Market Analysis

Beyond the Numbers

Upbeat Earnings News May Lead To Initial Strength On Wall Street
10/14/2021 8:58 AM

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to add to the gains posted in the previous session.

Early buying interest is likely to be generated in reaction to a batch of upbeat earnings news from several big-name financial companies.

Shares of Bank of America (BAC) are moving notably higher in pre-market trading after the financial giant reported third quarter results that beat analyst estimates on both the top and bottom lines.

Investment giant Morgan Stanley (MS) is also likely to see initial strength after reporting better than expected third quarter results.

Shares of Citigroup (C) and Wells Fargo (WFC) may also move to the upside after the financial giants reported third quarter earnings that exceeded expectations.

Adding to the positive sentiment on Wall Street, the Labor Department released a report showing first-time claims for U.S. unemployment benefits dropped below 300,000 for the first time in well over a year in the week ended October 9th.

The Labor Department also released a separate report showing U.S. producer prices increased by slightly less than expected in the month of September.

Stocks fluctuated over the course of the trading session on Wednesday before ending the day mostly higher. The Nasdaq and the S&P 500 moved to the upside on the day, although the narrower Dow closed nearly unchanged.

While the Dow edged down 0.53 points or less than a tenth of a percent to 34,377.81, the Nasdaq climbed 105.71 points or 0.7 percent to 14,571.64 and the S&P 500 rose 13.15 points or 0.3 percent to 4,363.80. The Nasdaq and the S&P 500 snapped three-session losing streaks.

The higher close on Wall Street came as a report from the Labor Department showed consumer prices rose by slightly more than expected in September, but the data was not seen as likely to accelerate the Federal Reserve's tapering plans.

The Labor Department said its consumer price index climbed by 0.4 percent in September after rising by 0.3 percent in August. Economists had been expecting another 0.3 percent increase.

Excluding higher prices for food and energy, core consumer prices edged up by 0.2 percent in September after inching up by 0.1 percent in August. The uptick in core prices matched economist estimates.

The report also showed the annual rate of growth in consumer prices accelerated to 5.4 percent in September from 5.3 percent in August, while the annual rate of growth in core prices was unchanged at 4.0 percent.

Later in the day, the minutes of the Fed's September meeting outlined the central bank's plans to gradually scale back its asset purchases.

The minutes revealed participants generally agreed that a gradual tapering of asset purchases that concludes around the middle of next year would likely be appropriate if the economic recovery remained broadly on track.

Participants noted that if a decision to begin tapering purchases occurred at the Fed's next meeting in early November, the process of tapering could begin with the monthly purchase calendars beginning in either mid-November or mid-December.

The meeting also included a discussion on how slowing the current rate of bond purchases of $120 billion per month might proceed.

The minutes highlighted an "illustrative path" that features monthly reductions of $10 billion in the purchase of Treasury securities and $5 billion in the purchase of agency mortgage-backed securities.

Participants noted that the Fed could adjust the pace of the moderation of its purchases if economic developments were to differ substantially from what they expected.

A note from Capital Economics said the minutes "make it clear" that the Fed will announce tapering plans at its next meeting scheduled for November 2nd and 3rd.

"The scheduled monthly reductions could, in theory, be sped up or down at a later date, but we suspect the bar to doing so will be pretty high," Capital Economics said. "The Fed will essentially be putting the taper on 'automatic pilot,' which is similar to what it did with the balance sheet run off that began in 2017."

On the earnings front, shares of Delta Air Lines (DAL) moved sharply lower after the airline beat third quarter estimates but warned of a fourth quarter loss due to higher fuel costs.

JPMorgan Chase (JPM) also moved to the downside even though the financial giant reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, asset management firm Blackrock (BLK) posted a strong gain after reporting better than expected third quarter earnings and revenues.

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 3.4 percent to its best closing level in over a month. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Significant strength was also visible among tobacco stocks, as reflected by the 2.8 percent jump by the NYSE Arca Tobacco Index.

Software stocks also turned in a strong performance on the day, resulting in a 1.6 percent advance by the Dow Jones U.S. Software Index.

On the other hand, the steep drop by Delta weighed on the airline sector, dragging the NYSE Arca Airline Index down by 2.3 percent.

Commodity, Currency Markets

Crude oil futures are jumping $0.95 to $81.39 a barrel after slipping $0.20 to $80.44 a barrel on Wednesday. Meanwhile, after spiking $35.40 to $1,794.70 an ounce in the previous session, gold futures are rising $4.40 to $1,799.10 an ounce.

On the currency front, the U.S. dollar is trading at 113.46 yen versus the 113.25 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1604 compared to yesterday’s $1.1594.


Asian stocks rose broadly on Thursday amid growing optimism about the state of the economic recovery and earnings improvement.

Chinese shares ended little changed with a negative bias as property developers declined after ratings agency S&P Global delivered fresh downgrades to two of the sector's bigger firms. The Hong Kong market was closed on account of National Day.

Japanese shares rose sharply, led by gains by technology stocks. The Nikkei 225 Index jumped 410.65 points, or 1.5 percent, to 28,550.93 while the broader Topix closed 0.7 percent higher at 1,986.97.

Advantest, Screen Holdings and Tokyo Electron soared 4-5 percent. Shipping firm Nippon Yusen tumbled 3.4 percent on concerns that rising energy prices will squeeze company profits.

Australian markets advanced, driven by gains in the mining and tech sectors. The benchmark S&P/ASX 200 Index rose 39.20 points, or 0.5 percent, to 7,311.70, while the broader All Ordinaries Index ended up 48.30 points, or 0.6 percent, at 7,620.20.

Investors shrugged off data that showed Australian employment fell sharply for a second straight month in September.

Diversified miner South 32 jumped 4.9 percent after it unveiled plans to buy a stake in a Chilean mine that produces copper. Tech stocks followed their U.S. peers higher, with Wisetech Global surging 7.2 percent.

Gold miners Evolution, Newcrest and Norther Star Resources climbed 2-5 percent after bullion prices neared a one-month peak overnight.

Seoul stocks rose for a second straight session Thursday, as the Korean won rebounded against the dollar after depreciating sharply against the greenback over the past few sessions.

The benchmark Kospi rallied 44.23 points, or 1.5 percent, to 2,988.64 amid expectations that the U.S. government's push to relieve supply-chain bottlenecks would help South Korean exporters.

Export prices in South Korea were up 20.2 percent year-on-year in September, the Bank of Korea said earlier today, accelerating from 18.9 percent in August.

Samsung Electronics, SK Hynix and Naver Corp climbed 1-3 percent, while LG Chem jumped 5 percent.


European stocks have risen on Thursday, extending gains from the previous session, as expectations of a strong earnings season helped offset concerns about inflation and policy tapering by the Federal Reserve.

While the U.K.’s FTSE 100 Index has advanced by 0.8 percent, the German DAX Index and the French CAC 40 Index are both up by 1.1 percent.

Semiconductor firms ASML and BE Semiconductor have advanced after Taiwan chip giant TSMC's quarterly profit beat expectations.

Dutch navigation and digital mapping company TomTom have also risen, reversing early losses after warning of supply chain problems.

French advertising company Publicis Groupe has also climbed. The company raised its outlook for 2021 after reporting 11.2 percent organic growth for the third quarter, with double-digit growth in all the regions.

Wind turbine manufacturer Nordex Group has also rallied. The company said it received orders for 389 wind turbines, with a total rated output of 1,829 megawatts, or MW, in the third quarter of 2021.

This compares to orders of 271 wind turbines, with 1,229 MW, reported for the same three-month period last year.

British homewares chain Dunelm Group has also moved to the upside after reporting growth in first-quarter sales.

Grainger has also jumped. The property-investment company said that its occupancy rate has recovered to pre-coronavirus pandemic levels.

On the other hand, Domino's Pizza Group has dropped. The fast-food chain said it expects labor shortages and higher food costs to continue into the new year.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits dropped below 300,000 for the first time in well over a year in the week ended October 9th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims fell to 293,000, a decrease of 36,000 from the previous week’s revised level of 329,000.

Economists had expected jobless claims to edge down to 319,000 from the 326,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims dropped to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The Labor Department also released a separate report showing U.S. producer prices increased by slightly less than expected in the month of September.

The Labor Department said its producer price index for final demand rose by 0.5 percent in September after climbing by 0.7 percent in August. Economists had been expecting producer prices to increase by 0.6 percent.

Core producer prices, which exclude prices for food, energy and trade services, inched up by 0.1 percent in September after rising by 0.3 percent in August. Core prices were expected to climb by 0.4 percent.

Compared to the same month a year ago, producer prices surged by 8.6 percent in September compared to an 8.3 percent spike in August.

Meanwhile, the annual rate of growth in core producer prices slowed to 5.9 percent in September from 6.3 percent in August.

At 9 am ET, Atlanta Federal Reserve President Raphael Bostic is due to speak and participate in a moderated question-and-answer session before a virtual Candid Conversations event hosted by the National Black MBA Association.

Bostic is also scheduled to participate in a Rebuilding for All panel before the 2021 Global Inclusive Growth Summit presented by the Mastercard Center for Inclusive Growth and the Aspen Institute at 10 am ET.

At 11 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 8th.

Crude oil inventories are expected to inch up by 0.1 million barrels after rising by 2.3 million barrels in the previous week.

The Treasury Department is also scheduled to announce the details of this month’s auction of twenty-year bonds at 11 am ET.

At 1 pm ET, New York Federal Reserve President John Williams is due to moderate a discussion before a “Women in the Workforce” event hosted by the Economic Club of New York.

Richmond Federal Reserve President Thomas Barkin is also scheduled to speak on Talking About Outcomes before the Forecasters Club of New York at 1 pm ET.

At 6pm ET, Philadelphia Federal Reserve President Patrick Harker is slated to speak virtually at the Prosperity Caucus.

Stocks In Focus

Shares of UnitedHealth (UNH) are moving notably higher in pre-market trading after the health insurer reported better than expected third quarter results and raised its full-year guidance

Delivery giant UPS (UPS) is also likely to see initial strength after Stifel Financial upgraded its rating on the company’s stock to Buy from Hold.

Shares of Walgreens Boots Alliance (WBA) may also move to the upside after the drugstore operator reported fiscal fourth quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Avis Budget (CAR) may come under pressure after Morgan Stanley downgraded its rating on the car rental company’s stock to Underweight from Equal-Weight.
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