Market Analysis

Beyond the Numbers

Bargain Hunting May Lead To Rebound On Wall Street
7/20/2021 8:52 AM

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to regain ground following the sell-off seen in the previous session.

Traders may look to pick up stocks at relatively reduced levels after the sharp drop seen on Monday dragged the major averages down to their lowest levels in almost a month.

A positive reaction to the latest earnings news may also contribute to initial strength on Wall Street, with tech giant IBM Corp. (IBM) moving notably higher in pre-market trading after reporting better than expected second quarter results.

Travelers (TRV) and Halliburton (HAL) are also likely to move to the upside after reporting second quarter earnings that exceeded analyst estimates.

Buying interest may be somewhat subdued, however, as concerns about a surge in new coronavirus cases continue to weigh on the markets.

Stocks moved sharply lower during trading on Monday, extending the pullback seen over the course of last Friday's session. With the steep drop on the day, the major averages ended the session at their lowest closing levels in almost a month.

The major averages regained some ground going into the close but remained firmly negative. The Dow plunged 725.81 points or 2.1 percent to 33,962.04, the Nasdaq slumped 152.25 points or 1.1 percent to 14,274.98 and the S&P 500 tumbled 68.67 points or 1.6 percent to 4,258.49.

The sell-off on Wall Street partly reflected concerns about a resurgence of the coronavirus, as the delta variant contributes to a spike in infections in the U.S.

According to data from the CDC, the 7-day average of Covid-19 cases in the U.S. has jumped to nearly 30,000 after falling as low as 11,455 a month ago.

The renewed virus concerns led to significant weakness among companies hit hardest by the pandemic, with cruise operators Carnival (CCL), Norwegian Cruise Lines (NCLH) and Royal Caribbean (RCL) posting steep losses.

Airline stocks also moved substantially lower on the day, dragging the NYSE Arca Airline Index down by 4.7 percent to its lowest closing level in well over five months.

Considerable weakness was also visible among energy stocks, which moved sharply lower along with the price of crude oil.

Crude for August delivery plummeted following news OPEC and its allies have agreed to steadily end production cuts by September 2022.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index plunged by 4.2 percent, while the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index tumbled by 3.6 percent and 3.1 percent, respectively.

Banking stocks also saw significant weakness on the day, resulting in a 3.8 percent nosedive by the KBW Bank Index. The index ended the session at its lower closing level in almost four months.

Steel, brokerage, chemical and gold stocks also showed notable moves to the downside on the day, reflecting broad based selling pressure.

In U.S. economic news, the National Association of Home Builders released a report showing an unexpected dip in U.S. homebuilder confidence in the month of July.

The report showed the NAHB/Wells Fargo Housing Market Index edged down to 80 in July from 81 in June. The modest decrease surprised economists, who had expected the index to inch up to 82.

With the unexpected drop, the housing market index slipped to its lowest level since hitting 78 in August of 2020.

Commodity, Currency Markets

Crude oil futures are edging down $0.05 to $66.37 a barrel after plunging $5.39 to $66.42 a barrel on Monday. Meanwhile, after falling $5.80 to $1,809.20 an ounce in the previous session, gold futures are climbing $13.60 to $1,822.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.52 yen compared to the 109.46 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1770 compared to yesterday’s $1.1800.


Asian stocks ended broadly lower on Tuesday as concerns around the global spread of the Covid-19 Delta variant and rising tensions between China and the West dented sentiment and stoked demand for safe-haven assets.

Investors also kept an eye on Treasury yields, with U.S. President Joe Biden adding his voice to assurances that inflationary pressures will be temporary.

Chinese shares cut early losses to end marginally lower as the People's Bank of China kept its July loan prime rate unchanged. Hong Kong's Hang Seng Index dropped 230.53 points, or 0.8 percent, to 27,259.25.

Japanese shares ended lower for the fifth straight session to enter correction territory, as concerns grew over the coronavirus surge ahead of the Tokyo Summer Olympic Games set to start on Friday. Japanese markets will be closed on Thursday and Friday for public holidays.

The Nikkei 225 Index slumped 264.58 points, or 1 percent, to 27,388.16, hitting its lowest level since January 6. The broader Topix closed 1 percent lower at 1,888.89.

Heavyweights Fast Retailing Co. and SoftBank Group Corp. fell 1.1 percent and 1.6 percent, respectively, while robot maker Fanuc gave up 2.4 percent. Automakers were among the biggest drags, with Honda Motor, Toyota and Nissan falling 1-3 percent.

Canon soared 9.2 percent after raising its annual operating profit forecast. Rival Nikon jumped 3 percent.

Data released earlier in the day showed Japan's national core consumer price index grew an annual 0.2 percent in June, coming in line with expectations.

Australian markets ended off their day's lows as the minutes from Reserve Bank of Australia’s latest policy meeting revived dovish expectations.

The benchmark S&P/ASX 200 Index hit its lowest level since June 2 before ending the session down 33.80 points, or 0.5 percent, at 7,252.20. The broader All Ordinaries Index dropped 33.90 points, or 0.5 percent, to 7,525.80.

Oil Search jumped 6.3 percent after the oil and gas explorer rejected a takeover bid from Santos. Shares of the latter tumbled 5 percent, while Beach Energy and Origin Energy fell more than 2 percent amid the oil price sell-off.

Mining heavyweight BHP lost 2.5 percent after it reported lower annual production across four of its six major divisions. Rival Rio Tinto gave up 2.7 percent.

Meanwhile, buy-now-pay-later firm Afterpay advanced 1.6 percent after saying it would launch a new banking application in October.

Seoul stocks fell for the third day running amid concerns that the resurgence in the new coronavirus variants ahead of the summer holiday season may deter economic recovery. The benchmark Kospi dipped 11.34 points, or 0.4 percent, to 3,232.70, with expectations for solid second quarter earnings helping limit losses.


European stocks have rebounded on Tuesday after suffering heavy losses the previous day on worries about the spread of the highly contagious coronavirus variants in more countries.

While the French CAC 40 Index has advanced by 0.7 percent, the U.K.’s FTSE Index is up by 0.4 percent and the German DAX Index is up by 0.2 percent.

The British pound hit a five-month low against the dollar and lingered near a five-week low against the euro as a global surge in coronavirus cases kept investors jittery.

Swiss bank UBS Group AG has moved sharply higher after reporting a better than expected profit in the second quarter.

Norway's Telenor has also shown a strong move to the upside after raising its full year outlook.

Alstom has also soared. The French speed-train maker reported that its first-quarter sales surged 146 percent to 3.7 billion euros from last year's 1.51 billion euros.

BP Plc and Royal Dutch Shell have also risen as oil prices rebound after seeing their worst plunge in 16 months overnight.

Airline easyJet has also after it posted a smaller than expected pre-tax quarterly loss.

Meanwhile, Electrolux AB shares have plunged. The Swedish home appliances maker posted a lower than expected second quarter operating profit and warned global supply chain woes would worsen in coming months.

Similarly, commercial vehicle manufacturer Volvo Group has also fallen as it warned of more production disruptions and stoppages this year amid a global shortage of semiconductors.

In economic news, German producer prices grew 8.5 percent on a yearly basis in June, bigger than the 7.2 percent rise posted in May, data published by Destatis revealed.

Economists had forecast an increase of 8.4 percent. This was the fastest rise since January 1982, when prices grew sharply amid a second oil crisis.

The euro area current account surplus dropped to a seasonally adjusted 12 billion euros in May from 22 billion euros in April, data from the European Central bank showed. In the same period last year, the surplus totaled 6 billion euros.

The surplus on goods trade remained unchanged at 25 billion euros, while the surplus on services trade dropped to 6 billion euros from 9 billion euros.

U.S. Economic Reports

New residential construction in the U.S. showed a substantial increase in the month of June, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said housing starts spiked by 6.3 percent to an annual rate of 1.643 million in June after jumping by 2.1 percent to a revised rate of 1.546 million in May.

Economists had expected housing starts to increase by 1.1 percent to a rate of 1.590 million from the 1.572 million originally reported for the previous month.

Meanwhile, the report showed building permits tumbled by 5.1 percent to an annual rate of 1.598 million in June after slumping by 2.9 percent to a revised rate of 1.683 million in May.

Building permits, an indicator of future housing demand, had been expected to climb by 1.1 percent to a rate of 1.700 million from the 1.681 million originally reported for the previous month.

Stocks In Focus

McKesson (MCK), Cardinal Health (CAH) and AmerisourceBergen (ABC) are moving sharply higher in pre-market trading amid reports the drug distributors and Johnson & Johnson (JNJ) are near a $26 billion settlement to resolve claims they helped fuel the nationwide opioid epidemic.

HCA Healthcare (HCA) is also likely to see initial strength after the hospital company reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of PPG Industries (PPG) may come under pressure after the paint and coatings maker reported weaker than expected second quarter earnings and warned of higher input costs.
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