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Beyond the Numbers

Bargain Hunting May Contribute To Initial Strength On Wall Street
1/19/2022 8:50 AM

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to regain ground after ending the previous session sharply lower.

Bargain hunting may contribute to initial strength on Wall Street, as traders pick up stocks at reduced levels following the sell-off seen on Tuesday.

The sharp downward move seen in the previous session dragged the Dow and the S&P 500 to their lowest closing levels in a month, while the tech-heavy Nasdaq hit a three-month closing low.

Early buying interest may also be generated in reaction to upbeat earnings news from several big-name companies.

Financial giants Bank of America (BAC) and Morgan Stanley (MS) are seeing notable pre-market strength after reporting better than expected fourth quarter earnings.

Shares of Procter & Gamble (PG) are also likely to move to the upside after the consumer products giant reported fourth quarter results that exceeded estimates and provided upbeat guidance.

In U.S. economic news, new residential construction in the U.S. unexpectedly saw a notable increase in the month of December, according to a report released by the Commerce Department on Wednesday.

The report said housing starts jumped 1.4 percent to an annual rate of 1.702 million in December from a revised rate of 1.678 million in November.

Economists had expected housing starts to drop to a rate of 1.650 million from the 1.679 million originally reported for the previous month.

The Commerce Department also said building permits spiked by 9.1 percent to an annual rate of 1.873 million from a revised rate of 1.717 million in November.

Building permits, an indicator of future housing demand, were expected to drop to a rate of 1.701 million from the 1.712 million originally reported for the previous month.

Following the mixed performance seen last Friday, stocks showed a notable move to the downside during trading on Tuesday. With the downward move, the Dow and the S&P 500 dropped to their lowest closing levels in a month, while the tech-heavy Nasdaq hit a three-month closing low.

The major averages all finished the day firmly in negative territory. The Dow slumped 543.34 points or 1.5 percent to 35,368.47, the Nasdaq plunged 386.86 points or 2.6 percent to 14,506.90 and the S&P 500 tumbled 85.74 points or 1.8 percent to 4,577.11.

Commodity, Currency Markets

Crude oil futures are rising $0.55 to $85.98 a barrel after jumping $1.61 to $85.43 a barrel a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,824.80, up $12.40 compared to the previous session’s close of $1,812.40. On Tuesday, gold dipped $4.10.

On the currency front, the U.S. dollar is trading at 114.48 yen compared to the 114.61 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1346 compared to yesterday’s $1.1325.

Asia

Asian stocks fell on Wednesday after a tech selloff on the Nasdaq overnight amid heightened expectations of a rate hike by the Federal Reserve. Traders expect the Fed to deliver a half-point interest rate hike in March despite some negative economic data.

Chinese shares saw modest losses, with the benchmark Shanghai Composite index ending down 11.73 points, or 0.33 percent, at 3,558.18, dragged down by electric vehicle makers and healthcare firms. Hong Kong's Hang Seng index finished marginally higher at 24,127.85.

Japanese shares hit a five-month low, with exporters Sony Group and Toyota Motors leading losses. The Nikkei average plummeted 790.02 points, or 2.80 percent, to 27,467.23 - its lowest since Aug. 20. The broader Topix index closed 2.97 percent lower at 1,919.72.

Sony Group sank 12.8 percent after gaming rival Microsoft said it plans to buy mega games company Activision Blizzard. Toyota Motor gave up 5 percent after the automaker said it expects to miss its annual 9 million vehicle production target due to chip disruptions.

Australian markets followed Wall Street lower after inflation concerns sent U.S. bond yields higher. The benchmark S&P/ASX 200 index dropped 76.30 points, or 1.03 percent, to 7,332.50 while the broader All Ordinaries index ended down 79.20 points, or 1.02 percent, at 7,656.60.

Tech stocks led loses, with heavyweight Afterpay losing 2.2 percent. Financials also fell broadly, with Macquarie Group tumbling 3.7 percent. Lynas Rare Earths dropped 1.1 percent despite the company posting record second-quarter revenue.

Energy stocks bucked the weak trend, with Santos and Woodside Petroleum rising 1.8 percent and 0.9 percent, respectively ahead of their production figures scheduled to be released on Thursday.

In economic releases, a measure of Australian consumer sentiment slipped in January as a surge in coronavirus cases soured the national mood.

Seoul stocks fell for the fifth day running on rate hike concerns. The benchmark Kospi ended a choppy session down 21.96 points, or 0.77 percent, at 2,842.28.

Chemical firm LG Chem plunged 5.9 percent while pharmaceutical giant Samsung Biologics rose 1.2 percent and its rival Celltrion added 4.7 percent.

Europe

European stocks recovered from an early slide to trade on a flat note Wednesday, as luxury stocks surged after upbeat trading updates from Richemont and Burberry.

A cautious undertone prevailed after U.S. Treasury yields hit fresh two-year highs amid Fed rate hike expectations.

Benchmark German debt yields turned positive for the first time since before the pandemic as markets braced for a coordinated monetary policy tightening globally.

The pan European Stoxx 600 was little changed at 479.68 after losing 1 percent on Tuesday.

The German DAX traded flat, while France's CAC 40 rose 0.4 percent and the U.K.'s FTSE 100 was marginally higher.

Switzerland's Richemont jumped 8.3 percent after saying revenue climbed 32 percent at constant currencies in the last quarter.

The world's second-largest luxury group reported strong demand for jewelry and watches.

France's LVMH, Kering and Hermes all rose over 3 percent.

British luxury brand Burberry soared 6.3 percent after upgrading its full-year forecasts.

WH Smith jumped nearly 6 percent. The retail company said it expected a resumption in the recovery of its travel markets over the coming months.

Medical technology business Smith+Nephew rose over 1 percent after acquiring cementless unicompartmental knee system developer Engage Surgical for up to $135 million.

Centamin fell 2.6 percent after it reported gold production and costs in line with expectations for 2021.

Leoni AG shares plunged 14 percent. The provider of energy and data management solutions for the automotive industry said that searches were carried out at the company sites, as part of investigations by the German Federal Cartel Office into various cable manufacturers and other industry-related companies.

In economic releases, Germany's consumer price inflation in 2021 hit its highest level in almost 30 years mainly due to the high monthly inflation rates in the second half of the year, Destatis said earlier today.

Consumer prices increased 3.1 percent in 2021 after rising 0.5 percent in 2020. A higher year-on-year rate of price increase than in 2021 was last measured in 1993, when prices were up 4.5 percent.

In December, consumer price inflation rose to 5.3 percent from 5.2 percent in November. The rate came in line with the preliminary estimate published on January 6.

The pound edged lower against the euro and was broadly flat against the dollar despite U.K. consumer price inflation surging to 5.4 percent in December from 5.1 percent in November.

This was the highest annual inflation rate in the National Statistic data series, which began in January 1997.

Another report from the statistical office showed that U.K. factory gate price inflation slowed marginally in December. Output price inflation decreased to 9.3 percent in December from 9.4 percent in November.

U.S. Economic Reports

New residential construction in the U.S. unexpectedly saw a notable increase in the month of December, according to a report released by the Commerce Department on Wednesday.

The report said housing starts jumped 1.4 percent to an annual rate of 1.702 million in December from a revised rate of 1.678 million in November.

Economists had expected housing starts to drop to a rate of 1.650 million from the 1.679 million originally reported for the previous month.

The Commerce Department also said building permits spiked by 9.1 percent to an annual rate of 1.873 million from a revised rate of 1.717 million in November.

Building permits, an indicator of future housing demand, were expected to drop to a rate of 1.701 million from the 1.712 million originally reported for the previous month.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $20 billion worth of twenty-year bonds.
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