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Beyond the Numbers

Impending Earnings News May Lead To Choppy Trading
4/15/2019 9:04 AM

The major U.S. index futures are pointing to a roughly flat opening on Monday, with stocks likely to show a lack of direction in early trading.

Traders may be reluctant to make significant moves ahead of the release of quarterly results from a slew of big-name companies in the coming days.

Bank of America (BAC), Johnson & Johnson (JNJ), IBM (IBM), Morgan Stanley (MS), PepsiCo (PEP), and American Express (AXP) are among the companies due to report their results this week.

Financial giants Citigroup (C) and Goldman Sachs (GS) released their quarterly results this morning and are moving in opposite directions in pre-market trading.

The impending release of data on industrial production, retail sales, and housing starts may also keep some traders on the sidelines along with the holiday on Friday.

Stocks did not see much follow-through on an initial upward move but remained mostly positive throughout the trading session on Friday. The gains on the day lifted the Nasdaq and the S&P 500 to their best closing levels in over six months.

Reflecting late-day strength, the major averages finished not far off their best levels of the session. The Dow jumped 269.25 points or 1 percent to 26,412.30, the Nasdaq rose 36.80 points or 0.5 percent to 7,984.16 and the S&P 500 advanced 19.09 points or 0.7 percent to 2,907.41.

For the week, the Nasdaq and the S&P 500 climbed by 0.6 percent and 0.5 percent, while the Dow edged down by less than a tenth of a percent.

The early strength on Wall Street came amid a positive reaction to quarterly results from JPMorgan Chase (JPM), with the financial giant jumping by 4.7 percent.

Before the start of trading, JPMorgan kicked off the earnings season by reporting record first quarter earnings and revenues that exceeded analyst estimates.

The better than expected results from JPMorgan partly offset some of the recent concerns about corporate results for the quarter.

Shares of Disney (DIS) also surged up by 11.5 percent after the entertainment giant initially priced its streaming service well below Netflix (NFLX).

Buying interest waned shortly after the start of trading, however, as traders seemed reluctant to make more significant moves ahead of the release of quarterly results from a slew of big-name companies next week.

A report from the Labor Department showing a bigger than expected increase in import prices in March may also have raised inflation concerns, although the price growth was largely due to another spike in fuel prices.

Meanwhile, the University of Michigan released a separate report showing consumer sentiment has deteriorated by more than anticipated in the month of April.

The preliminary report showed the consumer sentiment index dropped to 96.9 in April from the final March reading of 98.4. Economists had expected the index to edge down to 98.0.

Natural gas stocks moved sharply higher on the day, driving the NYSE Arca Natural Gas Index up by 2.2 percent to a five-month closing high.

The strength in the sector came after oil and gas exploration and production company Anadarko Petroleum (APC) agreed to be acquired by energy giant Chevron (CVX) in a stock and cash transaction valued at $33 billion.

The upbeat earnings news from JPMorgan also contributed to significant strength among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index climbing by 1.9 percent and 1.7 percent, respectively.

Semiconductor, chemical, and networking stocks also saw considerable strength on the day, while some weakness emerged among biotechnology and healthcare stocks.

Commodity, Currency Markets

Crude oil futures are sliding $0.60 to $63.29 a barrel after rising $0.31 to $63.89 last Friday. Meanwhile, an ounce of gold is trading at $1,287.40, down $7.80 from the previous session’s close of $1,295.20. On Friday, gold rose $1.90.

On the currency front, the U.S. dollar is trading at 112.03 yen compared to the 112.02 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1311 compared to last Friday’s $1.1299.

Asia

Asian stocks gave up early gains to end mixed on Monday, as investors looked for further signs of a pick-up in global growth and progress in U.S.-China trade talks.

Optimism prevailed on the trade front after U.S. Treasury Secretary Steven Mnuchin said Saturday a U.S.-China trade agreement would go "way beyond" previous efforts to open China's markets to U.S. companies.

Mnuchin told the media on the sidelines of the spring meetings of the International Monetary Fund and World Bank that he believed Washington and Beijing are “getting close to the final round of concluding issues.”

Chinese shares gave up early gains to end lower, with the benchmark Shanghai Composite Index closing down 10.84 points or 0.3 percent at 3,177.79. Hong Kong's Hang Seng Index slipped 99.04 points or 0.3 percent to 29,810.72.

Meanwhile, Japanese shares hit a four-month high, with sentiment lifted by a weaker yen and positive cues from global markets.

The Nikkei 225 Index jumped 298.55 points or 1.4 percent to 22,169.11, extending gains for the third straight session. The broader Topix closed 1.4 percent higher at 1,627.93.

Banks Mizuho Financial, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group rallied 1-2 percent after U.S. financial giants J.P. Morgan and Wells Fargo both reported better than expected earnings.

Exporters Canon and Honda Motor rose over 1 percent each as the safe haven yen struggled near a 1-1/2-month low against the dollar.

Australian markets fluctuated before finishing on a flat note. Gold miners succumbed to selling pressure, offsetting gains in the financial sector.

The benchmark S&P/ASX 200 Index finished marginally higher at 6,251.40 after posting its biggest weekly gain in seven. The broader All Ordinaries Index ended flat at 6,347.90.

Financials gained ground for the second straight session, with Commonwealth Bank of Australia rising 0.8 percent after announcing job cuts. The other three big banks rose between half a percent and 0.9 percent.

On the other hand, gold miners Newcrest, Northern Star and Evolution lost 3-4 percent as the precious metal dropped to a more than one-week low due to a resurgence in risk appetite.

Mining heavyweights BHP and Rio Tinto ended narrowly mixed as investors awaited quarterly production figures.

Seoul stocks closed higher for the 12th straight session as investors cheered a strong start to the U.S. earnings season. The benchmark Kospi rose 9.43 points or 0.4 percent to 2,242.88.

Asiana Airlines soared 30 percent on reports that Kumho Asiana Group will submit a fresh revamp plan soon.

Europe

European stocks are holding steady in cautious trading on Monday amid reports the European Union is considering hitting U.S. goods with retaliatory tariffs to the tune of 10.2 billion euros ($11.5 billion), escalating a tariff war over disputed aviation subsidies.

While the U.K.’s FTSE 100 Index is down by 0.1 percent, the French CAC 40 Index and the German DAX Index are both up by 0.1 percent.

Banks have rallied ahead of the release of quarterly results from a number of big U.S. banks this week.

IG Group Holdings has also moved sharply higher. The multi-platform trading company said its Chairman Andy Green intends to resign at the company's annual meeting in September 2019.

Italian media group Mediaset as well as its German rival ProSiebenSat.1 Media has also risen on merger speculation.

French advertising and public relations company Publicis Groupe has jumped after it agreed to buy digital marketing firm Epsilon from Alliance Data Systems Corp. for $4.4 billion in cash.

Norsk Hydro has also moved to the upside after it won further support for its bid to resume full output from its Alunorte alumina refinery in Brazil.

Meanwhile, miners have fallen on profit taking after recent strong gains. Rio Tinto has slumped after it committed $302 million of additional capital to advance its Resolution Copper project in the US state of Arizona.

Acacia Mining has also fallen after its gold production in the first quarter declined 13 percent, mainly due to lower production at North Mara and Buzwagi.

Daimler has also moved to the downside. The German luxury carmaker denied media reports that it quietly removed emission-test-cheating software from a range of Mercedes GLK 220 CDI diesel models.

U.S. Economic Reports

After reporting an unexpected slowdown in the pace of growth in New York manufacturing activity in the previous month, the Federal Reserve Bank of New York released a report on Monday showing growth picked up somewhat in April but remained fairly subdued.

The New York Fed said its headline general business conditions index climbed to 10.1 in April after falling to 3.7 in March, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 6.0.

At 12 pm ET, Chicago Federal Reserve President Charles Evans is due to speak about current economic conditions and monetary policy at a New York Association for Business Economics luncheon in New York.

Stocks In Focus

Waste Management (WM) is seeing pre-market strength after agreeing to acquire smaller rival Advanced Disposal Services, Inc. in a deal valued at $4.9 billion.

Shares of Citigroup are also seeing some pre-market strength after the company reported first quarter earnings that exceeded analyst estimates.

On the other hand, Goldman Sachs may see initial weakness after reporting better than expected first quarter earnings but revenues that missed expectations.
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