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Beyond the Numbers

Futures Pointing To Extended Pullback On Wall Street
4/20/2021 8:33 AM

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to extend the pullback seen in the previous session.

The downward momentum on Wall Street comes as traders appear poised to continue cashing in on recent strength in the markets.

Profit taking also contributed to the weakness on Monday after the Dow and the S&P 500 ended last Friday’s trading at new record closing highs.

A new wave of coronavirus infections overseas may also weigh on the markets amid concerns about new restrictions and the impact on the global economy.

Overall trading activity may be somewhat subdued, however, with another quiet day on the U.S. economic front keeping some traders on the sidelines.

Upbeat earnings news from companies like Procter & Gamble (PG), Johnson & Johnson (JNJ) and Travelers (TRV) may also help limit any downside.

U.S. stocks closed mostly lower on Monday, pulling back off the historic highs set last Friday, as investors largely stayed cautious amid a lack of triggers and looked ahead to more earnings news and economic data.

Further, geopolitical concerns and worries about spikes in coronavirus cases in several countries raised uncertainty about the pace of global the economic recovery, contributing to the lackluster movements in the market.

The major averages all ended in negative territory. The Dow ended down 123.04 points or 0.4 percent at 34,077.63. The S&P 500 closed lower by 22.21 points or 0.5 percent at 4,163.26 and the tech-heavy Nasdaq ended down 137.58 points or 1 percent at 13,914.77.

The market's retreat was due largely to some heavy selling in the technology space. U.S. stocks had moved to record highs last week, riding on buoyant economic data and some upbeat earnings announcements.

Coca-Cola Co. (KO) revealed earnings for first quarter that declined from the same period last year. The company's profit came in at $2.25 billion, or $0.52 per share. This compares with $2.78 billion, or $0.64 per share, in last year's first quarter.

Excluding items, Coca-Cola reported adjusted earnings of $2.40 billion or $0.55 per share for the period. The stock closed modestly higher.

After the close of trading, IBM Corp. (IBM) reported earnings of $955 million, or $1.06 per share or the first quarter of this financial year, compared with $1175 million, or $1.31 per share, in last year's first quarter.

Commodity, Currency Markets

Crude oil futures are climbing $0.38 to $63.76 a barrel after rising $0.25 to $63.38 barrel on Monday. Meanwhile, after sliding $9.60 to $1,770.60 an ounce in the previous session, gold futures are inching up $2.10 to $1,772.70 an ounce.

On the currency front, the U.S. dollar is trading at 108.43 yen compared to the 108.17 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2043 compared to yesterday’s $1.2037.

Asia

Asian stocks ended broadly lower on Tuesday as surging coronavirus cases in the region and possible restrictions on economic activity in several countries dented investor optimism about a global economic recovery.

Chinese shares ended slightly lower as the country's central bank kept its benchmark lending rates unchanged, as widely expected. 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 slipped 4.61 points, or 0.1 percent, to 3,472.94, while Hong Kong's Hang Seng Index inched up 29.58 points, or 0.1 percent, to 29,135.73.

Japanese shares tumbled amid growing concerns over another virus state of emergency in the country just three months before the country hosts the Olympics. The Nikkei 225 Index plunged 584.99 points, or 2 percent, to 29,100.38, snapping a three-day winning streak.

The broader Topix closed 1.6 percent lower at 1,926.25 as investors took in calls for new states of emergency in the Osaka region and possibly Tokyo.

Toyota Motor dropped 1.2 percent after a report the carmaker sees "cloudier" chip supply later this year. Subaru lost 2.8 percent after saying it was suspending production at its plant in Indiana through the end of April due to chip shortages.

SoftBank Group declined 1.8 percent after the U.K. government said it would look into the national security implications of U.S. group Nvidia's purchase of British chip designer Arm Holdings.

Australian markets slipped from 14-month highs, with banks and tech companies retreating. The benchmark S&P/ASX 200 Index dropped 47.80 points, or 0.7 percent, to 7,017.80 after five days of gains. The broader All Ordinaries Index ended down 45.90 points, or 0.6 percent, at 7,282.10.

Tech stocks declined, with Xero and Appen falling around 1.4 percent. Buy-now-pay-later company Afterpay shed 0.8 percent after saying it is exploring a U.S. listing.

The big four banks ended down between half a percent and 1.2 percent. Mining giant Rio Tinto gave up half a percent after releasing its first-quarter production results.

Lynas Rare Earths slumped 8.3 percent after it reported a slight drop in its quarterly rare earths output. Challenger plummeted 15.8 percent after the retirement income and investment manager said normalized profit for the full-year 2021 will be nearer to the bottom of its guidance range.

In economic news, minutes from the RBA's monetary policy meeting on April 6 showed that the central bank is in no hurry to tighten policy settings.

Seoul stocks hit a record high amid strong buying by foreign investors ahead of earnings from carmakers and tech firms. The benchmark Kospi rose 21.86 points, or 0.7 percent, to 3,220.70, reaching a record closing high and extending gains for the seventh straight session.

Europe

European stocks have fallen on Tuesday, pulling back from the record highs reached a day earlier as the yield on the 30-year Treasury bond climbed and new Covid-19 cases continued to rise around the world, raising concerns over a disconnect between fundamentals and high equity valuations.

U.S. Treasury yields rose as investors awaited the outcome of auctions set to be held for $34 billion of 52-week bills and $40 billion of 42-day bills.

Focus now shifts to the European Central Bank meeting on Thursday, which investors hope will give more clarity about stimulus plans for the bloc.

While the French CAC 40 Index has tumbled by 1.5 percent, the U.K.’s FTSE 100 Index is down by 1.2 percent and the German DAX Index is down by 0.9 percent.

The British pound has risen broadly versus its major peers after official figures showed Britain's unemployment rate unexpectedly fell for a second month in a row to 4.9 percent in the December to February period.

British American Tobacco, Imperial Brands and Swedish Match have slumped after reports the Biden administration is considering requiring tobacco companies to reduce the nicotine levels in all cigarettes sold in the United States.

Real estate investment trust Hammerson has also fallen after it appointed Himanshu Raja as Chief Financial Officer and Executive Director, effective 26 April 2021.

Moneysupermarket.com has also shown a notable move to the downside after its first quarter revenue fell by 20 percent compared to 2020.

Associated British Foods has also dropped after the food processing firm reported a decrease in pretax profit for the first half of fiscal 2021.

Danone SA shares have also fallen. The food company reported first quarter consolidated sales of 5.66 billion euros, down 9.4 percent from 5.66 billion euros last year.

Meanwhile, Deutz AG has risen. The internal combustion engine manufacturer raised its full-year guidance for 2021 after reporting a 1 percent rise in first-quarter revenue.

Luxury carmaker BMW has also edged higher. The company reported sales growth in all significant regions of the world, in particular in China, and all brands in the first quarter of 2021.

K+S Group shares have also advanced. The chemical company said it received allowance from the U.S. Justice Department for the sale of the Americas operating unit.

Medical technology company Getinge has also moved sharply higher after reporting a rise in first-quarter core profit.

Specialty chemicals company Sika has also risen. The company said that its sales for the first quarter were CHF 1.999 billion, representing an increase of 12.6 percent in local currencies from last year.

U.S. Economic Reports

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

Stocks In Focus

Shares of United Airlines (UAL) are moving notably lower in pre-market trading after the airline reported a wider than expected first quarter loss on revenues that came in below analyst estimates.

Xerox (XRX) is also likely to see initial weakness after the company reported weaker than expected first quarter earnings as many offices remained closed due to the coronavirus pandemic.

On the other hand, shares of Kansas City Southern (KSU) are seeing significant pre-market strength after Canadian National Railway (CNI) offered to acquire the rail operator in a cash-and-stock transaction valued at $33.7 billion or $325 per share.

Auto retailer AutoNation (AN) may also move to the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.
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