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Beyond the Numbers

Boeing May Lead Advance By Dow, But Tech Weakness May Weigh On Nasdaq
12/2/2021 9:02 AM

The major U.S. index futures are currently pointing to a mixed open on Thursday, as the Dow futures are advancing but the Nasdaq 100 futures are moving lower.

Some sectors may benefit from bargain hunting following the substantial downturn seen over the course of the previous session.

News the first confirmed case of the omicron variant was detected in the U.S. contributed to the broad-based sell-off, with airline stocks leading the way lower.

The advance by the Dow futures may partly reflect significant pre-market strength among shares of aerospace giant Boeing (BA).

Boeing is moving notably higher after a report from Bloomberg said the new owners of Jet Airways India Ltd. are in talks with Boeing and Airbus to purchase at least 100 narrowbody jets for the once-bankrupt carrier’s fleet.

On the other hand, weakness among technology stocks may weigh on the tech-heavy Nasdaq, with shares of Apple (AAPL) moving notably lower in pre-market trading.

The drop by Apple comes after another report from Bloomberg said the tech giant told some of its parts suppliers that demand for iPhone 13 has slowed.

Stocks showed a strong move to the upside in early trading on Wednesday but pulled back sharply over the course of the session. With the downturn on the day, the Dow fell to a nearly two-month closing low, while the Nasdaq and S&P 500 hit their lowest closing levels in over a month.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 461.68 points or 1.3 percent at 34,022.04, the Nasdaq plunged 283.64 points or 1.8 percent to 15,254.05 and the S&P 500 slumped 53.96 points or 1.2 percent to 4,513.04.

The substantial downturn on Wall Street came after the Center for Disease Control and Prevention revealed the first confirmed case of Covid-19 caused by the new Omicron variant has been detected in the U.S.

The CDC said the first confirmed omicron case was detected in an individual in California, who returned from South Africa on November 22, 2021.

"The individual, who was fully vaccinated and had mild symptoms that are improving, is self-quarantining and has been since testing positive," the CDC said. "All close contacts have been contacted and have tested negative."

The sharp pullback reflects recent volatility as traders show significant sensitivity to the latest news about the Omicron variant of the coronavirus.

While news of the detection of the variant contributed to the steep drop last Friday, indications the symptoms of the variant were "extremely mild" contributed to a rebound on Monday.

However, comments from Covid-related drugmakers suggesting vaccines and treatments are less effective against Omicron contributed to Tuesday's pullback.

Traders largely shrugged off the latest U.S. economic news, including a report released by payroll processor ADP showed private sector employment increased by slightly more than expected in the month of November.

ADP said private sector employment shot up by 534,000 jobs in November after surging by a revised 570,000 jobs in October.

Economists had expected private sector employment to jump by about 525,000 jobs compared to the addition of 571,000 jobs originally reported for the previous month.

ADP chief economist Nela Richardson noted, "It's too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months."

The Institute for Supply Management released a separate report showing manufacturing activity grew at a slightly faster rate in the month of November.

The ISM said its manufacturing PMI crept up to 61.1 in November from 60.8 in October, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 61.0.

Airline stocks showed a substantial downturn over the course of the trading session, with the NYSE Arca Airline Index plummeting by 4.9 percent after soaring as much as 3.4 percent in early trading.

Significant weakness also emerged among gold stocks, as reflected by the 3.2 percent nosedive by the NYSE Arca Gold Bugs Index. The index tumbled to its lowest closing level in well over a month despite an increase by the price of gold.

Oil service stocks also came under pressure as the day progressed, resulting in a 2.6 percent slump by the Philadelphia Oil Service Index. With the steep drop, the index ended the session at a three-month closing low.

Software, natural gas, and retail stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.46 to $65.11 a barrel after falling $0.61 to $65.57 a barrel on Wednesday. Meanwhile, after climbing $7.80 to $1,784.30 an ounce in the previous session, gold futures are sliding $8.80 to $1,775.50 an ounce.

On the currency front, the U.S. dollar is trading at 112.83 yen versus the 112.78 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1330 compared to yesterday’s $1.1320.

Asia

Asian stocks ended mixed on Thursday, as investors weighed some better than expected readings on the U.S. economy against hawkish Fed comments on inflation and news that the first case of the Omicron variant had been found in California.

Chinese shares ended on a flat note after reports the country is planning to ban companies from going public on foreign stock markets through variable interest entities. The China Securities Regulatory Commission has denied the report.

Hong Kong's Hang Seng Index rose 130.01 points, or 0.6 percent, to 23,788.93 amid signs that Beijing is marginally easing liquidity strains on the cash-strapped property sector.

Japanese stocks ended notably lower as investors fretted over the effects of the new Omicron coronavirus variant on the global economic recovery.

The Nikkei 225 Index dropped 182.25 points, or 0.7 percent, to 27,753.37, while the broader Topix closed 0.5 percent lower at 1,926.37, dragged down by mining, air transportation, energy, retail and precision instrument stocks.

Australian shares hit two-month lows, reflecting jitters over new findings about the Omicron variant of the coronavirus.

The benchmark S&P/ASX 200 Index slipped 10.70 points, or 0.2 percent, to 7,225.20, marking its weakest level since October 6 as state governments tightened domestic border controls. The broader All Ordinaries Index ended down 21.70 points, or 0.3 percent, at 7,536.10.

Technology stocks succumbed to heavy selling pressure, with heavyweight Afterpay plunging 6.1 percent to hit a four-month low after delaying a shareholder vote on its US$29 billion deal with Twitter co-founder Jack Dorsey-led Square.

Utilities and industrial stocks advanced, with Transurban Group and AGL Energy climbing 2 percent and 4 percent, respectively. Australian Pharmaceutical Industries jumped 6 percent after Woolworths Group joined the tussle for the pharmacy chain.

Seoul stocks rallied for the second straight session on the back of strong foreign buying in semiconductor-related stocks. The Kospi jumped 45.55 points, or 1.6 percent, to close at 2,945.27. Market bellwether Samsung Electronics advanced 1.9 percent and No. 2 chipmaker SK Hynix added 3 percent.

South Korea's economy grew at the same pace as earlier forecast in the third quarter of the year despite better than expected private consumption and robust exports, central bank data showed. Another report showed inflation in the country accelerated to the fastest pace since 2011.

Europe

European stocks have moved sharply lower on Thursday, with fears around the Omicron coronavirus variant and warnings about inflation from major central banks weighing on sentiment.

While the German DAX Index has plunged by 1.8 percent, the French CAC 40 Index is down by 1.5 percent and the U.K.’s FTSE 100 Index is down by 0.9 percent.

Chipmakers Infineon Technologies, ASML Holding and AMS have fallen amid reports Apple told some of its parts suppliers that demand for iPhone 13 has slowed.

ThyssenKrupp has also dropped. The German industrial engineering and steel production company said in its update that despite persisting Covid-19 related headwinds and other hurdles, it expects a turnaround to a profit during the current fiscal year.

Luxury goods company Hermes has also shown a notable move to the downside despite its inclusion in the Euro STOXX 50 index.

Sandvik AB has also dipped. The Swedish engineering company has signed an agreement to acquire privately held Australian firm Deswik, a provider of mine planning software, for an undisclosed sum.

Miners Anglo American, Antofagasta and Glencore have also fallen after the OECD warned sluggish growth could be further derailed by the new Covid-19 variant.

Chemicals and engineering firm Johnson Matthey and tech darling Darktrace have also come under pressure after index manager FTSE Russell confirmed that the companies will be ousted from the FTSE 100 index.

On the other hand, Safran has risen. The French aerospace company said it expects organic revenue growth over 2021-2025 to reach 10 percent CAGR.

Oil & gas company Royal Dutch Shell has also moved to the upside after announcing the commencement of up to $1.5 billion of share buybacks.

Electra Private Equity has also moved notably higher. The private equity investor said it would soon begin the process of moving from Britain's main stock market to the junior AIM market.

U.S. Economic Reports

After reporting first-time claims for U.S. unemployment benefits at their lowest level in over fifty years in the previous week, the Labor Department released a report on Thursday showing a modest rebound by initial jobless claims in the week ended November 27th.

The report said initial jobless claims rose to 222,000, an increase of 28,000 from the previous week's revised level of 194,000.

Economists had expected jobless claims to climb to 240,000 from the 199,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average fell to a new pandemic-era low of 238,750, a decrease of 12,250 from the previous week's revised average of 251,000.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds.

Outgoing Federal Reserve Governor Randal Quarles is also due to deliver departing thoughts before a virtual event hosted by the American Enterprise Institute at 11 am ET.

At 11:30 am ET, Richmond Federal Reserve President Thomas Barkin and San Francisco Federal Reserve President Mary Daly are schedule to participate in a virtual fireside chat on the State of the Labor Market hosted by the Peterson Institute for International Economics.

Atlanta Federal Reserve Bank President Raphael Bostic is also due to participate in a virtual live interview on Policy for Progress before the Reuters Next conference at 11:30 am ET.

Stocks In Focus

Shares of Snowflake (SNOW) are moving sharply higher in pre-market trading after the cloud data company reported better than expected fiscal third quarter results and provided upbeat guidance.

Discount retailer Five Below (FIVE) is also seeing significant pre-market strength after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Lands’ End (LE) are likely to see initial weakness after the apparel retailer reported fiscal third quarter revenues that missed expectations and provided disappointing guidance.
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