Market Analysis

Beyond the Numbers

Markets May Continue To Benefit From Recent Upward Momentum
11/19/2019 8:55 AM

The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to see further upside after moving modestly higher over the course of the previous session.

The markets may benefit from recent upward momentum, which has helped propel stocks to record highs amid unshakable optimism about a potential U.S.-China trade deal.

Boeing (BA) may help lead the Dow higher after the aerospace giant received orders for 50 of its embattled 737 Max jets at the Dubai Air Show.

On the other hand, shares of Home Depot (HD) may come under pressure after the home improvement retailer reported weaker than expected third quarter revenues and lowered its full-year sales guidance.

After moving mostly lower early in the session, stocks recovered over the course of the trading day on Monday. The major averages climbed well off their lows of the session and managed to end the day modestly higher.

The major averages crept up to new record closing highs. The Dow edged up 31.33 points or 0.1 percent to 28,036.22, the Nasdaq inched up 9.11 points or 0.1 percent to 8,549.94 and the S&P 500 ticked up 1.57 points or 0.1 percent to 3,122.03.

Stocks initially moved to the downside after a tweet from CNBC's Beijing Bureau Chief Eunice Yoon suggested Chinese officials have grown pessimistic about the chances for a trade deal.

"Mood in Beijing about #trade deal is pessimistic, government source tells me. #China troubled after Trump said no tariff rollback. (China thought both had agreed in principle.)" Yoon tweeted.

She added, "Strategy now to talk but wait due to impeachment, US election. Also prioritize China economic support."

Yoon's tweet offset earlier positive sentiment in reaction to weekend report from Chinese state media indicating the U.S. and China had "constructive discussions" regarding a phase one trade deal in a high-level phone call.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin reportedly talked with Chinese Vice Premier Liu He about the core issues for an agreement.

However, traders have recently shown a predilection for taking upbeat reports about the trade talks at face value while shrugging off the negative news.

The prevailing optimism about an eventual trade deal has led to a steady upward trend on Wall Street for the past month and a half.

On the U.S. economic front, the National Association of Home Builders released a report showing homebuilder confidence edged slightly lower in the month of November.

The report said the NAHB/Wells Fargo Housing Market Index slipped to 70 in November after climbing to 71 in October. Economists had expected the index to come in unchanged.

The modest decrease came after the housing market index rose for four straight months to reach its highest level since hitting a matching reading in February of 2018.

Meanwhile, Federal Reserve Chairman Jerome Powell met with President Donald Trump and Treasury Secretary Mnuchin at the White House on Monday.

Powell traveled to the White House at Trump's invitation to discuss the economy, growth, employment and inflation, the Fed said in a statement.

The Fed said Powell's comments were consistent with his remarks at his congressional hearings last week, when he indicated the central bank would leave interest rates on hold for the foreseeable future unless there is a material change in the economic outlook.

Powell did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy, the Fed said.

The Fed chief also told Trump that the Federal Open Market Committee will make its monetary policy decisions based solely on careful, objective and non-political analysis.

In a subsequent post on Twitter, the president described the sit-down with Powell as a "very good & cordial meeting."

Despite the recovery by the broader markets, energy stocks showed a substantial move to the downside, with decreases in associated commodities prices weighing on the sector.

With natural gas for December delivery plummeting $0.122 to $2.566 per million BTUs, the NYSE Arca Natural Gas Index plunged by 3.8 percent, while the Philadelphia Oil Service Index tumbled by 2.3 percent as crude oil slumped.

On the other hand, gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2 percent. The strength among gold stocks came amid an increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are sliding $0.73 to $56.32 a barrel after slumping $0.67 to $57.05 a barrel on Monday. Meanwhile, after rising $3.40 to $1,471.90 an ounce in the previous session, gold futures are slipping $2.30 to $1,469.60 an ounce.

On the currency front, the U.S. dollar is trading at 108.66 yen compared to the 108.68 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1077 compared to yesterday’s $1.1.072.


Asian stocks closed mixed on Tuesday as investors continued to wait for signs of progress in trade negotiations between the U.S. and China. Nevertheless, investor sentiment was bolstered by news that the Trump administration issued a new 90-day extension that will allow U.S. companies to continue doing business with Chinese telecom giant Huawei Technologies.

Chinese shares closed higher for the second straight day amid hopes of government stimulus to boost slowing economic growth. The benchmark Shanghai Composite Index rose 24.79 points or 0.9 percent to finish at 2,933.99.

Hong Kong shares extended Monday's rally, erasing some of last week's hefty losses. The Hang Seng Index jumped 412.71 points or 1.6 percent to 27,093.80.

Meanwhile, Japanese stocks declined as investors turned cautious amid uncertainty over a U.S.-China trade deal. CNBC's Beijing Bureau Chief Eunice Yoon reported that Chinese officials have grown pessimistic about the chances for a trade deal.

The benchmark Nikkei 225 Index fell 124.11 points or 0.5 percent to 23,292.65, while the broader Topix dipped 3.99 points or 0.2 percent to finish at 1,696.73.

Market heavyweight SoftBank Group dropped 1.3 percent and Fast Retailing declined 1.4 percent. The major exporters mostly fell on a stronger yen. Sony declined 1.3 percent, Mitsubishi Electric lost 0.5 percent and Canon dipped 0.3 percent. Panasonic advanced 1.1 percent.

In the tech space, Tokyo Electron lost 1.3 percent and Advantest slipped 1.6 percent. Among auto stocks, Toyota Motor fell 1.1 percent and Honda Motor declined 0.7 percent.

Among the major gainers, Sumitomo Dainippon Pharma spiked 7.4 percent and Kyowa Kirin surged up 4.7 percent.

On the flip side, Z Holdings, formerly known as Yahoo Japan, fell 8.1 percent, while Taiyo Yuden lost 4.9 percent and CyberAgent declined 4.4 percent.

The Australian markets recovered after a weak start to close higher after minutes of the Reserve Bank of Australia's November monetary policy meeting showed that the central bank had seen a case for cutting the cash rate again earlier this month but decided to keep the rate on hold.

At the November meeting, the RBA left its key interest rate unchanged at a record low of 0.75 percent, as widely expected, after cutting it by a quarter point in October.

The benchmark S&P/ASX 200 Index added 47.40 points or 0.7 percent to close at 6,814.20, while the broader All Ordinaries Index advanced 42.40 points or 0.6 percent to 6,914.10.

Among the major miners, Fortescue Metals gained 2.7 percent, Rio Tinto added 0.9 percent and BHP rose 0.3 percent.

In the banking space, ANZ Banking, Westpac and Commonwealth Bank closed higher in a range of 0.4 percent to 0.5 percent, while National Australia Bank edged down 0.2 percent.

Woodside Petroleum announced plans to triple its gas and oil reserve base to 3.7 million barrels over the next seven years and narrowed its 2019 output guidance. The oil company's shares rose 0.5 percent.

A2 Milk said it expects its fiscal 2020 earnings margins to be stronger than its previous outlook on strong first-half sales and improved marketing investment in the U.S. and China. The dairy producer's shares soared 11.2 percent.

Qantas Airways forecast capital spending of about A$2 billion in fiscal 2020 and said it expects capacity growth to be little changed in the second half of the year. The airline's shares added 2.1 percent.

Meanwhile, Kogan.com shares fell 6.6 percent after the internet retailer's chief executive Ruslan Kogan said at the company's annual general meeting that October gross sales increased 18 percent, while gross profit rose 22 percent.

New Zealand shares also closed higher, with the benchmark NZX 50 Index rising 19.08 points or 0.2 percent to finish at 10,892.24. Dairy company A2 Milk gained 10.3 percent, while wholesale broadband provider Chorus rose 6.9 percent.

Seoul stocks fell for the second straight day as investors remained cautious amid mixed signals regarding a potential U.S.-China trade deal. The benchmark Kospi lost 7.45 points or 0.3 percent to settle at 2,153.24.

Market heavyweight Samsung Electronics closed flat, while chipmaker SK hynix declined 0.2 percent. Among the major losers, pharmaceutical firm Celltrion dipped 1.6 percent and Samsung BioLogics dropped 0.8 percent.


Despite uncertainty about a U.S.-China trade deal and ongoing unrest in Hong Kong, European stocks are moving higher on Tuesday, with investors tracking economic data, earnings reports and other corporate news for direction. Automobile, banking and resources stocks are among the prominent gainers.

While the French CAC 40 Index has edged up by 0.2 percent, the German DAX Index and the U.K.’s FTSE 100 Index have jumped by 1 percent and 1.1 percent, respectively.

In the U.K. market, Halma shares have moved sharply higher after the company said its adjusted profit for the first-half rose 14 percent and earnings per share increased by 15 percent.

Shares of budget carrier Easyjet have also moved to the upside after the company's results came in at the upper end of its guidance.

Home emergency repairs company Homeserve has also advanced after reporting a 9 percent increase in basic earnings per share.

Deutsche Bank, Continental, MTU Aero Engines, Volkswagen and BMW are among the prominent gainers in the German market.

In France, Accor, ArcelorMittal and Hermes International are up sharply. Michelin, Peugeot, Societe Generale, Credit Agricole, Renault and Kering are also moving higher.

According to data released this morning, the eurozone current account surplus stood at 28 billion euros in September, compared to 29 billion euros a month earlier.

Data from Eurostat showed Eurozone's construction output rose for the first time in three months, growing 0.7 percent in September, reversing a 0.8 percent fall in August.

The European Automobile Manufacturers Association said Europe's passenger car sales increased to the highest October level on record since 2009.

Car registrations jumped 8.7 percent from last year to reach 1.17 million units in October, the data showed.

U.S. Economic Reports

A report released by the Commerce Department showed a substantial rebound in new residential construction in the month of October.

The Commerce Department said housing starts surged up by 3.8 percent to an annual rate of 1.314 million in October after plunging by 7.9 percent to a revised rate of 1.266 million in September.

Economists had expected housing starts to jump by 5.1 percent to a rate of 1.320 million from the 1.256 million originally reported for the previous month.

The report also said building permits spiked by 5.0 percent to an annual rate of 1.461 million in October after tumbling by 2.4 percent to a revised rate of 1.391 million in September.

Building permits, an indicator of future housing demand, had been expected to edge down by 0.1 percent to a rate of 1.385 million from the 1.387 million originally reported for the previous month.

At 9 am ET, New York Federal Reserve President John Williams is due to speak in a moderated session at the Securities Industry and Financial Markets Association Annual Meeting in Washington, D.C.

Stocks In Focus

Shares of Broadcom (AVGO) may move to the upside after Morgan Stanley upgraded its rating on the chipmaker’s stock to Overweight from Equal Weight.

Medical device maker Medtronic (MDT) may also see initial strength after reporting fiscal second quarter results that exceeded analyst estimates and raising its full-year forecast.

Meanwhile, shares Kohl’s (KSS) are moving sharply lower in pre-market trading after the department store chain reported weaker than expected third quarter results and lowered its annual guidance.
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