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Beyond the Numbers

U.S. Stocks May Move Back To The Upside After Last Week’s Pullback
1/19/2021 8:44 AM

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move back to the upside following the pullback seen last week.

The markets may benefit from a positive reaction to the latest earnings news from companies like Goldman Sachs (GS) and Halliburton (HAL).

Shares of Goldman Sachs are moving notably higher in pre-market trading after the financial services giant reported much better than expected fourth quarter earnings.

Oil services giant Halliburton is also likely to see initial strength after reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Bank of America (BAC) may move to the downside after the financial giant reported better than expected fourth quarter earnings but on revenues that missed estimates.

Netflix (NFLX), Procter & Gamble (PG), IBM (IBM), and Intel (INTC) are among some of the other big-name companies scheduled to release their quarterly results this week.

Traders are also likely to keep an eye on testimony from Treasury Secretary nominee Janet Yellen, who is due to appear before the Senate Finance Committee.

In prepared remarks seen by numerous media outlets, Yellen calls for additional stimulus to address the impact of the ongoing coronavirus pandemic, arguing the government needs to “act big.”

Yellen acknowledges the mounting national debt facing the incoming administration but claimed the benefits of another relief package will far outweigh the costs.

After moving sharply lower early in the session, stocks regained some ground over the course of the trading day on Friday but remained firmly in negative territory. With the drop, the Dow and the Nasdaq pulled back further off the record intraday highs set in early trading on Thursday.

The Dow ended the day down 117.26 points or 0.6 percent at 30,814.26 after tumbling by nearly 380 points in early trading. The Nasdaq slumped 114.14 points or 0.9 percent to 12,998.50 and the S&P 500 slid 27.29 points or 0.7 percent to 3,768.25.

The major averages also moved to the downside for the week, with the Dow falling by 0.9 percent, while the Nasdaq and the S&P 500 both dropped by 1.5 percent.

The early sell-off on Wall Street partly reflected a negative reaction to earnings news from financial giants Wells Fargo (WFC), Citigroup (C) and JPMorgan Chase (JPM).

Wells Fargo and Citigroup posted steep losses after both reported better than expected fourth quarter earnings but on revenues that missed estimates.

Shares of JPMorgan also moved notably lower even though the company reported fourth quarter results that beat expectations on both the top and bottom lines.

JPMorgan benefited from the release of money previously set aside for expected loan defaults, although its earnings would have still beat estimates with the boost.

Negative sentiment was also generated in reaction to a report from the Commerce Department showing a continued decline in U.S. retail sales in the month of December.

The Commerce Department said retail sales fell by 0.7 percent in December after tumbling by a revised 1.4 percent in November.

Economists had expected retail sales to come in unchanged compared to the 1.1 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by 1.4 percent in December after sliding by 1.3 percent in November.

Ex-auto sales were expected to edge down by 0.1 percent compared to the 0.9 percent decrease originally reported for the previous month.

"The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy," said Andrew Hunter, Senior U.S. Economist at Capital Economics. "Despite the building optimism over fiscal stimulus, the next few months are still likely to be difficult."

Meanwhile, the Federal Reserve released a separate report showing U.S. industrial production jumped by much more than expected in the month of December.

The Fed said industrial production surged up by 1.6 percent in December after climbing by an upwardly revised 0.5 percent in November.

Economists had expected production to rise by 0.4 percent, matching the increase originally reported for the previous month.

"The December production data underline that while new restrictions are holding back parts of the service sector again, the recovery in manufacturing continues largely unaffected," said Michael Pearce, Senior U.S. Economist at Capital Economics.

The weakness on Wall Street may also have reflected the old adage of "sell the news" after President-elect Joe Biden announced a $1.9 trillion coronavirus relief package on Thursday.

The proposed stimulus package includes an increase in direct payments to individuals, increased federal unemployment benefits and aid to state and local governments.

Steel stocks showed a substantial move to the downside on the day, resulting in a 4.8 percent nosedive by the NYSE Arca Steel Index.

Considerable weakness was also visible among energy stocks, which pulled back along with the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index plunged by 4.3 percent and 4.2 percent, respectively.

Airline stocks also moved sharply lower following the rally seen in the previous session, with the NYSE Arca Airline Index slumping by 4.2 percent after ending Thursday's trading at its best closing level in a month.

Gold, banking and semiconductor stocks also showed notable moves to the downside, while some strength emerged among interest rate-sensitive utilities and commercial real estate stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.18 to $52.54 a barrel after tumbling $1.21 to $52.36 a barrel last Friday. Meanwhile, after plunging $21.50 to $1,829.90 an ounce in the previous session, gold futures are climbing $5.70 to $1,835.60 an ounce.

On the currency front, the U.S. dollar is trading at 103.89 yen compared to the 103.69 yen it fetched on Monday. Against the euro, the dollar is valued at $1.2138 compared to yesterday’s $1.2077.

Asia

Asian stocks ended broadly higher on Tuesday as optimism about vaccine rollouts and government stimulus offset concerns over the worldwide spread of the coronavirus.

Investors looked to comments from U.S. Treasury Secretary nominee Janet Yellen on U.S. stimulus at the Senate confirmation hearing later today, with her prepared remarks calling on the federal government to “act big.”

Chinese shares fell notably as mainland investors shifted assets from China to Hong Kong-listed shares. The benchmark Shanghai Composite Index dropped 29.84 points, or 0.8 percent, to 3,566.38, while Hong Kong's Hang Seng Index surged up 779.51 points, or 2.7 percent, to 29,642.28.

Japanese shares gained ground as bargain hunting emerged after two days of profit taking. The Nikkei 225 Index rallied 391.25 points, or 1.4 percent, to 28,633.46 as investors watched headlines linked to the country's vaccination schedule. The broader Topix closed 0.6 percent higher at 1,855.84.

Chip-related shares were in demand, with Tokyo Electron rising 2.1 percent and Advantest surging 4.2 percent. Automaker Nissan Motor added 3.9 percent, Honda Motor advanced 1.7 percent and tire maker Bridgestone climbed 3.3 percent.

Australian markets posted strong gains, with miners and financials leading the surge. The benchmark S&P/ASX 200 Index climbed 79.60 points, or 1.2 percent, to 6,742.60, while the broader All Ordinaries Index ended up 79.60 points, or 1.2 percent, at 7,015.

Waste management firm Bingo Industries soared over 20 percent after it received a A$2.29 billion ($1.8 billion) cash buyout offer from a private equity group.

Rio Tinto gained 0.7 percent after releasing fourth-quarter production results. Rival BHP rose 0.9 percent after data showed China's industrial activity roared back to pre-pandemic growth rates in the fourth quarter.

Banks ANZ, NAB and Westpac rose between 1.6 percent and 1.9 percent, as the country recorded zero local Covid-19 cases for another day.

Seoul stocks rallied as institutional investors lapped up auto-related shares on expectations of improved earnings. The benchmark Kospi jumped 78.73 points, or 2.6 percent, to finish at 3,092.66, after having lost more than 4 percent in the previous two sessions.

Hyundai Motor shares soared 8.5 percent, while its affiliate Ki Motors jumped 16.6 percent. Auto parts maker Hyundai Mobis advanced 6.7 percent.

Europe

European stocks are modestly higher on Tuesday, with optimism about China's economy and expectations of improved earnings helping underpin sentiment.

Meanwhile, investors looked to comments from U.S. Treasury Secretary nominee Janet Yellen on U.S. stimulus at the Senate confirmation hearing later today.

According to a copy of her prepared remarks, Yellen will call on the federal government to “act big” to ramp up the recovery.

While the U.K.’s FTSE 100 Index is just above the unchanged line, the French CAC 40 Index is up by 0.1 percent and the German DAX Index is up by 0.2 percent.

Sanofi has advanced. The French pharmaceutical company said the U.K.'s Medicines and Healthcare Products Regulatory Agency has granted a Promising Innovative Medicine to nirsevimab.

Speed-train maker Alstom has also rallied after confirming its full-year outlook and mid-term 2022/23 guidance.

TeamViewer has also moved to the upside. The software company announced an acquisition of Xaleon, an Austrian startup and a provider of customer engagement software.

Lipidor AB, a Sweden-based lipid technology company, has also risen. The company said it has signed an exclusive licensing agreement with Cannassure Therapeutics Ltd., an Israel-based manufacturer of medicinal cannabis products.

Logitech has also gained after the computer peripherals maker raised its annual forecasts for the third time and reported a nearly three-fold jump in quarterly adjusted operating income.

Gold mining company Centamin has jumped after reporting gold production from the Sukari Gold Mine for the fourth quarter in-line with the quarterly guidance range.

Real estate investment trust Hammerson has also advanced after saying it has collected 41 percent of the rent due for the first quarter of 2021.

Construction company Kier Group has also moved sharply higher after reporting better trading over the last six months.

Meanwhile, Automakers are moving lower after industry data showed Europe's new car registrations continued to fall in December. Car registrations were down 3.3 percent on a yearly basis, but slower than the 12 percent fall logged in November.

On the economic front, Germany's consumer prices declined as initially estimated in December, final data from Destatis showed. The consumer price index decreased 0.3 percent year-on-year in December, the same as seen in November.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today, although reports on weekly jobless claims, homebuilder confidence, housing starts, and existing home sales may attract attention in the coming days.

Stocks In Focus

Shares of Coherent (COHR) are skyrocketing in pre-market trading after the laser maker agreed to be acquired by Lumentum (LITE) for $5.7 billion in cash and stock.

Computer peripheral maker Logitech (LOGI) is also likely to see initial strength after reporting better than expected fiscal third quarter results and raising its guidance.

Shares of Western Union (WU) are also moving sharply higher in pre-market trading after the money transfer company announced an agreement with Walmart (WMT) to enable its services at the retail giant’s locations across the U.S.

On the other hand, shares of NOV Inc. (NOV) may come under pressure after the supplier of oil and gas drilling equipment said it expects fourth quarter revenue and earnings to be below prior guidance.
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