The major U.S. index futures are pointing to a lower opening on Monday, with sentiment reflecting tentativeness, given investor pessimism over the sustainability of recent gains. The dollar is firmer ahead of the 2-day FOMC meeting that kick starts on Tuesday. The FOMC announcement, though not expected to be meaningful, given the lack of the Chair's press briefing, could keep traders on tenterhook. The new home sales report may also render direction to markets.
U.S. stocks once again posted gains in the week ended October 23rd, with some upbeat earnings and the stimulatory stance of major global central banks supporting sentiment.
Last Monday, the major averages moved about in a lackluster manner and ended little changed, with some sour earnings news and a pullback in commodity prices impacting sentiment. The lackluster performance continued into Tuesday, courtesy of some mixed earnings and uncertainty concerning the economic outlook. The averages ended Tuesday's session slightly lower.
With the parade of mixed earnings news continuing to weigh on the markets, stocks closed moderately lower on Wednesday. However, the European Central Bank's signal that December may bring more stimulus helped the markets break the lackluster phase, with the averages ending Thursday's session notably higher. Buoyant tech earnings from the likes of Google parent Alphabet (GOOGL), Amazon (AMZN) and Microsoft (MSFT) and the People's Bank of China's surprise move to cut lending rates triggered another strong rally on Friday.
For the week ended October 23rd, the Dow Industrials, the S&P 500 Index and the Nasdaq Composite Index added 2.50 percent, 2.07 percent and 2.97 percent, respectively. The Nasdaq Composite Index and the S&P 500 Index are now higher for the year, with both closing at their highest levels in a little over 2 months. At the same time, the Dow Industrials ended at its best level since July 31st.
Among the sectors, the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index added 4.76 percent and 3.08 percent, respectively for the week. The NYSE Arca Airline Index and the Dow Jones Transportation Average also jumped 2.20 percent and 2.69 percent, respectively for the week.
Currency, Commodity Markets
Crude oil futures are receding $0.04 to $44.56 a barrel after retreating $2.66 or 5.29 percent to $44.60 a barrel in the week ended October 23rd. Gold futures, which rose $20.30 or 1.72 percent to $1,162.80 an ounce in the previous week, are currently climbing $3.40 to $1,166.20 an ounce. The commodities took a hit last week from the rising dollar.
Among currencies, the U.S. dollar advanced in the week ended October 23rd, with the greenback gaining ground on expectations of interest rate differentials between the U.S. and the rest of the major nations. The European Central Bank is contemplating additional stimulus, especially as inflation in the region remains negative, China was forced to infuse further stimulus as the economy cools off after a period of meteoric growth and the Bank of Japan is also fighting deflation. At the same time, the Federal Reserve is set on the path of interest rate normalization.
The dollar rallied 1.70 percent against the yen before ending the week at 121.47 yen and jumped 2.91 percent against the euro to $1.1018 a euro.
The U.S. dollar is currently trading at 120.98 yen and is valued at $1.1020 versus the euro.
Asia
The major Asian markets ended mixed, as early optimism triggered by the Chinese rate cut announced last Friday petered out in some of the markets. The Australian, Hong Kong, Malaysian and Indian market retreated, while the remaining major markets in the region advanced. The New Zealand market was closed for the Labor Day holiday.
Japanese stocks ended higher, as the yen remained depressed above the 121 yen level against the dollar. The Nikkei 225 Index opened higher and moved sideways in the morning. After giving back some of its gains in the afternoon, the index ended up 121.82 points or 0.65 percent at 18,947.
Most construction, textile, real estate, retail, paper, chemical, pharma, export, mining, finance, telecom and utility stocks moved to the upside, while food and cement stocks came under selling pressure.
Australia's All Ordinaries Index opened higher and held above the unchanged line for much of the session. However, in late afternoon trading, the index declined steadily and dipped below the unchanged line in the final few minutes of trading. The index ended down 1.80 points or 0.03 percent at 5,386.
Telecom, industrial and utility stocks declined notably, while finance, real estate and healthcare stocks advanced.
China's Shanghai Composite Index ended up 17.15 points or 0.50 percent at 3,430 despite some late-session volatility. At the same time, Hong Kong's Hang Seng Index ended at 23,116, down 35.69 points or 0.15 percent.
Europe
European stocks opened mixed and are continuing to turn in a mixed performance, as the stimulus optimism wanes and traders look ahead to the week's key economic and earnings catalysts. The German market is higher, while the U.K. and French market are seeing weakness.
In corporate news, Philips (PHG) indicated the sale of its Lumileds lighting business may face regulatory hurdles in the U.S. after announcing that it has reversed to a profit in its third quarter from a loss in the year ago period.
TNT Express, which has agreed to be acquired by FedEx (FDX), announced a narrower loss for the third quarter and a small increase in its revenues. Luxury carmaker Peugeot Citroen announced a modest increase in its third quarter revenues amid resurgent demand in Europe.
On the economic front, German business confidence weakened less than expected in October, as expectations unexpectedly improved, the results of a survey by the Ifo Institute showed.
The business climate index fell to 108.2, yet the score was above the 107.8 economists had forecast. In September, the reading was 108.5. The current conditions index fell 0.9 points to 112.6, while the expectations index rose 1.5 points to 103.8.
Data released by the British Bankers' Association showed that the number of loans approved for home purchases dropped to 44,489 in September from 46,567 in August. It was the lowest level in 4 months. Home loan approvals were up 14 percent from a year ago.
U.S. Economic Reports
The FOMC announcement due for Wednesday, two each of consumer confidence and house readings, the Commerce Department's personal income and spending and durable goods orders data, both for September, and advance third quarter GDP data scheduled for release on Thursday are among the key economic events of the week.
Traders may also focus on the flash estimate of Markit's service sector reading for October, the results of MNI Indicators' Chicago business barometer for October, the weekly jobless claims report and the S&P/Case-Shiller house price index for August. The Labor Department's employment cost index for the third quarter and the results of the Treasury auctions of 5-year and 7-year notes round up the economic events of the week.
The Commerce Department is scheduled to release its new home sales report for September at 10 am ET. Economists expect new home sales to come in at a seasonally adjusted annual rate of 549,000.
New home sales came in at a seasonally adjusted annual rate of 552,000 in August following an upwardly revised 522,000 rate in July. The July reading was initially reported at 507,000. Economists expected new home sales to come in at 515,000.
Inventories measured in terms of months of supply fell to 4.7 months from 4.9 months. The median sale price of a new home rose 0.5 percent month-over-month and was 22 percent higher than a year ago.
The Dallas Federal Reserve is set to release the results of its manufacturing survey for October at 10:30 am ET. The consensus estimate calls for an improvement in the general activity index to -6 in October from -9.5 in September.
Stocks in Focus
Xerox (XRX) reported better than expected third quarter adjusted earnings but its revenues were shy of estimates. The company's board also authorized a review of its business portfolio and capital allocation options.
Ctrip.com (CTRP) said it has completed a share exchange transaction with Baidu, Inc. Following this, Baidu exchanged 178.70 million Class A ordinary shares and 11.45 million Class B ordinary shares of Qunar Cayman Islands Limited beneficially owned by Baidu in exchange for 11.49 million newly-issued ordinary shares of Ctrip.
Duke Energy (DUK) announced a deal to buy Piedmont Natural Gas (PNY) for about $4.9 billion in cash,
TJX Companies (TJX) said it has completed its acquisition of Trade Secret, an Australian off-price retailer, for A$80 million.
Securitas announced a deal to buy Diebold's (DBD) electronic security business for $350 million. The deal is expected to close in the first quarter of 2016.
Amkor (AMKR), Broadcom (BRCM), Cheesecake Factory (CAKE), Crane (CR), Edward Lifesciences (EW), Everest Re (RE), Hartford Financial (HIG), InterActive Corp. (IACI), PartnerRe (PRE), Plum Creek (PCL), PMC-Sierra (PMCS), Rent-A-Center (RCII), Swift Transportation (SWFT), Waste Connections (WCN) and XL Group (XL) are among the companies due to release their quarterly results after the close of trading.
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