Market Analysis

Beyond the Numbers

Bargain Hunting May Lead To Strength On Wall Street
2/9/2018 8:52 AM

The major U.S. index futures are pointing to a modestly higher opening on Friday following the sell-off seen in the previous session.

Bargain hunting may contribute to early strength on Wall Street after the steep losses seen in the previous session dragged the major averages down to their lowest levels in about two months.

Traders may also react positively to news that lawmakers managed to end a brief government shutdown with a bill raising spending caps and funding the government until March 23rd.

Buying interest may be somewhat subdued, however, as traders continue to express concerns about the outlook for interest rates.

Following the lackluster performance seen in the previous session, stocks saw substantial weakness during trading on Thursday. With the sell-off, the major averages fell to their lowest closing levels in about two months.

The major averages finished the day at their lows of the session. The Dow plummeted 1,032.89 points or 4.2 percent to 23,860.46, the Nasdaq plunged 274.83 points or 3.9 percent to 6,777.16 and the S&P 500 dove 100.66 points or 3.8 percent to 2,581.00.

The sell-off on Wall Street reflected continued concerns about the outlook for interest rates amid signs of rising inflation.

Traders have recently expressed worries that the Federal Reserve may be forced to raise interest rate by more than previously anticipated.

Concerns about another government shutdown may also have contributed to the steep decline seen on Wall Street on Thursday.

Commodity, Currency Markets

Crude oil futures are slumping $0.86 to $60.29 a barrel after sliding $0.64 to $61.15 a barrel on Thursday. Meanwhile, after climbing $4.40 to $1,319 an ounce in the previous session, gold futures are edging down $0.30 to $1,318.70 an ounce.

On the currency front, the U.S. dollar is trading at 108.88 yen compared to the 108.74 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2271 compared to yesterday’s $1.2247.


Asian stocks closed sharply lower on Friday on renewed worries about higher interest rates after the yield on the 10-year U.S. Treasury note neared its highest levels in four years and the Bank of England hinted at somewhat earlier than expected rate hikes.

A downturn in oil prices and concerns about high valuations also spooked investors. The declines in Asia mirrored the overnight sell-off on Wall Street, where the Dow Jones Industrial Average plunged 4.2 percent to enter correction territory.

Chinese shares led regional losses as liquidity conditions tightened before the Chinese New Year break starting next week. China's central bank said it has released temporary liquidity of almost 2 trillion yuan ($316.11 billion) to meet cash demand before the long Lunar New Year holidays.

The benchmark Shanghai Composite Index plummeted 131.12 points or 4 percent to finish at 3,130.93, while Hong Kong's Hang Seng Index plunged 943.85 points or 3.1 percent to 29,507.42.

On the economic front, China's consumer and producer price inflation slowed in January, data from the National Bureau of Statistics showed.

Consumer prices climbed 1.5 percent year-on-year in January, the weakest in four months, after rising 1.8 percent in December. Producer prices grew 4.3 percent year-on- year, weaker than December's 4.9 percent increase but exceeding expectations for 4.2 percent growth.

Japanese shares tumbled as crude prices slumped and the dollar neared a four-month low versus the yen. The Nikkei 225 Index fell 508.24 points or 2.3 percent to 21,382.62, taking its weekly loss to 8 percent. The broader Topix Index closed 1.9 percent lower at 1,731.97, down about 7 percent for the week.

Nissan Motor plummeted 3.1 percent after the automaker slashed its full-year operating profit forecasts. On the flip side, Nikon rallied 3 percent after reporting a significant rise in earnings for the first nine months of the fiscal year.

Australian shares lost ground following weak cues from Wall Street and other regional markets. The benchmark S&P/ASX 200 Index dropped 52.70 points or 0.9 percent to 5,838 amid across the board selling.

The broader All Ordinaries Index fell 57.70 points or 1 percent to 5,937.50 as oil and metal prices slid to their lowest levels in several weeks.

Santos, Origin Energy and Beach Energy lost 2-5 percent as oil prices extended losses for the sixth straight session.

Mining heavyweights BHP Billiton and Rio Tinto declined around 1 percent, while banks ended with modest losses. Department store chair Myer Holdings plummeted 9.3 percent after warning of more writedowns.

On the positive side, gold miner Evolution Mining jumped 4.5 percent, while Northern Star and Regis Resources rose about 2 percent as the precious metal traded firm on safe-haven buying.

Australian's jobless rate is forecast to fall to 5.25 percent for the year ending June 2018, instead of 5.5 percent estimated three months ago, the Reserve Bank of Australia said in its Statement on Monetary Policy.

At the same time, estimates for economic growth and inflation were broadly unchanged from the November statement.


European stocks are trading lower on Friday as worries over rising bond yields and budget disputes in Washington kept investors nervous.

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

TalkTalk Telecom has tumbled in London, a day after the company warned on profits and slashed its dividend.

Transport and logistics company A.P. Møller - Mærsk A/S has also moved lower after its fourth quarter profit missed expectations.

French asset manager Amundi has also come under pressure after it set out a new growth target for the 2018-2020 period.

Meanwhile, Belgium's Umicore has jumped after the company reported better than expected full-year results.

Shares of L'Oreal have also advanced in Paris after strong demand in Asia helped the cosmetics giant boost its fourth quarter sales.

On the data front, French industrial production expanded more than expected in December, reversing a drop in November, statistical office Insee said.

Industrial production grew 0.5 percent month-on-month, in contrast to a 0.3 percent drop in November. Output was expected to grow 0.1 percent.

U.K. industrial output decreased 1.3 percent month-on-month in December, marking the first decrease in nine months, while the country's visible trade deficit widened at the end of the year, separate reports showed.

U.S. Economic Reports

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of December. Economists expected wholesale inventories to edge up by 0.2 percent.

Stocks In Focus

Shares of Expedia (EXPE) are moving sharply lower in pre-market trading after the travel services company reported weaker than expected fourth quarter earnings.

Real estate website operator Zillow (ZG) may also see early weakness after reporting fourth quarter adjusted earnings that met estimated but providing disappointing revenue guidance for the current quarter.

Shares of Wynn Resorts (WYNN) may move to the downside after Morgan Stanley downgraded the casino operator’s stock to Equal Weight from Overweight.

On the other hand, shares of Nvidia (NVDA) are seeing significant pre-market strength after the graphics chipmaker reported better than expected fourth quarter results and provided upbeat guidance.

Cybersecurity services provider FireEye (FEYE) is also likely to see initial strength after reporting an unexpected fourth quarter profit and providing a strong forecast.

Shares of Moody’s (MCO) may also move to the upside after the credit rating agency reported better than expected fourth quarter results and provided upbeat guidance.
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