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Beyond the Number

U.S. Stocks May Turn In Another Mixed Performance
7/29/2021 9:00 AM

The major U.S. index futures are currently pointing to a mixed open on Thursday after the major averages ended the previous session on opposite sides of the unchanged line.

Stocks may move in opposite directions as traders continue to digest Wednesday’s monetary policy announcement by the Federal Reserve.

The Fed’s statement noted progress has been made towards the central bank’s maximum employment and price stability goals, although Fed Chair Jerome Powell noted there is still “some ground to cover on the labor market side.”

Traders are also reacting to a report from the Commerce Department showing the pace of U.S. economic growth fell short of economist estimates in the second quarter of 2021.

The Commerce Department said real GDP surged up by 6.5 percent in the second quarter following a 6.3 percent jump in the first quarter. Economists had expected GDP to spike by 8.5 percent.

The GDP growth in the second quarter reflected increases in consumer spending, non-residential fixed investment, exports, and state and local government spending.

However, decreases in private inventory investment, residential fixed investment, and federal government spending limited the upside along with an increase in imports, which are a subtraction in the calculation of GDP.

Meanwhile, the Labor Department released a report showing a modest pullback in initial jobless claims in the week ended July 24th.

The report said initial jobless claims dipped to 400,000, a decrease of 24,000 from the previous week’s revised level of 424,000.

Economists had expected jobless claims to drop to 380,000 from the 419,000 originally reported for the previous week.

U.S. stocks ended mixed on Wednesday after a somewhat volatile session, as investors reacted to a slew of corporate earnings updates and the Federal Reserve’s monetary policy announcement.

Technology stocks advanced on strong results from Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT), while the components of the Dow and the S&P 500 failed to find any significant support.

The tech-laden Nasdaq surged higher and settled at 14,762.58, gaining 102.01 points or 0.7 percent. The Dow ended down by 127.59 points or 0.4 percent at 34,930.93, while the S&P 500 edged down 0.82 points or less than a tenth of a percent to 4,400.64.

The Federal Open Market Committee, which concluded its two-day monetary policy meeting Wednesday afternoon, left the target range for its federal funds rate unchanged at 0 to 0.25 percent as expected and said it will continue with its $120 billion-a-month bond-buying program.

The central bank, which said the economy is strengthening despite concerns over the spread of the coronavirus, added that risks to the economic outlook remain.

“The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered,” noted the central bank's post-meeting statement. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

Noting that there has been progress towards the central bank's goals on employment and inflation, the bank's statement says changes to policy with regard to monthly bond purchases could be on the way. The Fed said the open market committee will continue to assess progress in coming meetings.

In the press conference that followed the monetary policy meeting, Fed Chair Jerome Powell said there was “more ground to make up” in the labor market to meet the “substantial further progress” threshold to taper bond purchases.

Shares of Alphabet Inc. climbed more than 3 percent after the company reported a sharp jump in earnings in the second quarter thanks to a nearly 70 percent increase in advertising revenue.

Microsoft shares settled roughly flat despite the company reporting stronger than expected second-quarter results, while Apple ended down more than a percent as a warning about a global chip shortage outweighed better than expected quarterly results.

Facebook (FB) gained 1.5 percent after reporting a profit of $10.39 billion or $3.61 per share for the second quarter, compared with $5.18 billion or $1.80 per share in the year-ago quarter.

Boeing (BA) shares climbed more than 4 percent on strong results. The aerospace giant reported net earnings of $587 million or $1.00 per share compared to a loss of $2.38 billion or $4.20 per share in the prior year.

Pfizer (PFE) shares surged up 4.2 percent after the company raised its outlook for fiscal 2021 earnings and revenues.

Commodity, Currency Markets

Crude oil futures are rising $0.23 to $72.62 a barrel after climbing $0.74 to $72.39 a barrel on Wednesday. Meanwhile, after edging down $0.10 to $1,799.70 an ounce in the previous session, gold futures are jumping $26.20 to $1,825.90 an ounce.

On the currency front, the U.S. dollar is trading at 109.72 yen versus the 109.91 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1879 compared to yesterday’s $1.1845.

Asia

Asian stocks advanced on Thursday after the U.S. Federal Reserve reaffirmed its commitment to easy monetary policies, saying that tapering would require more economic recovery from the pandemic.

Chinese shares rebounded after three days of declines as authorities stepped up efforts to calm frayed investor nerves after a market rout.

The benchmark Shanghai Composite Index jumped 50.13 points, or 1.5 percent, to settle at 3,411.72, while Hong Kong's Hang Seng Index surged up 841.44 points, or 3.3 percent, to 26,315.32.

Japanese shares rose notably as the Fed hinted at progress on tapering talks but gave no timeline. The Nikkei 225 Index climbed 200.76 points, or 0.7 percent, to 27,782.42, while the broader Topix closed 0.4 percent higher at 1,927.43.

Heavyweight SoftBank Group advanced 4.1 percent amid reports that the company was selling its stake in ride-hailing company Uber.

Tech shares followed their U.S. peers higher, with Screen Holdings surging 5.8 percent and Advantest spiking 7.3 percent. Automaker Nissan Motor jumped 5.8 percent after upgrading its annual outlook.

Australian markets eked out modest gains, led by miners and tech stocks. The benchmark S&P/ASX 200 Index rose 38.10 points, or 0.5 percent, to 7,417.40 despite an extended lockdown of Sydney, and New South Wales recording its biggest daily rise in Covid-19 cases since the pandemic began. The broader All Ordinaries Index climbed 45.60 points, or 0.60 percent, to 7,695.20.

Fortescue Metals rallied 1.9 percent after it reported record iron ore shipments for the quarter ending June. Heavyweights BHP and Rio Tinto gained 1.6 percent and 1.5 percent, respectively, while Mineral Resources jumped 3.7 percent.

Gold miners also ended broadly higher as the precious metal edged up to its highest level in over a week. Regis Resources soared 5.7 percent and Northern Star Resources added 2 percent.

In the tech sector, Iress jumped 13.9 percent after rejecting two bids from private-equity firm EQT.

Seoul stocks ended higher for the third straight day on optimism for strong corporate earnings. The Kospi inched up 5.79 points, or 0.2 percent, to close at 3,242.65.

Europe

European stocks have moved higher on Thursday, with dovish comments by the Federal Reserve on interest rates and a slew of upbeat earnings updates boosting sentiment.

Following the Fed's slightly hawkish monetary policy announcement, Fed Chair Jerome Powell noted that the U.S. is not at a point where the Fed could start to taper its asset purchases.

While the German DAX Index has risen by 0.4 percent, the French CAC 40 Index is up by 0.7 percent and the U.K.’s FTSE 100 Index is up by 0.9 percent.

Royal Dutch Shell has rallied. The oil major raised its dividend and unveiled plans to buy back $2 billion worth of shares this year after reporting a jump in quarterly earnings.

Anglo American shares have also moved sharply higher after the miner delivered a record half-year profit.

Spirits maker Diageo has also advanced after it reported a better than expected increase in full-year organic net sales growth.

ArcelorMittal has also surged. The steelmaker boosted its guidance for global steel demand after delivering its best quarter since 2008.

Telecoms equipment maker Nokia has also soared. The company lifted its full-year profit forecast after reporting stronger than expected second-quarter operating profit.

Plane maker Airbus has also jumped after raising its guidance for profit and aircraft deliveries.

MorphoSys AG has also advanced. The biotech company said it regained the momentum in Monjuvi sales and the momentum will likely continue into the third quarter.

On the flip side, electric utility EDF has fallen in Paris after the government suspended an ambitious overhaul plan for the company due to disagreement with the European Commission.

Hotel group Accor has also declined after reporting an operating loss for the first half of the year.

Telecom company Orange has also moved to the downside as it announced a 3.7 billion-euro ($4.4 billion) impairment on the value of its Spanish activities.

Credit Suisse has also come under pressure after the Swiss banking giant posted a 78 percent drop in second quarter net profit.

Sportswear company Puma has also moved lower after voicing concerns about the short-term impact of the coronavirus pandemic on its supply chain.

Telecommunications company BT has also slumped after its first quarter revenue missed expectations.

Medical technology company Smith & Nephew has also plunged despite the company moving back into profit.

In economic news, the European Commission said earlier today that its economic sentiment indicator, an aggregate measure of business and consumer confidence, rose to 119.0 in July from 117.9 in June.

Elsewhere, Germany's unemployment declined more than expected in July, reports said, citing data published by the Federal Labor Agency.

U.S. Economic Reports

After reporting an unexpected increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing a modest pullback in initial jobless claims in the week ended July 24th.

The report said initial jobless claims dipped to 400,000, a decrease of 24,000 from the previous week’s revised level of 424,000.

Economists had expected jobless claims to drop to 380,000 from the 419,000 originally reported for the previous week.

A separate report released by the Commerce Department showed a significant increase in U.S. gross domestic product in the second quarter of 2021, although the pace of growth fell short of economist estimates.

The Commerce Department said real GDP surged up by 6.5 percent in the second quarter following a 6.3 percent jump in the first quarter. Economists had expected GDP to spike by 8.5 percent.

The GDP growth in the second quarter reflected increases in consumer spending, non-residential fixed investment, exports, and state and local government spending.

However, decreases in private inventory investment, residential fixed investment, and federal government spending limited the upside along with an increase in imports, which are a subtraction in the calculation of GDP.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of June. Pending home sales are expected to rise by 0.3 percent.

The Treasury Department is due to announce the results of this month’s auction of $62 billion worth of seven-year notes at 1 pm ET.

Stocks In Focus

Shares of Tempur Sealy (TPX) are moving notably higher in pre-market trading after the mattress maker reported better than expected second quarter results and raised its full-year guidance.

Auto giant Ford (F) is also likely to see initial strength after reporting an unexpected second quarter profit and boosting its full-year outlook.

On the other hand, shares of iRobot (IRBT) are moving sharply lower in pre-market trading after the Roomba maker reported second quarter earnings that missed analyst estimates and cut its full-year guidance.

Payment service PayPal (PYPL) may also move to the downside after reporting second quarter earnings that beat expectations but providing a disappointing forecast.
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