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Beyond the Number

Futures Pointing To Mixed Open On Wall Street
3/25/2020 8:59 AM

The major U.S. index futures are pointing to a mixed open on Wednesday, with stocks likely to show a lack of direction following the massive rally in the previous session.

Traders may be reluctant to continue making substantial moves following the volatility seen in recent sessions, as the spike on Tuesday followed another sell-off on Monday.

News that Senate leaders and the White House have reached an agreement on a $2 trillion stimulus bill may generate some positive sentiment, although some traders may feel the news was priced into the markets yesterday.

Senate Majority Leader Mitch McConnell, R-Ken., announced the agreement very early this morning, saying he expects the legislation to pass later today.

McConnell described the bill as a “war-time level of investment” in the country, providing financial assistance to individuals and companies amid the ongoing coronavirus pandemic.

The Republican leader’s Democratic counterpart, Senate Minority Leader Chuck Schumer, D-N.Y., also praised the bill, which he said would provide “unemployment compensation on steroids.”

Schumer also claimed the final bill would provide increased oversight of a proposed $500 billion corporate bailout fund, which had been a key sticking point among Democrats.

The Senate could pass the bill as soon as today, although the stimulus package would still need to be approved by the Democrat-controlled House before heading to President Donald Trump’s desk.

Stocks moved sharply higher over the course of the trading day on Tuesday, partly offsetting the significant weakness seen in recent sessions. After ending the previous session at its worst closing level in over three years, the Dow recorded its biggest percentage gain since 1933.

The major averages saw further upside going into the close, ending the day just off their highs of the session. The Dow skyrocketed 2,112.98 points or 11.3 percent to 20,704.91, the Nasdaq spiked 557.18 points or 8.1 percent to 7,417.86 and the S&P 500 soared 209.93 points or 9.4 percent to 2,447.33.

The rally on Wall Street came amid indications Democrats and Republicans are closing in on an agreement on a massive fiscal stimulus bill.

After a meeting with Treasury Secretary Steve Mnuchin and incoming White House Chief of Staff Mark Meadows, Senate Minority Leader Chuck Schumer, D-N.Y., said negotiations were on the "two-yard line."

"Last night, I thought we were on the five-yard line. Right now, we're on the two," Schumer said on the Senate floor. "Of the few outstanding issues, I don't see any that can't be overcome in the next few hours."

Schumer indicated Democrats are still pushing for increased oversight of a proposed $500 billion bailout fund to help industries that are struggling amid the coronavirus outbreak.

The ongoing negotiations come after the stimulus bill failed to clear a key procedural hurdle in the Senate for two straight days amid opposition from Democrats.

Most Democratic Senators voted against advancing the bill amid complaints that the legislation does too much to bail out companies and not enough to provide assistance to workers.

Traders were also reacting to President Donald Trump's comments suggesting the coronavirus-related shutdown of much of the country could end sooner than many anticipated.

Trump said during a Fox News virtual town hall that he would love to see the country "open" by Easter, which is on April 12th.

"We're opening up this incredible country. Because we have to do that. I would love to have it open by Easter," Trump said.

Trump's remarks represent a sharp contrast to his comments just last week indicating the coronavirus pandemic would not be under control until July or August.

The president's eagerness to get the economy back up and running may also lead to conflict with public health officials, who are likely to continue to call for social distancing.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing new home sales pulled back off a nearly thirteen-year high in February, with the data widely seen as old news.

Energy stocks turned in some of the market's best performances on the day, with the Philadelphia Oil Service Index and the NYSE Arca Oil Index spiking by 18.4 percent and 14.9 percent, respectively.

The rally by energy stocks came as the price of crude oil for May delivery moved higher for the second straight session.

Substantial strength was also visible among housing stocks, as reflected by the 15.3 percent jump by the Philadelphia Housing Sector Index. The index rebounded after ending the previous session at a five-year closing low.

Gold stocks also showed a significant move to the upside as the price of the precious metal continued to skyrocket.

Financial, transportation, networking and steel stocks also saw considerable strength, moving sharply higher along with the other major sectors amid broad based buying interest.

Commodity, Currency Markets

Crude oil futures are sliding $0.39 to $23.62 a barrel after climbing $0.65 to $24.01 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,630.90, down $29.90 compared to the previous session’s close of $1,660.80. On Tuesday, gold spiked $93.20.

On the currency front, the U.S. dollar is trading at 111.35 yen compared to the 111.23 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0815 compared to yesterday’s $1.0788.

Asia

Asian stocks rallied on Wednesday after U.S. Senators and Trump administration officials reached an agreement on a massive economic stimulus package worth about $2 trillion to combat the economic impact of the coronavirus pandemic.

China's Shanghai Composite Index jumped 59.15 points, or 2.2 percent, to 2,781.59 as mainland China reported a drop in new imported coronavirus cases and no locally transmitted infections. Hong Kong's Hang Seng Index surged up 863.70 points, or 3.8 percent, to 23,527.19.

A survey showed that more than one fifth of American companies in China are back to normal operations after widespread disruptions to business operations, supply chains and economic activity.

Japanese shares posted strong gains as aggressive asset buying from the Bank of Japan and robust buying of wide-ranging securities, particularly by pension funds, triggered a wave of short covering.

The Nikkei 225 Index spiked 1,454.28 points, or 8 percent, to 19,546.63, marking its biggest daily gain since the peak of the global financial crisis in October 2008. The broader Topix closed 6.9 percent higher at 1,424.62.

Market heavyweight SoftBank Group jumped 10 percent, while Dentsu Group, Japan's main marketing agency for the Tokyo Olympics, surged 11.7 percent.

Australian markets ended sharply higher amid a broad-based rally on optimism over the U.S. stimulus bill. The benchmark S&P/ASX 200 Index temporarily broke through the 5,000 level before finishing the session up 262.40 points, or 5.5 percent, at 4,998.10. The broader All Ordinaries Index ended up 252.90 points, or 5.3 percent, at 5,006.20.

Qantas Airways surged over 26 percent as it secured A$1.05 billion ($627.8 million) against its aircraft fleet to help it ride out the coronavirus crisis.

Virgin Australia jumped 14.5 percent after announcing it is slashing domestic capacity. Hearing implant maker Cochlear entered a trading halt after a capital raising announcement.

The big four banks climbed 9-12 percent after S&P Global Ratings said the country's banks should be able to absorb increased credit losses due to covid-19 within their annual earnings.

Miners BHP, Fortescue Metals Group and Rio Tinto advanced 5-10 percent. Gold miner Evolution Mining soared 10.3 percent and Newcrest added 6.9 percent.

Seoul stocks extended gains from the previous session as U.S. Senate leaders reached a deal with the Trump administration on a nearly $2 trillion stimulus package and finance ministers of the Group of Seven advanced economies vowed to restore economic growth in the face of the pandemic.

The benchmark Kospi spiked 94.79 points, or 5.9 percent, to 1,704.76 despite foreign investors extending their selling streak to a 15th consecutive session.

Automakers paced the gainers. Hyundai Motor spiked 13 percent and its affiliate Kia Motors gained 8.9 percent. In the tech sector, Samsung Electronics rose 3.6 percent and SK Hynix gained 7.4 percent.

Europe

After moving sharply higher early in the session, European stocks have given back ground over the course of the trading day.

Investor sentiment was initially boosted after U.S. lawmakers and the Trump administration reached an agreement on a sweeping $2 trillion stimulus package designed to curb the economic fallout of the coronavirus pandemic.

The major European markets have turned mixed since then. While the German DAX Index has slumped by 1.4 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

Equinor has surged after it announced an approximately $3 billion action plan to strengthen financial resilience amid the COVID-19 impact and lower commodity prices.

Credit Suisse Group has also moved to the upside. The Swiss lender said that profitability in the first quarter of 2020 has so far continued the strong year-on-year improvement trend, despite the COVID-19 pandemic and the resultant volatile market environment.

Homebuilder Persimmon has also jumped after saying that its board remains confident of the company’s future prospects.

Construction group Eiffage has also moved sharply higher after it was chosen as concession operator of the future A79 motorway in France.

Electric utility E. ON has also soared. The company said that its management board, with the approval of the supervisory board, has adopted a dividend policy with an annual growth rate of up to 5 percent.

On the other hand, pest control firm Rentokil Initial has slumped after the company withdrew its fiscal 2020 guidance due to the impact of the coronavirus.

In economic news, German business sentiment logged its steepest drop since German reunification, as the spread of the coronavirus weighed on economic activity, final survey data from ifo Institute showed.

The business confidence index fell to 86.1 in March from 96.0 in February, hitting its lowest level since July 2009. The preliminary reading for March was 87.7.

U.K. consumer prices advanced 1.7 percent from last year in February, as expected, after gaining 1.8 percent in January, data from the Office for National Statistics showed.

U.S. Economic Reports

A report released by the Commerce Department on Wednesday showed an unexpected increase in new orders for U.S. durable goods in the month of February.

The Commerce Department said durable goods orders jumped by 1.2 percent in February after a revised uptick 0.1 percent in January.

Economists had expected durable goods orders to decrease by about 0.8 percent compared to the 0.2 percent dip that had been reported for the previous month.

The unexpected increase in durable goods orders was largely due to a substantial rebounded in orders for transportation equipment, which spiked by 4.6 percent in February after falling by 0.9 percent in January.

However, excluding the jump in orders for transportation equipment, durable goods orders fell by 0.6 percent in February after climbing by 0.6 percent in January. Economists had expected a 0.4 percent drop.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended March 20th.

Crude oil inventories are expected to increase by 2.9 million barrels after climbing by 2.0 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of its auction of $41 billion worth of five-year notes at 1 pm ET.

Stocks In Focus

Shares of Nike (NKE) are moving sharply higher in pre-market trading after the athletic footwear and apparel maker reported better than expected fiscal third quarter results and said sales in China have rebounded since the coronavirus outbreak in the country has eased.

Boeing (BA) is also likely to see initial strength after a report from Reuters said the aerospace giant plans to restart 737 MAX production by May, ending a months-long halt triggered by two fatal crashes.

On the other hand, shares of At Home Group (HOME) are seeing substantial pre-market weakness after the home décor retailer reported fiscal fourth quarter earnings that matched analyst estimates but on slightly weaker than expected sales.

High tech contractor Synnex (SNX) may also move to the downside after reporting better than expected fiscal first quarter earnings but on revenues that missed analyst estimates.
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