rising 1.1 percent.

Japan's gross domestic product was bumped all the way up to a seasonally adjusted annualized 1.6 percent in the third quarter of 2019, a government report showed today. That was a sharp upward move from the 0.2 percent gain originally reported for Q3.

Another report showed that Japan had a current account surplus of 1,816.8 billion yen in October - exceeding expectations for 1,806.8 billion yen and up from 1,612.9 billion in September.

Australian markets eked out modest gains after data showed surprise strength in the U.S. jobs market. The benchmark S&P/ASX 200 Index rose by 23.00 points, or 0.3 percent, to 6,730.00, while the broader All Ordinaries Index ended up 22.90 points, or 0.3 percent, at 6,836.40.

Energy stocks led the surge, with Woodside Petroleum, Oil Search, Origin Energy and Santos rising around 2 percent as oil prices held near 12-week highs.

Viva Energy Group slumped 6.6 percent after warning it expects fiscal 2019 underlying net profit to fall by up to 41 percent due to weak refining margins.

Mining heavyweights BHP and Rio Tinto climbed around 2 percent, while smaller rival Fortescue Metals Group jumped 3.4 percent. Gold miner Evolution gained 2.3 percent and Newcrest added 2.5 percent.

Administrative services provider Mcmillan Shakespeare plunged 7.5 percent after it warned of tougher market conditions.

Seoul stocks gained ground despite North Korea conducting a "very important test" at a long-range missile launch site. The Kospi edged up 6.80 points, or 0.3 percent, to 2,088.65.

U.S. President Donald Trump warned Sunday that North Korean leader Kim Jong Un risks losing "everything" if he acts in a hostile way.


European stocks edged have lower on Monday, with weak exports data from China and lingering U.S.-China trade worries keeping investors nervous.

Caution also prevails ahead of key developments this week, including the Federal Reserve's latest interest rate decision, new ECB boss Christine Lagarde's first policy meeting and the U.K. general election.

While the French CAC 40 Index has slid by 0.5 percent, the German DAX Index and the U.K.’s FTSE 100 Index are down by 0.2 percent and 0.1 percent, respectively.

In an interview with France 3 television, French Finance Minister Bruno Le Maire said that France was ready to challenge U.S. President Trump's tariffs threat at the World Trade Organization (WTO).

“We are ready to take this to an international court, notably the WTO, because the national tax on digital companies touches U.S. companies in the same way as EU or French companies or Chinese. It is not discriminatory,” Le Maire said.

Swiss drug maker Roche has slipped after announcing changes in the Board of Directors and the Corporate Executive Committee of the company.

Tullow Oil shares have moved sharply lower. The oil and gas explorer downgraded its production guidance for 2020, suspended its dividend and announced that chief executive Paul McDade and exploration director Angus McCoss had both stood down.

Meanwhile, United Internet has recouped early losses after the German internet services company said it has decided to make a share buyback offer to its shareholders for a total of up to 9 million shares at a price of 29.65 euros per share.

Britain's biggest retailer Tesco has jumped on news it is considering the sale of its stores in Thailand and Malaysia.

Pharma services company hVIVO has also soared after announcing it has reached an agreement on the terms of a recommended offer to be made by Open Orphan Plc for the entire share capital of hVIVO.

In economic news, Germany's exports expanded unexpectedly, while imports remained flat in October, figures from Destatis revealed. Exports grew 1.2 percent on a monthly basis in October, confounding expectations for a decline of 0.3 percent.

France's economic growth is expected to slow slightly in the fourth quarter, the Bank of France reiterated today. The bank retained its GDP growth estimate for the final three months of 2019 at 0.2 percent, which is slower than the 0.3 percent expansion in the third quarter.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today, although the Treasury Department is due to announce the results of its auction of $38 billion worth of three-year notes at 1 pm ET.

Stocks In Focus

Shares of Macy’s (M) are moving notably lower in pre-market trading after Goldman Sachs downgraded its rating on the department store chain to Sell from Neutral.

Recreational vehicle manufacturer Thor Industries (THO) is also likely to see initial weakness after reporting fiscal first quarter that came in below analyst estimates.

On the other hand, shares of TG Therapeutics (TGTX) are seeing significant pre-market strength after the biopharmaceutical company said it is highly encouraged by the first clinical data presented from its once daily, BTK inhibitor, TG-1701.

Drug giant Bristol-Myers Squibb (BMY) may also move to the upside after reporting solid results from an early clinical trial of a cancer treatment it acquired through its takeover of Celgene.
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