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Beyond the Numbers

Futures Pointing To Roughly Flat Open On Wall Street
7/23/2020 9:01 AM

The major U.S. index futures are currently pointing to a roughly flat opening on Thursday, with stocks likely to show a lack of direction after ending the previous session mostly higher.

The stock futures gave back ground after the Labor Department released a report showing first-time claims for U.S. unemployment benefits increased for the first time in sixteen weeks.

The report said initial jobless claims jumped to 1.416 million in the week ended July 18th, an increase of 109,000 from the previous week’s revised level of 1.307 million.

Economists had expected jobless claims to come in unchanged at the 1.300 million originally reported for the previous month.

Jobless claims increased for the first time since late March but remain well below the record high of 6.867 million set in the week ended March 28th.

Meanwhile, trading may also be impacted by reaction to news that Senate Republicans and White House negotiators have reached a “fundamental agreement” on a $1 trillion coronavirus relief bill.

The news may add to recent optimism about additional stimulus, although lawmakers still need to hash out the differences between the GOP proposal and the $3.4 trillion bill passed by the Democratic-controlled House.

Stocks fluctuated over the course of the trading day on Wednesday but managed to end the session mostly higher. With the upward move, the Dow reached its best closing level in over a month and the S&P 500 rose to a new five-month closing high.

The major averages moved to the upside going into the close, with the Dow and the S&P 500 reaching new highs for the session. The Dow advanced 165.44 points or 0.6 percent to 27,005.84, the Nasdaq rose 25.76 points or 0.2 percent to 10,706.13 and the S&P 500 climbed 18.72 points or 0.6 percent to 3,276.02.

The strength on Wall Street came as traders remain optimistic about the economic outlook despite the recent surge in new coronavirus cases.

Adding to the optimism, the National Association of Realtors released a report showing existing home sales rebounded at a record pace in June after three straight months of declines.

NAR said existing home sales spiked by 20.7 percent to an annual rate of 4.72 million in June after plunging by 9.7 percent to a rate of 3.91 million in May. Economists had expected sales to skyrocket by about 24.5 percent.

"The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown," said Lawrence Yun, NAR's chief economist.

He added, "This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue."

The unrelenting economic optimism overshadowed concerns about the coronavirus even though President Donald Trump warned on Tuesday that the pandemic "will probably, unfortunately, get worse before it gets better."

With new cases spiking, the U.S. government placed an initial order for 100 million doses of the COVID-19 vaccine candidate jointly developed by Pfizer (PFE) and BioNTech (BNTX) for $1.95 billion and can acquire up to 500 million additional doses.

Buying interest was subdued for much of the session, however, as traders worried about rising tensions between the U.S. and China after the U.S. asked Beijing to close its diplomatic consulate in Houston within the next 72 hours.

Chinese foreign ministry spokesperson Wang Wenbin condemned the action and warned of retaliation if the U.S. does not reverse its decision.

Housing stocks moved sharply higher following the upbeat existing home sales data, driving the Philadelphia Housing Sector Index up by 3 percent to a four-month closing high.

Significant strength was also visible among gold stocks, as reflected by the 1.7 percent jump by the NYSE Arca Gold Bugs Index. The index ended the session at its best closing level in over seven years.

The strength in the gold sector came amid a sharp increase by the price of the precious metal.

Commercial real estate, chemical and utilities stocks also showed strong moves to the upside, while energy and financial stocks saw some weakness on the day.

Commodity, Currency Markets

Crude oil futures are slipping $0.18 to $41.72 a barrel after edging down $0.02 to $41.90 a barrel on Wednesday. Meanwhile, after jumping $21.20 to $1,865.10 an ounce in the previous session, gold futures are climbing $10.80 to $1,875.90 an ounce.

On the currency front, the U.S. dollar is trading at 107.16 yen versus the 107.18 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1554 compared to yesterday’s $1.1550.

Asia

Asian stocks ended mixed on Thursday as tensions between the U.S. and China escalated sharply after the U.S. ordered the closure of the Chinese consulate in Houston to “protect Americans' intellectual property and private information.”

China vowed to retaliate and said the unilateral closure within a short period of time is an unprecedented escalation of its recent actions against China. Japanese markets were closed for the Marine Day holiday.

Chinese shares ended slightly lower amid heightened U.S.-China tensions. The benchmark Shanghai Composite Index ended down 8.05 points, or 0.2 percent, at 3,325.11, while Hong Kong's Hang Seng Index climbed 205.06 points, or 0.8 percent, to 25,263.

Australian markets ended a choppy session modestly higher. The benchmark S&P/ASX 200 Index inched up 19.40 points, or 0.3 percent, to 6,094.50 despite the country reporting its highest coronavirus deaths in three months. The broader All Ordinaries Index ended up 21.30 points, or 0.3 percent, at 6,213.90.

Banks ended mixed, with NAB rising 0.7 percent and Westpac adding 0.4 percent, while Commonwealth dropped half a percent.

Energy stocks extended gains for a third day, with Santos climbing 3.5 percent after saying it sees steady output in the near term.

Gold miners fell broadly even as bullion prices hit a nearly nine-year high on fears of worsening U.S.-China relations and U.S. stimulus hopes. Newcrest Mining advanced 1.9 percent after its quarterly output beat estimates.

Seoul stocks ended lower on growth worries amid escalating U.S.-China tensions. The Kospi average fell 12.47 points, or 0.6 percent, to 2,216.19 after data showed the country has fallen into recession for the first time in 17 years.

Asia's fourth-largest economy contracted 3.3 percent in the June quarter from three months earlier, central bank data showed, marking the sharpest contraction since the first quarter of 1998. That missed forecasts for a decline of 2.3 percent following the 1.3 percent contraction in the previous three months.

SK Hynix gave up 1 percent after the world's No.2 memory chipmaker warned that chip prices would correct in the second half of 2020.

Meanwhile, Hyundai Motor, the country's biggest carmaker, surged 5.1 percent after reporting a smaller than expected drop in operating profit in the second quarter.

Europe

European stocks are gaining ground on Thursday as hopes for another round of government stimulus for the virus-stricken U.S. economy coupled with upbeat earning updates from the likes of Daimler and Unilever have helped investors look past an escalation in U.S.-China tensions.

Meanwhile, a survey showed German consumer morale improved more than expected heading into August. Market research group GfK said its forward-looking consumer sentiment index rose to -0.3 from a revised -9.4 in July. The expected reading was -5.0.

Gfk said German consumers are gradually putting the coronavirus shock of earlier this year behind them. A V-shaped trend is currently emerging for the consumer climate.

While the U.K.’s FTSE 100 Index has risen by 0.4 percent, the German DAX Index is up by 0.2 percent and the French CAC 40 Index is up by 0.1 percent.

Shares of Daimler have soared. After reporting wider loss and weak sales volume in its second quarter dueto the virus-related lockdowns, the auto giant said that it started seeing the first signs of a sales recovery and expects to record an operating profit in fiscal 2020.

Heidelberger Druckmaschinen has also jumped. The precision mechanical engineering company has agreed to sell the German-Swiss Gallus Group to Swiss packaging group benpac holding.

French drinks group Pernod Ricard has also advanced after raising its full-year organic profit outlook from recurring operations.

Publicis Groupe SA shares have also spiked. The world's third-biggest advertising company beat expectations for underlying sales in the second quarter and said it continued to record significant wins in new business across the world.

Unilever has also moved sharply higher as it beat analyst expectations of a drop in sales in its latest half-year results. Second-quarter underlying sales declined just 0.3 percent versus expectations of a 4.3 percent drop.

Risk insurance and reinsurance provider Beazley Group has also jumped. The company swung to a loss in the first-half after setting aside $170 million for coronavirus-related claims.

Security contractor G4S has also shown a strong move to the upside after posting a higher than expected first-half operating profit.

U.S. Economic Reports

After reporting decreases in first-time claims for U.S. unemployment benefits for fifteen straight weeks, the Labor Department released a report on Thursday showing a notable rebound in jobless claims in the week ended July 18th.

The report said initial jobless claims jumped to 1.416 million, an increase of 109,000 from the previous week’s revised level of 1.307 million. Economists had expected jobless claims to come in unchanged at the 1.300 million originally reported for the previous month.

Jobless claims increased for the first time since late March but remain well below the record high of 6.867 million set in the week ended March 28th.

At 10 am ET, the Conference Board is scheduled to release its report on leading economic indicators in the month of June. The leading economic index is expected to jump by 2.5 percent.

The Treasury Department is due to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 1 pm ET.

Stocks In Focus

Shares of Twitter (TWTR) are moving sharply higher in pre-market trading after the social media giant reported second quarter revenues that missed analyst estimates but strong subscriber growth.

Electric car maker Tesla (TSLA) is also likely to see initial strength after reporting much better than expected second quarter earnings.

Shares of PulteGroup (PHM) are also seeing significant pre-market strength after the homebuilder reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Align Technology (ALGN) may come under pressure after the medical device company reported a wider than expected second quarter loss.
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