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Beyond the Numbers

Vaccine News, Goldman Sachs Earnings May Spark Early Rally On Wall Street
7/15/2020 8:51 AM

The major U.S. index futures are pointing to a sharply higher open on Wednesday, with stocks likely to add to the strong gains posted in the previous session.

Upbeat news on the coronavirus vaccine front is likely to generate early buying interest, helping traders shrug off news of a record single-day spike in new Covid-19 cases in the U.S.

Biotech firm Moderna (MRNA) said its experimental vaccine for Covid-19 was safe and produced strong immune responses in all 45 patients in an ongoing early-stage human trial.

An interim analysis of the open-label Phase 1 study of the vaccine candidate was published in the New England Journal of Medicine.

The latest news follows other recent positive developments on the coronavirus treatment and vaccine fronts, which have generated optimism the economic threat posed by the pandemic could be addressed in the relatively near future.

A spike by shares of Goldman Sachs (GS) may add to the positive sentiment after the financial giant reported much stronger than expected second quarter results.

Goldman Sachs reported earnings of $6.26 per share on revenues of $13.3 billion compared to analyst estimates for earnings of $3.78 per share on revenues of $9.8 billion. The company benefited from strong results in its trading and investment banking divisions.

Following the sharp pullback seen in afternoon trading on Monday, stocks showed a significant move back to the upside during trading on Tuesday. The Dow showed a particularly strong upward move, reaching its best closing level in a month.

The Dow soared 556.79 points or 2.1 percent to 26,642.59 and the S&P 500 surged up 42.30 points or 1.3 percent to 3,197.53, which was also a one-month high.

The tech-heavy Nasdaq lagged behind for much of the session but eventually joined its counterparts in positive territory, closing up 97.73 points or 0.9 percent at 10,488.58.

The spike by the Dow was partly attributed to traders transitioning out of big-name tech stocks and into more cyclical stocks like Caterpillar (CAT), which led the blue chip index higher with a 4.8 percent jump.

Strong gains by energy giants Chevron (CVX) and Exxon Mobil (XOM) also contributed to the advance by the Dow, reflecting strength in the broader energy sector.

The Philadelphia Oil Service Index skyrocketed by 5.2 percent, the NYSE Arca Oil Index rallied by 3.5 percent and the NYSE Arca Natural Gas Index spiked by 3.4 percent.

The strength among energy stocks came amid a modest increase by the price of crude oil, with crude for August delivery inching up $0.19 to $40.29 a barrel.

Gold stocks also moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 4.3 percent even though the price of gold for August delivery edged down $0.70 to $1,813.40 an ounce.

Substantial strength was also visible among housing stocks, as reflected by the 3.7 percent jump by the Philadelphia Housing Sector Index. The index ended the session at its best closing level in over a month.

Steel, chemical, and biotechnology stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Meanwhile, banking stocks were among the few groups to buck the uptrend, dragging the KBW Bank Index down by 1.6 percent.

Shares of Wells Fargo (WFC) came under pressure after the banking giant reported a wider than expected second quarter loss and slashed its dividend.

Citigroup (C) also posted a steep loss 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 JPMorgan Chase (JPM) moved to the upside after the financial giant reported second quarter results that exceeded analyst estimates on both the top and bottom lines, benefiting from a spike in trading revenue.

Commodity, Currency Markets

Crude oil futures are climbing $0.65 to $40.94 a barrel after inching up $0.19 to $40.29 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,808.80, down $4.60 compared to the previous session’s close of $1,813.40. On Tuesday, gold edged down $0.70.

On the currency front, the U.S. dollar is trading at 106.79 yen compared to the 107.24 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1437 compared to yesterday’s $1.1400.

Asia

Asian stocks moved broadly highly on Wednesday amid optimism about a potential coronavirus vaccine, although Chinese markets fell on rising U.S.-China tensions.

Biotech firm Moderna said its experimental vaccine for Covid-19, mRNA-1273, showed it was safe and produced strong immune responses in all 45 patients in an ongoing early-stage human trial.

Chinese stocks fell sharply after U.S. President Donald Trump ordered an end to Hong Kong's special status under U.S. law, prompting a warning from China.

China's foreign ministry said in a statement Beijing will impose retaliatory sanctions against U.S. individuals and entities in response to a law targeting banks doing business with Chinese officials.

The benchmark Shanghai Composite Index tumbled 53.31 points, or 1.6 percent, to 3,361.30, while Hong Kong's Hang Seng Index ended marginally higher.

Japanese shares hit a one-month high amid optimism about a coronavirus vaccine and as the Bank of Japan kept its current easing policies in place. The Nikkei 225 Index jumped 358.49 points, or 1.6 percent, to 22,945.50, its highest close since June 10. The broader Topix closed 1.6 percent higher at 1,589.51.

Mining, steel and iron, and machinery stocks led the gainers. Exporters also ended broadly higher on a weaker yen. Honda Motor jumped 3.2 percent, Toyota Motor gained 1.4 percent, Nissan Motor soared 7.3 percent, Panasonic advanced 1.9 percent and Sony rallied 2.3 percent. Oil company Inpex surged 3.9 percent and Japan Petroleum added 2.3 percent.

Australian markets chased Wall Street higher as investors looked past a spike in Covid-19 cases to focus on progress towards a vaccine. Also helping underpin sentiment, the United Kingdom said on Tuesday the first round of trade talks with Australia had been "productive."

The benchmark S&P/ASX 200 Index rallied 111.80 points, or 1.9 percent, to 6,052.90 even as the second wave of infections pushed Australia's total case tally throughout the pandemic to more than 10,000. The broader All Ordinaries Index surged up 114.90 points, or 1.9 percent, to 6,160.40.

Mining heavyweights BHP and Rio Tinto jumped 2.5 percent and 3.7 percent, respectively, on the back of higher iron ore prices. Firm bullion prices lifted gold miners, with Newcrest Mining and Northern Star Resources rising 2-3 percent.

Origin Energy advanced 1.6 percent after the company said it would book impairments of about A$1.2 billion ($840.12 million) after tax.

Afterpay added 2.4 percent after signing deals with Apple and Google that will allow more people to use its payment service online and in retail stores.

Meanwhile, Woodside Petroleum, the country's biggest independent gas producer, lost 2.2 percent after posting a 29 percent sequential drop in quarterly revenue.

Seoul stocks rose but ended off their day's highs amid rising tensions between the United States and China, South Korea's two largest trading partners. The benchmark Kospi advanced 18.27 points, or 0.8 percent, to 2,201.88, ending above the 2,200-level for the first time in nearly five months.

Europe

European shares have rebounded on Wednesday as investors cheer positive updates on a potential Covid-19 vaccine and pinned hopes on EU stimulus.

Biotech firm Moderna said its experimental vaccine for Covid-19, mRNA-1273, showed it was safe and produced strong immune responses in all 45 patients in an ongoing early-stage human trial.

EU leaders are set to meet later this week for an extraordinary summit, and they are expected to agree on a recovery fund of 750 billion euros for pandemic-hammered economies. The European Central Bank meeting is coming up on Thursday with little change expected.

While the French CAC 40 Index has soared by 2.4 percent, the U.K.’s FTSE 100 Index is up by 2 percent and the German DAX Index is up by 1.8 percent.

Swedish telecom operator Tele2 AB has moved sharply higher after reaffirming its 2020 earnings outlook and reinstating an extraordinary dividend.

Atlantia SpA has also soared as Italy's government moved to resolve a long-running dispute linked to a 2018 bridge collapse.

Swiss watch and jewelry maker Swatch Group has also surged. The company cut 6.5 percent of its jobs and trimmed its retail network due the coronavirus pandemic.

The company also announced the end of its 22-year-old contract to sell Calvin Klein watches and said it expects a positive operating result for the full year.

Medical and safety technology provider Draegerwerk AG & Co. KGaA has also spiked. The company reported that its preliminary net sales for the second quarter increased by 26.5 percent (net of currency effects) to 788.4 million euros from last year.

Considering the high demand due to the Covid-19 pandemic, the company expects full-year net sales and EBIT to be considerably above both the prior year and the original guidance.

GlaxoSmithKline has also moved to the upside after a U.S. health panel voted in favor of its blood cancer drug.

Meanwhile, Fashion brand Burberry has slumped after it warned second-quarter revenue would be materially hit by the coronavirus pandemic.

On the economic front, official data showed British inflation unexpectedly accelerated in June. U.K. consumer price inflation rose to 0.6 percent from 0.5 percent in May, data from the Office for National Statistics showed. The rate was expected to slow to 0.4 percent.

Confounding expectations for a decline of 0.2 percent, consumer prices gained 0.1 percent after remaining unchanged in May.

U.S. Economic Reports

With fuel prices continuing to skyrocket, the Labor Department released a report on Wednesday showing U.S. import prices surged up by more than expected in the month of June.

The report said import prices shot up by 1.4 percent in June after climbing by a downwardly revised 0.8 percent in May.

Economists had expected import prices to jump by 1.0 percent, matching the increase originally reported for the previous month.

The Labor Department said export prices also soared by 1.4 percent in June after rising by a downwardly revised 0.4 percent in May.

Export prices were expected to climb by 0.8 percent compared to the 0.5 percent increase originally reported for the previous month.

The Federal Reserve Bank of New York released a separate report showing New York manufacturing activity expanded in the month of July following four consecutive months of contraction.

The New York Fed said its general business conditions soared to a positive 17.2 in July from a negative 0.2 in June, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to jump to 10.0.

Meanwhile, the report said firms remained optimistic about the six-month outlook, though less so than in the previous month.

At 9:15 am ET, the Federal Reserve is due to release its report on industrial production in the month of June. Industrial production is expected to spike by 4.3 percent in June after jumping by 1.4 percent in May.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended July 10th at 10:30 am ET.

Crude oil inventories are expected to decrease by 2.3 million barrels after climbing by 5.7 million barrels in the previous week.

At 12 pm ET, Philadelphia Federal Reserve President Patrick Harker is due to speak on the economic outlook at a Center City Proprietors Association online event.

The Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, at 2 pm ET.

Stocks In Focus

Cruise operators Carnival Corp. (CCL), Royal Caribbean (RCL) and Norwegian Cruise Line (NCLH) are moving sharply higher in pre-market trading in reaction to the news about a potential coronavirus vaccine.

Shares of U.S. Bancorp (USB) may also see initial strength after the bank holding company reported second quarter earnings that exceeded analyst estimates.

Meanwhile, health insurer UnitedHealth (UNH) reported second quarter earnings that far exceeded analyst estimates despite weaker than expected revenues.
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