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Beyond the Numbers

Traders May Take A Breather Following Recent Volatility On Wall Street
4/22/2021 8:58 AM

The major U.S. index futures are pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction in early trading.

Traders may be reluctant to make significant moves amid uncertainty about the near-term outlook for the markets following the volatility seen over the past few sessions.

The rally seen during trading on Wednesday came following the pullback seen earlier in the week, which dragged the Dow and the S&P 500 well off last Friday’s record highs.

The steady advance by the markets throughout most of the past year has led to some concerns about stock valuations amid the ongoing coronavirus pandemic.

Stocks have largely refrained from an extended pullback, however, as traders seem wary of selling stocks and missing out on further upside.

Some analysts have warned that a market correction is overdue and suggested a continued advance could exacerbate the pullback.

Positive sentiment may be generated in reaction to a report from the Labor Department unexpectedly showing a continued decline in initial jobless claims in the week ended April 17.

Following the pullback seen earlier in the week, stocks showed a strong move back to the upside during trading on Wednesday. The major averages saw initial weakness but climbed firmly into positive territory as the day progressed.

The major averages saw further upside going into the close, ending the session near their best levels of the day. The Dow jumped 316.01 points or 0.9 percent to 34,137.31, the Nasdaq surged up 163.95 points or 1.2 percent to 13,950.22 and the S&P 500 advanced 38.48 points or 0.9 percent to 4,173.42.

Stocks linked to the economy reopening saw significant strength on the day, with shares of Norwegian Cruise Line (NCLH) spiking by 10.3 percent.

The jump by Norwegian comes after Goldman Sachs upgraded its rating on the cruise line operators stock to Buy from Neutral. Rivals Carnival (CCL) and Royal Caribbean (RCL) are also posting strong gains.

Intuitive Surgical (ISRG), Edwards Lifesciences (EW), and Tenet Healthcare (THC) also moved notably higher after reporting better than expected quarterly results.

On the other hand, shares of Netflix (NFLX) moved sharply lower, with the video streaming giant tumbling by 7.4 percent.

The steep drop by Netflix came after the company reported first quarter earnings and revenues that beat estimates but much weaker than expected subscriber growth.

Reflecting the strength among reopening plays, airline stocks showed a strong move back to the upside, driving the NYSE Arca Airline Index up by 3 percent. The index rebounded after tumbling to a two-month closing low on Tuesday.

Substantial strength also emerged among semiconductor stocks, as reflected by the 2.8 percent jump by the Philadelphia Semiconductor Index.

Chemical stocks also turned in a strong performance, with the S&P Chemical Sector Index surging up by 2.3 percent to a record closing high.

Gold, steel and banking stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are inching up $0.15 to $61.50 a barrel after slumping $1.32 to $61.35 a barrel on Wednesday. Meanwhile, after climbing $14.70 to $1,793.10 an ounce in the previous session, gold futures are falling $8.10 to $1,785 an ounce.

On the currency front, the U.S. dollar is trading at 108.11 yen versus the 108.08 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2048 compared to yesterday’s $1.2035.

Asia

Asian stocks ended mostly higher on Thursday, rebounding a bit from recent losses on a positive lead from the performance by the U.S. markets and some bargain hunting.

The mood, however, was quite cautious in most of the markets in the region amid doubts about an early economic rebound due to the continuing surge in coronavirus in Asia and the possibility of lockdowns in certain places.

Japan reported nationwide daily infections of topped 5,000 for the first time in three months. The country's government is mulling fresh coronavirus state of emergency in Tokyo as well as Osaka, Kyoto and Hyogo prefectures on Friday.

India reported more than 3 lakh COVID-19 cases on Wednesday, with as many as 315,660 new cases and 2,091 deaths being recorded in the country about an hour before midnight.

In the Australian market, healthcare and information technology stocks fared well. The S&P/ASX 200 Index and the All Ordinaries Index both ended on a firm note, gaining 0.8 percent and 0.7 percent respectively.

Megaport Ltd. shares soared nearly 10 percent, while Monadelphous Group and Westgold Resources both climbed about 5.7 percent.

Meanwhile, Pilbara Minerals shares plunged nearly 11 percent. Several other materials shares, including Blackmores and Lynas Rare Earths, also ended sharply lower.

The Japanese stock market rose sharply, with the Nikkei 225 Index surging up 2.4 percent. The market breadth was pretty strong, with gainers outnumbering losers by 3.5 to 1.

Rakuten Inc., up nearly 6.5 percent, was among the top movers in the Nikkei index. Kawasaki Kisen Kaisha rallied 5.5 percent and JFE Holdings jumped 4.7 percent.

Tokyo Electronics, Olympus Corp, Kikkoman Corp, Dainippon Screen Manufacturing, Terumo, Fujitsu, Nippon Yusen KK, Mitsui OSK Lines, Chiyoda and Chugain Pharmaceuticals were among the other major gainers.

The Chinese markets ended mixed. Shanghai's Composite Index dipped 0.2 percent, while Hong Kong's Hang Sang ended up 0.5 percent.

Hong Kong's seasonally adjusted unemployment rate dropped to 6.8 percent in the January - March quarter, the lowest since the quarter ending December 2020, according to the Census and Statistics Department.

Markets in Malaysia, New Zealand and South Korea finished higher. Taiwan closed weak, while Indonesia and Singapore settled flat.

Europe

European stocks are mostly higher on Thursday, extending recent gains amid continued optimism about earnings and hopes that a momentum shift in vaccination efforts will help curb the spread of the Covid-19 pandemic.

The markets have remained firmly positive after the European Central Bank announced its widely expected decision to maintain its very accommodative monetary policy stance.

While the U.K.’s FTSE 100 Index has risen by 0.3 percent, the German DAX Index and the French CAC 40 Index are up by 0.6 percent and 0.7 percent, respectively.

In the U.K. market, Experian Plc shares are moving notably higher. Melrose Industries shares have also climbed higher thanks to a rating upgrade by investment bank Peel Hunt.

Aveva Group, IAG, Scottish Mortgage, Rolls-Royce Holdings, Polymetal International and RightMove are also posting strong gains.

On the other hand, BAE Systems, Fresnillo, Rentokil Initial, Antofagasta and Informa have moved sharply lower.

In France, WorldLine SA shares are seeing significant strength. STMicroElectronics, Veolia and Hermes International are also moving notably higher.

Shares of drinks maker Pernod Ricard have also jumped after the company reported strong sales growth in the three months to the end of March, helped by strong demand in its key U.S. and Chinese markets.

LVMH, Faurecia, Schneider Electric, Dassault Systemes and Valeo are also notably higher. Lenders BNP Paribas and Societe Generale are posting with modest gains.

Meanwhile, Orange shares are weak. Although the company saw an increase in first quarter revenues to €10.3 billion, its core operational profits retreated 0.3 percent to €2.6 billion in the quarter.

Renault is also lower after the French car maker's revenue unexpectedly fell in the first quarter as it lagged behind European peers in recovering from the pandemic.

In Germany, RWE, Siemens, Infineon, Continental, Delivery Hero, Henkel, E.ON, and MTU Aero are posting strong gains.

SAP is also rising after the company said its net profit for the first quarter rose on year to 1.65 billion euros from 1.02 billion euros in the year ago quarter.

At the same time, shares of Swiss lender Credit Suisse are sharply lower. The bank reported a net loss of 252 million Swiss francs ($295 million) in the first quarter.

The bank said the loss reflected a "significant charge with respect to the US-based hedge fund Archegos Capital matter in the first quarter, offsetting positive performance across wealth management and investment banking."

In economic news, monthly survey data from the statistical office Insee showed French manufacturing confidence improved in April, with the manufacturing sentiment index advancing to 104 in the month from 99.0 in March. Economists had forecast the index to remain at 99.0.

U.K. manufacturing orders grew at the fastest pace in two years and optimism among manufacturers rose the most since 1973, survey results from the Confederation of British Industry showed.

The order book balance rose to +5 percent in three months to April from -12 percent in January, the latest Industrial Trends survey revealed. This was the strongest growth since April 2019.

Business sentiment in the quarter to April advanced to +38 percent from -22 percent in January. This was the fastest growth since April 1973.

U.S. Economic Reports

After reporting a sharp pullback in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday unexpectedly showing a continued decline in initial jobless claims in the week ended April 17.

The report said initial jobless claims fell to 547,000, a decrease of 39,000 from the previous week’s revised level of 586,000.

The continued drop came as a surprise to economists, who had expected jobless claims to rebound to 617,000 from the 576,000 originally reported for the previous month.

With the unexpected decrease, jobless claims slid to their lowest level since hitting 256,000 in the week ended March 14, 2020.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of March.

Economists expect existing home sales to dip by 0.5 percent to an annual rate of 6.19 million in March after plunging by 6.6 percent to a rate of 6.22 million in February.

The Conference Board is also due to release its report on leading economic indicators in the month of March at 10 am ET. The leading economic index is expected to climb by 0.6 percent.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Stocks In Focus

Shares of Equifax (EFX) are moving sharply higher in pre-market trading after the credit reporting agency reported better than expected first quarter results and raised its full-year guidance.

Rural lifestyle retailer Tractor Supply (TSCO) is also likely to see initial strength after reporting first quarter results that exceeded analyst estimates and raised its full-year outlook.

Shares of Discover Financial Services (DFS) may also move to the upside after the company reported better than expected first quarter results.

On the other hand, shares of Sleep Number (SNBR) are likely to come under pressure after the mattress retailer reported first quarter earnings that beat estimates but weaker than expected sales.
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