Market Analysis

Beyond the Numbers

Upbeat Earnings News May Generate Initial Buying Interest
1/24/2020 8:57 AM

The major U.S. index futures are currently pointing to a higher opening on Friday, with stocks likely to move to the upside following the mixed close seen in the previous session.

The upward momentum on Wall Street partly reflects a positive reaction to earnings from Intel (INTC) and American Express (AXP).

Shares of Intel are up by 4.9 percent in pre-market trading after the semiconductor giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Intel also provided upbeat guidance for the current year and said its board of directors approved a five percent cash dividend increase.

American Express is also seeing significant pre-market strength after the financial services giant reported better than expected fourth quarter results.

The markets may also continue to benefit from the World Health Organization’s determination that it is too early to declare the Chinese coronavirus outbreak a global health emergency.

After moving to the downside early in the session, stocks showed a notable rebound over the course of the trading day on Thursday. The major averages climbed well off their lows of the session, with the Nasdaq and the S&P 500 reaching positive territory.

The major averages finished the day mixed, as the Dow climbed off its worst levels but still closed in the red. While the Dow edged down 26.18 points or 0.1 percent to 29,160.06, the Nasdaq rose 18.71 points or 0.2 percent to 9,402.48 and the S&P 500 inched up 3.79 points or 0.1 percent to 3,325.54.

Lingering concerns about the impact of the Chinese coronavirus generated early selling pressure on Wall Street after contributing to a sell-off in the Asia-Pacific markets.

Despite efforts to contain the outbreak, deaths from the new coronavirus have risen to 17, with nearly 600 cases confirmed worldwide.

However, stocks showed a notable recovery after the World Health Organization said it is still too early to declare the outbreak a Public Health Emergency of International Concern.

"Make no mistake, this is an emergency in China. But it has not yet become a global health emergency," said WHO Director-General Tedros Adhanom Ghebreyesus.

The WHO noted an emergency committee stands ready to be reconvened to reconsider formally declaring the situation a PHEIC.

"At this time, there is no evidence of human-to-human transmission outside China, but that doesn't mean it won't happen," Tedros said.

A steep drop by shares of Travelers (TRV) helped keep the Dow in the red after the insurance giant reported fourth quarter earnings and revenues that beat estimates but slightly weaker than expected net premiums written.

In U.S. economic news, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended January 18th.

The report said initial jobless claims rose to 211,000, an increase of 6,000 from the previous week's revised level of 205,000.

Economists had expected jobless claims to climb to 215,000 from the 204,000 originally reported for the previous week.

Meanwhile, a separate report from the Conference Board showed a slightly bigger than expected decrease by its index of leading U.S. economic indicators.

The Conference Board said its leading economic index fell by 0.3 percent in December after inching up by a revised 0.1 percent in November

Economists had expected the leading economic index to dip by 0.2 percent compared to the unchanged reading originally reported for the previous month.

Transportation stocks showed a significant move to the upside over the course of the session, driving the Dow Jones Transportation Average up by 1.3 percent.

Considerable strength also emerged among housing stocks, as reflected by the 1.2 percent gain posted by the Philadelphia Housing Sector Index.

On the other hand, oil service stocks saw substantial weakness on the day, dragging the Philadelphia Oil Service Index down by 1.7 percent. The weakness among oil service stocks came amid another sharp drop by the price of crude oil.

Tobacco stocks also showed a notable move to the downside, resulting in a 1.4 percent slump by the NYSE Arca Tobacco Index.

Commodity, Currency Markets

Crude oil futures are sliding $0.36 to $55.23 a barrel after tumbling $1.15 to $55.59 a barrel on Thursday. Meanwhile, after climbing $8.70 to $1,565.40 an ounce in the previous session, gold futures are falling $5.30 to $1,560.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.54 yen versus the 109.49 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1037 compared to yesterday’s $1.1055.


Asian stocks largely ended Friday's session on a steady note after the World Health Organization said the coronavirus outbreak in China did not yet constitute a global health emergency. The death toll in China has now risen to 26, while the number of confirmed cases jumped to 830.

Markets in China, South Korea and Taiwan were closed for the Lunar New Year holidays. Hong Kong's Hang Seng Index edged up 40.52 points, or 0.2 percent, to 27,949.64 in a shortened trading session ahead of the Year of the Rat.

Japanese shares closed higher after the release of macroeconomic data. Japanese inflation accelerated in December but remained well below the 2 percent target, a government report showed.

Consumer price inflation increased to 0.8 percent from 0.5 percent a month ago. This was above economists' forecast of 0.7 percent.

Separately, flash survey results from IHS Markit revealed that Japan's private sector rebounded at the start of 2020, driven by an expansion in services output. The corresponding index rose to 51.1 in January from 48.6 in December.

The services PMI advanced to 52.1 from 49.4 a month ago. The factory PMI also climbed in the month but held below 50.

The Nikkei 225 Index inched up 31.74 points, or 0.1 percent, to 23,827.18, while the broader Topix closed marginally lower at 1,730.44.

Australian markets ended a volatile week in positive territory as healthcare stocks advanced, offsetting losses in the mining sector. Both the S&P/ASX 200 Index and the All Ordinaries Index finished marginally higher at 7,090.50 and 7,203.20, respectively.

Biotechnology firm CSL and Ansell, which manufactures protective industrial and medical gloves, both rose about 1 percent amid the coronavirus outbreak. The big four banks rose between 0.4 percent and 0.6 percent.

Shares of Insurance Australia Group slumped 5.4 percent after the company lowered its fiscal 2020 insurance profit margin outlook.

Mining heavyweights BHP and Rio Tinto lost 1.5 percent and 2.8 percent, respectively, while gold miner Newcrest Mining rose 1.2 percent. Energy stocks finished broadly higher despite oil prices hitting an eight-week low overnight.

Australia's private sector output declined at the sharpest pace since the survey began in May 2016, flash survey data from IHS Markit showed. Sharper reductions in output were seen across the manufacturing and service sectors.


European stocks have risen sharply on Friday as coronavirus-related worries seem to have abated for now. The World Health Organization acknowledged that the pneumonia-like respiratory disease is an emergency in China, but said the outbreak did not yet constitute a so-called global health emergency.

On the data front, the euro area private sector grew at the same moderate pace as seen in the final month of 2019, survey data from IHS Markit showed today.

The composite output index held steady at 50.9 in January compared to expectations for an uptick to 51.1. The services PMI fell to 52.2 from 52.8 in the previous month, while the manufacturing PMI rose to 47.8 from 46.3 a month ago.

The survey showed that the combined growth of the 'big-2' eurozone economies picked up, but this was offset by near-stagnation across the rest of the single-currency area.

Elsewhere, the U.K. manufacturing PMI jumped to a nine-month high of 49.8 in January versus 48.9 expected. The services PMI came in at a 16-month high of 52.9.

While the French CAC 40 Index has jumped by 1.2 percent, the German DAX Index is up by 1.5 percent and the U.K.’s FTSE 100 Index is up by 1.7 percent.

Virgin Money UK has moved sharply higher on the day after the mortgage lender said that Jim Pettigrew plans to retire as Chairman by September 2021.

Medical technology business Smith+Nephew has also moved to the upside. The company has acquired Tusker Medical, Inc., a California-based developer of the Tula System. The commercial terms have not been disclosed.

Supermarket chain Wm Morrison Supermarkets has also rallied on reports that it plans to cut 3,000 management roles across its stores as part of a major restructuring.

Bayer has also moved notably higher after reports that it is in talks to create what might become a $10 billion settlement of tens of thousands of cancer lawsuits.

Meanwhile, Givaudan, a Swiss manufacturer of fragrance and flavor products, has moved to the downside despite confirming its 2020 guidance.

Swedish telecoms equipment group Ericsson has moved sharply lower after it reported a smaller than expected rise in fourth-quarter core earnings.

Just East shares have also fallen after a competition watchdog launched a last-minute investigation into the proposed merger between Just Eat and Takeaway.com.

Rémy Cointreau shares have also slumped. After reporting a sharp drop in third quarter sales, the spirits group said it has decided to hold off on the previously provided annual and mid-term objectives.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of Broadcom (BRCM) are seeing notable pre-market strength after the chipmaker revealed it has reached two multi-year supply agreements with Apple (AAPL) that could generate as much as $15 billion in revenue.

Genera Holdings (GNRC) may also move to the upside after Oppenheimer upgraded its rating on the power generator maker to Outperform from Perform.

On the other hand, Discover (DFS) may see initial weakness after the financial services company reported better than expected fourth quarter earnings but Evercore downgraded its rating on the company’s stock to Underperform from In Line.
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