Market Analysis

Beyond the Numbers

Earnings News, Efforts To Contain Virus May Generate Buying Interest
1/22/2020 8:45 AM

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks likely to move back to the upside following the modest pullback seen in the previous session.

A positive reaction to earnings news from IBM Corp. (IBM) may generate early buying interest, with the tech giant jumping by nearly 4 percent in pre-market trading.

The advance by IBM comes after the company reported better than expected fourth quarter results and provided upbeat full-year 2020 guidance.

Positive sentiment may also be generated in reaction to news of the Chinese government’s efforts to stop the spread of the Wuhan coronavirus outbreak.

Chinese health officials told the Wall Street Journal that hospitals are stepping up preventive measures and government officials are recommending that people not enter or leave Wuhan.

Following the holiday on Monday, stocks fluctuated over the course of the trading day on Tuesday before ending the session mostly lower. With the drop on the day, the major averages pulled back off the record closing highs set last Friday.

The major averages all finished the day in negative territory. The Dow slid 152.06 points or 0.5 percent to 29,196.04, the Nasdaq dipped 18.13 points or 0.2 percent to 9,370.81 and the S&P 500 fell 8.83 points or 0.3 percent to 3,320.79.

Stocks initially move to the downside amid concerns about the economic impact of a deadly coronavirus outbreak in China.

Chinese officials revealed the coronavirus outbreak has resulted in six deaths among nearly 300 confirmed cases, with the virus confirmed to be transmissible among humans.

The major averages staged a recovery attempt over the course of the morning before pulling back once again after the Centers for Disease Control and Prevention confirmed the first travel-related case of the coronavirus in the United States.

The CDC said the first case of coronavirus infection in the U.S. was diagnosed in the state of Washington in a patient who recently returned from Wuhan, China.

Adding to the negative sentiment, the International Monetary Fund downwardly revised its forecast for global economic outlook due to bigger than expected slowdowns in emerging markets like India.

The IMF said it now expects 3.3 percent global growth in 2020 compared to its previous estimate for 3.4 percent growth. The organization also lowered its 2021 growth forecast to 3.4 percent from 3.6 percent.

Selling pressure remained relatively subdued, however, with traders seemingly reluctant to miss out on any further upside.

A lack of major U.S. economic data may also have kept some traders on the sidelines following the long, holiday weekend.

The economic calendar remains relatively quiet throughout the week, which may lead to increased attention on the latest earnings news.

Natural gas stocks moved sharply lower over the course of the session, dragging the NYSE Arca Natural Gas Index down by 3.9 percent to its lowest closing level in over a month.

The sell-off by natural gas stocks came amid a steep drop by the price of the commodity, with natural gas for February delivery plummeting $0.108 or 5.4 percent to $1.895 per million BTUs.

Substantial weakness also emerged among oil service stocks, as reflected by the 3 percent nosedive by the Philadelphia Oil Service Index.

Steel stocks also saw significant weakness amid concerns about the outlook for demand, with the NYSE Arca Steel Index tumbled by 2.6 percent.

Transportation, tobacco and biotechnology stocks also saw notable weakness on the day, while gold and housing stocks showed strong moves to the upside.

Commodity, Currency Markets

Crude oil futures are sliding $0.53 to $57.85 a barrel after slipping $0.20 to $58.38 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,556.80, down $1.10 compared to the previous session’s close of $1,557.90. On Tuesday, gold dipped $2.40.

On the currency front, the U.S. dollar is trading at 109.97 yen compared to the 109.87 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1088 compared to yesterday’s $1.1082.


Asian stocks ended mostly higher on Wednesday as China's response to a virus outbreak tempered some fears of a global pandemic.

The World Health Organization is expected to declare a Public Health Emergency of International Concern in response to the coronavirus outbreak, which appears to have originated in eastern China and spread to more Chinese cities, including Beijing and Shanghai.

Chinese shares reversed early losses to end the session higher. The benchmark Shanghai Composite Index rose 8.61 points, or 0.3 percent, to 3,060.75, while Hong Kong's Hang Seng Index jumped 355.71 points, or 1.3 percent, to 28,341.04.

Japanese shares also recovered from an early slide to end notably higher as panic about the coronavirus in China abated. The Nikkei 225 Index climbed 166.79 points, or 0.7 percent, to 24,031.35, while the broader Topix closed 0.5 percent higher at 1,744.13.

Hygiene-related stocks gained ground, with Azearth, a supplier of protective attire, surging 24 percent. Fibre-maker Omikenshi soared almost 10 percent and air conditioning manufacturing company Daikin Industries rallied 2.3 percent.

On the flip side, Mitsubishi Motors lost 4.2 percent after reports of raids on its German distributors as part of a probe into suspected diesel emissions cheating involving Mitsubishi cars.

Australian markets rallied to reach fresh highs, driven by gains in financials. The benchmark S&P/ASX 200 Index jumped 66.40 points, or 0.9 percent, to 7,132.70, while the broader All Ordinaries Index surged up 68.50 points, or 1 percent, to 7,249.

Banks ANZ and Commonwealth rose 0.8 percent and 1.2 percent, respectively. National Australia Bank, which is facing a class action lawsuit, ended on a flat note.

Mining giant Rio Tinto advanced 0.9 percent. Smaller rival Fortescue Metals Group surged over 5 percent to extend gains for the fifth session after Credit Suisse upgraded the stock to Neutral.

Oil & gas producer Santos gained 0.8 percent after posting record annual production. Airline stocks slipped amid growing coronavirus fears, with Qantas Airways losing 2 percent.

Australia's consumer confidence declined in January as devastating bushfires weighed on the economic growth outlook, survey data from Westpac showed today. The Westpac-Melbourne Institute Index of Consumer Sentiment declined 1.8 percent to 93.4 in January from 95.1 in December.

Seoul stocks ended sharply higher after data showed South Korea's government spending surge helped the economy post its fastest quarterly growth in more than two years. The benchmark Kospi rallied 27.56 points, or 1.2 percent, to finish at 2,267.25.

GDP climbed a seasonally adjusted 1.2 percent in the fourth quarter of 2019, the Bank of Korea said in a preliminary reading. That beat forecasts for an increase of 1.0 percent and accelerated from the 0.4 percent gain in the three months prior.


European stocks are mixed in cautious trading on Wednesday as panic about the coronavirus outbreak in China abated and investors looked ahead to the first European Central Bank meeting of 2020 for directional cues.

The Geneva-based World Health Organization said it would hold an emergency meeting today to decide whether to designate the coronavirus outbreak as an international public health emergency.

While the U.K.’s FTSE 100 Index has fallen by 0.3 percent, the French CAC 40 Index is just above the unchanged line and the German DAX Index is up by 0.1 percent.

Daimler has moved to the downside. The German automaker reported that its fiscal 2019 preliminary Group earnings before interest and tax, or EBIT, were 5.6 billion euros, sharply lower than 11.1 billion euros recorded in fiscal 2018.

Designer brand Burberry Group has also fallen after its sales in Hong Kong dropped by half over the Christmas quarter.

Retailer J Sainsbury has also slumped. The company announced that it appointed Simon Roberts as Chief Executive Officer, effective June 1.

On the other hand, technology company Sage Group has jumped after delivering a strong quarter and backing its guidance for the full financial year.

Berkeley Group Holdings has also soared. The company said it would increase its returns to shareholders by about 455 million pounds ($594.00 million) over the next two years

Dutch semiconductor equipment maker ASML Holding N.V. has also moved higher after it launched a three-year share-buyback program of up to 6 billion euros.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on existing home sales in the month of December at 10 am ET.

Economists expect existing home sales to jump by 1.2 percent to an annual rate of 5.43 million in December after tumbling by 1.7 percent to a rate of 5.35 million in November.

Stocks In Focus

Shares of Moderna (MRNA) are moving sharply higher in pre-market trading after the drugmaker told CNBC it is working with U.S. government health agencies to develop a vaccine for the current strain of coronavirus.

United Airlines (UAL) may regain ground following yesterday’s sell-off after reporting fourth quarter earnings that exceeded analyst estimates.

On the other hand, shares of Johnson & Johnson (JNJ) are likely to see initial weakness after the healthcare giant reported fourth quarter earnings that beat estimates but on slightly weaker than expected revenues.
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