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Beyond the Numbers

Futures Pointing To Choppy Trading On Wall Street
7/20/2020 9:00 AM

The major U.S. index futures are currently pointing to a mixed opening on Monday following the mixed performance seen last week.

Traders may be reluctant to make significant moves as they continue to weigh the recent surge in coronavirus cases in certain states against continued optimism about the economic outlook.

Florida reported 12,523 new coronavirus cases on Saturday, reflecting the fifth consecutive day the state reported more than new 10,000 infections

A lack of major U.S. economic data may also keep some traders on the sidelines as they wait for more upbeat news to support their unrelenting optimism.

The economic calendar remains relatively light throughout the week, although traders are likely to keep an eye on the weekly jobless claims report as well as data on new and existing home sales.

Earnings news may take the spotlight in the coming days, with IBM Corp. (IBM), Coca-Cola (KO), Microsoft (MSFT), AT&T (T), Twitter (TWTR), and Intel (INTC) among a slew of companies due to report their quarterly results.

Following the pullback seen on Thursday, stocks showed a lack of direction over the course of the trading day on Friday. The major averages spent the day bouncing back and forth across the unchanged line before closing mixed.

While the Dow dipped 62.76 points or 0.2 percent to 26,671.95, the Nasdaq climbed 29.36 points or 0.3 percent to 10,503.19 and the S&P 500 rose 9.16 points or 0.3 percent to 3,224.73.

The major averages also turned in a mixed performance for the week, as the tech-heavy Nasdaq slumped by 1.1 percent but the S&P 500 jumped by 1.2 percent and Dow surged up by 2.3 percent.

The choppy trading on Wall Street came as traders generally remain optimistic about the economic outlook but can't ignore the troubling headlines on the coronavirus front.

The U.S. reported a record 77,255 new coronavirus cases on Thursday, according to data compiled by Johns Hopkins University.

Reflecting the widespread resurgence of the coronavirus, the University of Michigan released a report showing an unexpected deterioration in U.S. consumer sentiment in the month of July.

The preliminary report said the consumer sentiment index tumbled to 73.2 in July after jumping to 78.1 in June. The pullback surprised economists, who had expected the index to inch up to 79.0.

With the unexpected decrease, Surveys of Consumers chief economist Richard Curtin noted the index is "insignificantly" above the nearly nine-year low set in April.

"Following the steepest two-month decline on record, it is not surprising that consumers need some time to reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy," Curtin said.

He added, "Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring."

A steep drop by shares of Netflix (NFLX) also weighed on the markets, with the video streaming giant plunging by 6.5 percent.

The sell-off by Netflix came after the company reported second quarter earnings that missed analyst estimates and forecast weaker than expected subscriber growth.

Despite the lackluster performance by the broader markets, gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 3.2 percent to its best closing level in over seven years.

The rally by gold stocks came amid an increase by the price of the precious metal, with gold for August delivery climbing $9.70 to $1,810 an ounce.

Significant strength was also visible among utilities stocks, as reflected by the 2.4 percent spike by the Dow Jones Utilities Average. The average ended the session at its best closing level in over a month.

Networking stocks also showed a strong move to the upside on the day, resulting in a 2.3 percent jump by the NYSE Arca Networking Index, which also reached a one-month closing high.

On the other hand, banking stocks moved sharply lower over the course of the session, dragging the KBW Bank Index down by 2.5 percent.

Airline stocks also came under pressure, extending the sharp pullback seen on Thursday and resulting in a 1.9 percent slump by NYSE Arca Airline Index.

Commodity, Currency Markets

Crude oil futures are falling $0.35 to $40.24 a barrel after slipping $0.16 to $40.59 a barrel last Friday. Meanwhile, after climbing $9.70 to $1,810 an ounce in the previous session, gold futures are rising $8.40 to $1,181.40 an ounce.

On the currency front, the U.S. dollar is trading at 107.14 yen versus the 107.02 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is unchanged compared to last Friday’s $1.1428.

Asia

Asian stocks ended mixed on Monday as EU leaders remained at odds over how to carve up a 750 billion-euro stimulus package designed to help haul Europe out of its deepest recession since World War II. Uncertainty over U.S. stimulus and weak Japanese exports data also kept underlying sentiment cautious.

Chinese shares rallied as the country's central bank left its key interest rates unchanged for the third consecutive month amid signs of economic recovery. The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

The benchmark Shanghai Composite Index soared 100.02 points, or 3.1 percent, to 3,314.15, although Hong Kong's Hang Seng Index edged down 31.18 points, or 0.1 percent, to 25,057.99.

Japanese shares ended little changed after data showed the country's exports fell more than expected in June. The Nikkei 225 Index fluctuated before ending marginally higher at 22,717.48. The broader Topix inched up 0.2 percent to 1,577.03.

Japan posted a merchandise trade deficit of 268.8 billion yen in June, missing expectations for a shortfall of 35.8 billion yen following the 833.4 billion yen deficit in May.

Exports were down 26.2 percent year-on-year - shy of forecasts for a decline of 24.9 percent following the 28.3 percent drop in the previous month. Imports fell an annual 14.4 percent versus expectations for a slump of 16.8 percent after sinking 26.2 percent a month earlier.

Separately, the minutes from the Bank of Japan's June rate review showed that policymakers debated the risk of returning to deflation at the meeting.

Heavyweight SoftBank Group lost 2.2 percent and Fast Retailing gave up 1.6 percent. Exporters ended mixed despite a weaker yen. Canon rose 0.8 percent and Sony advanced 1.7 percent, while Nissan Motor tumbled 3 percent.

Australian markets fell as Victoria recorded another 275 new coronavirus cases and authorities warned it could take weeks to slow the outbreak to levels seen as recently in June.

The benchmark S&P/ASX 200 Index dropped 32 points, or 0.5 percent, to 6,001.60, while the broader All Ordinaries Index ended down 32.60 points, or 0.5 percent, at 6,112.30.

The big four banks fell between 0.8 percent and 1.6 percent ahead of the mini budget later this week, while energy companies such as Woodside Petroleum, Oil Search, Origin Energy, Beach Energy and Santos lost 2-4 percent.

Mining heavyweights BHP and Rio Tinto advanced 1.2 percent and 0.9 percent, respectively. Diversified miner South32 declined 2.3 percent after flagging impairments. Gold miners posted broad-based gains, with Resolute Mining surging as much as 4.8 percent.

Seoul stocks finished slightly lower after rising sharply last week on hopes for stimulus measures in major economies. The benchmark Kospi edged down 2.99 points, or 0.1 percent, to close at 2,198.20. Automakers bucked the weak trend, with both Hyundai Motor and Kia Motors rising over 3 percent.

Europe

European stocks have turned mixed on Monday as EU leaders have failed to reach an agreement on a coronavirus rescue plan after three days of haggling.

The main division is between countries hit hardest by the coronavirus and some EU members seeking to limit the size of the fund and stricter controls on its use.

Dutch Prime Minister Mark Rutte admitted leaders were "close to failure" and talks could still "fall apart".

While the German DAX Index has risen by 0.4 percent, the French CAC 40 Index is down by 0.1 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

Shares of Philips Electronics NV have jumped after the Dutch consumer electronics giant reported higher orders and said it expects improved profitability in the second half.

Synairgen shares have soared in London after the company announced positive results from its clinical trial of SNG001, its wholly-owned inhaled formulation of interferon beta, in hospitalized Covid-19 patients.

Renault have advanced despite the automaker reporting a 34.9 percent drop in worldwide sales in the first half of the year. The company said it had seen some signs of recovery in June.

On the other hand, recruiting firm SThree has moved to the downside after its first-half profit nearly halved from last year.

Swiss wealth manager Julius Baer Gruppe has also fallen after reporting a 6 percent drop in assets under management from end-2019 in the six months through June.

In economic news, the euro area current account surplus declined in May, largely reflecting the widening deficit on the secondary income, data from the European Central Bank showed.

The current account surplus fell to 8 billion euros in May from 14 billion euros in April. In the same period last year, the surplus was 23 billion euros.

The trade surplus rose to 17 billion euros from 13 billion euros in April. Meanwhile, the surplus on services fell to 4 billion euros from 5 billion euros.

U.S. Economic Reports

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

Stocks In Focus

Shares of Noble Energy (NBL) are moving sharply higher in pre-market trading after Chevron (CVX) announced an agreement to acquire the oil and gas company in an all-stock transaction valued at $5 billion, or $10.38 per share.

Oil service giant Halliburton (HAL) is also likely to see initial strength after reporting an unexpected adjusted profit in the second quarter despite revenues coming in below analyst estimates.

On the other hand, shares of Nikola (NKLA) are likely to come under pressure after the electric truck maker filed to offer millions of shares related to warrants.
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