Market Analysis

Beyond the Number

Upbeat JPMorgan Earnings May Generate Early Buying Interest
7/14/2020 8:48 AM

The major U.S. index futures are currently pointing to a modestly higher open on Tuesday following the sharp pullback seen late in the previous session.

Early buying interest may be generated in reaction to upbeat earnings news from JPMorgan Chase (JPM), with the financial giant moving notably higher in pre-market trading.

JPMorgan reported second quarter results that exceeded analyst estimates on both the top and bottom lines, benefiting from a spike in trading revenue.

Citigroup (C) is also likely to see initial strength after reporting second quarter earnings that fell sharply year-over-year but still exceeded analyst estimates. Revenues also came in above expectations.

On the other hand, shares of Wells Fargo (WFC) are likely to come under pressure after the banking giant reported a wider than expected second quarter loss and slashed its dividend.

Delta Air Lines (DAL) may also move to the downside after reporting a second quarter loss that was wider than analysts had expected.

Stocks showed a strong move to the upside in morning trading on Monday but pulled back sharply over the course of the afternoon. The tech-heavy Nasdaq showed a particularly steep drop after reaching a new record intraday high.

After jumping by as much as 2 percent, the Nasdaq plunged 226.60 points or 2.1 percent to 10,390.84. The S&P 500 also slumped 29.82 points or 0.9 percent to 3,155.22, while the Dow inched up 10.50 points or less than a tenth of a percent to 26,085.80.

The sharp pullback by the Nasdaq came as tech giants like Netflix (NFLX), Amazon (AMZN) and Facebook (FB) showed substantial downturns after reaching new record intraday highs.

Electric car maker Tesla (TSLA) also pulled back sharply, tumbling by 3.1 percent after soaring by as much as 16.2 percent.

The afternoon sell-off on Wall Street also came as California Governor Gavin Newsom rolled back the state's reopening following a recent spike in coronavirus cases.

Newsom ordered a statewide closure of all indoor operations at restaurants, bars, movie theaters, zoos and museums, with other businesses like gyms and hair salons being required to close their doors in counties on the state's watch list.

The early rally on Wall Street came as traders reacted positively to more upbeat news regarding a potential coronavirus vaccine.

Pfizer (PFE) and BioNTech (BNTX) announced that two of the companies' four investigational vaccine candidates received Fast Track designation from the U.S. Food and Drug Administration.

The companies said they expect to start the next phase of trials as soon as later this month and are anticipating enrolling up to 30,000 subjects.

If the ongoing studies are successful and the vaccine receives regulatory approval, Pfizer and BioNTech expect to manufacture up to 100 million doses by the end of 2020 and potentially more than 1.2 billion doses by the end of 2021.

The upbeat news on the vaccine front came as the U.S. has reported more than 60,000 new coronavirus cases for three days in a row, with Florida seeing a record 15,299 new cases on Sunday.

Shares of Pfizer jumped by 4.1 percent, contributing to the slight uptick by the Dow, while shares of BioNTech soared by 10.6 percent.

Gold stocks moved sharply lower in afternoon trading, resulting in a 3.8 percent nosedive by the NYSE Arca Gold Bugs Index.

The sell-off by gold stocks came as the price of gold for August delivery gave back ground in electronic trading.

Substantial weakness also emerged among software stocks, as reflected by the 3.6 slump by the Dow Jones U.S. Software Index. The index pulled back further off the record closing high set last Thursday.

Oil service stocks also saw considerable weakness on the day, with the Philadelphia Oil Service Index tumbling by 2.9 percent.

Biotechnology, networking and retail stocks also showed significant downturns over the course of the session, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.54 to $39.56 a barrel after falling $0.45 to $40.10 a barrel on Monday. Meanwhile, after climbing $12.20 to $1,814.10 an ounce in the previous session, gold futures are declining $5.70 to $1,808.40 an ounce.

On the currency front, the U.S. dollar is trading at 107.35 yen compared to the 107.29 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1364 compared to yesterday’s $1.344.


Asian stocks ended mostly lower on Tuesday as global coronavirus cases topped 13 million and the World Health Organization warned the pandemic could get far worse if countries around the world do not follow basic healthcare precautions.

"The virus remains public enemy number one," WHO Director-General Tedros Adhanom Ghebreyesus told a virtual briefing from WHO headquarters in Geneva.

Renewed U.S.-China tensions also dampened investor sentiment as the White House rejected nearly all Chinese maritime claims in the South China Sea.

In another development, the Trump administration plans to scrap a 2013 agreement between U.S. and Chinese auditing authorities, a senior State Department official reportedly said.

Chinese shares declined as rising confirmed coronavirus cases and percolating tensions between the U.S. and China overshadowed encouraging inflation data. The benchmark Shanghai Composite Index ended down 28.67 points, or 0.8 percent, at 3,414.62.

China's exports unexpectedly grew in June, data from the General Administration of Customs revealed. Exports increased 0.5 percent on a yearly basis in June, while economists had forecast an annual fall of 1.5 percent.

Likewise, imports increased 2.7 percent annually, confounding expectations for a decrease of 10 percent. The trade surplus totaled $46.42 billion versus the $62.9 billion surplus posted in May. In yuan terms, exports advanced 4.3 percent and imports gained 6.2 percent in June.

Hong Kong's Hang Seng Index slumped 294.23 points, or 1.1 percent, to 25,477.89 as reports of locally transmitted coronavirus cases prompted authorities to tighten precautions against the pandemic.

Japanese shares lost ground on profit taking after hitting a one-month high in the previous session. The benchmark Nikkei 225 Index slid 197.73 points, or 0.9 percent, to 22,587.01, while the broader Topix closed half a percent lower at 1,565.15.

Shares of semiconductor and other high-tech firms slumped after the Nasdaq Composite dropped sharply overnight, pulled down by Amazon, Microsoft and other big-name leaders of Wall Street's recent rally.

Tokyo Electron fell 1.5 percent, while Advantest and Screen Holdings declined around 2.4 percent each. Sony Corp. lost 2 percent after hitting its highest level since 2001 in the previous session.

Market heavyweight SoftBank Group gave up 1.4 percent on a Wall Street Journal report that the tech conglomerate is exploring options that include a full or partial sale or a public offering of British chip designer Arm Holdings.

Australian markets fell notably as two states extended border restrictions and Australia's most populous state imposed limits on the number of people allowed in large pubs amid growing fears of a second coronavirus wave.

The benchmark S&P/ASX 200 Index dropped 36.40 points, or 0.6 percent to 5,941.10, while the broader All Ordinaries Index ended down 43.80 points, or 0.7 percent, at 6,045.50.

Energy companies ended broadly lower after crude oil prices fell overnight. Buy-now-pay-later firm Afterpay slumped 7.2 percent after announcing a business update for full-year 2020.

Gold miners Evolution Mining, Northern Star Resources and Newcrest fell over 2 percent as safe-haven gold prices gave back ground in electronic trading after ending the regular session higher.

Lender Westpac Banking Corp shed 0.8 percent after naming Michael Rowland as its chief financial officer. Whitehaven Coal soared 4.1 percent after the company posted a 29 percent jump in fourth-quarter coal production.

Australia's business confidence and conditions rebounded in June, survey data from National Australia Bank showed today. The business confidence index rose 21 points to 1 from -20 in May. Confidence increased across all sectors except retail.

Seoul stocks ended modestly lower, with a record number of global coronavirus infections, a tepid earnings outlook and mounting U.S.-China tensions denting sentiment. The benchmark Kospi edged down 2.45 points, or 0.1 percent, to 2,183.61 ahead of the Bank of Korea's rate decision on Thursday.

The government will invest 160 trillion won (US$133 billion) by 2025 on the "Korean New Deal," projects that will help create 1.9 million jobs and kick-start the coronavirus-hit economy, Finance Minister Hong Nam-ki said today.


European stocks have fallen on Tuesday, as bonds climbed and the dollar rose on safe-haven demand as simmering U.S.-China tensions and worries about the state of California shutting down dented investors' appetite for risk.

U.S.-China tensions intensified after the Trump administration rejected China's expansive maritime claims in the South China Sea, a move that Beijing criticized as inciting tensions in the region.

California on Monday banned indoor dining and shuttered movie theaters and bars as coronavirus infection spike.

Indoor religious services, gyms and hair and nail salons are again off-limits in most of the state to head off surging coronavirus cases and hospitalizations.

While the U.K.’s FTSE 100 Index has edged down by 0.2 percent, the German DAX Index is down by 1.3 percent and the French CAC 40 Index is down by 1.5 percent.

Tech stocks have followed their U.S. peers lower, with Infineon Technologies and Dialog Semiconductor posting notable losses.

Online supermarket Ocado Group has also declined after it reported a first-half loss before tax of 40.6 million pounds.

Halma has also slumped. After reporting a record annual profit and revenue, the company warned that profit for full-year 2021 will fall.

On the other hand, Drug delivery devices maker Gerresheimer AG has risen after backing its full-year guidance.

In economic news, German economic sentiment weakened in July, survey data from the ZEW - Leibniz Centre for European Economic Research showed today.

The ZEW Indicator of Economic Sentiment fell to 59.3 in July from 63.4 in June. The score was forecast to rise to 60.0.

Data showed the British economy saw only a slight rebound in May after the historic fall caused by the shutdown from the coronavirus pandemic.

Gross domestic product grew 1.8 percent in May from April, when it was down 20.3 percent. However, this was weaker than the expected growth of 5.5 percent. The dominant service sector grew 0.9 percent after contracting 18.9 percent.

U.S. Economic Reports

Partly reflecting a substantial rebound in gasoline prices, the Labor Department released a report on Tuesday showing a slightly bigger than expected increase in U.S. consumer prices in the month of June.

The Labor Department said its consumer price index climbed by 0.6 percent in June after edging down by 0.1 percent in May. Economists had expected consumer prices to rise by 0.5 percent.

Excluding higher prices for food and energy, the core consumer price index ticked up by 0.2 percent in June after slipping by 0.1 percent in May. Core prices were expected to inch up by 0.1 percent.

At 2 pm ET, Federal Reserve Governor Lael Brainard is scheduled to speak at a National Association for Business Economics webinar event entitled “Perspectives on the Pandemic.”

St. Louis Fed President James Bullard is due to speak in a live-streamed event on the U.S. economy and monetary policy at the Economic Club of New York at 2:30 pm ET.

Stocks In Focus

Shares of HanesBrands (HBI) are seeing significant pre-market strength after Wells Fargo Securities upgraded its rating on the apparel maker to Outperform from Neutral.

Blueprint Medicines (BPMC) is also likely to move to the upside after announcing a collaboration agreement with Roche that includes the Swiss drugmaker investing up to $1.7 billion in Blueprint.

On the other hand, shares of Mohawk Industries (MHK) are moving sharply lower in pre-market trading after the maker of carpets and other floor covering products revealed it is being sued for alleged federal securities law violations.
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