Market Analysis

Beyond the Numbers

Upbeat Earnings News May Contribute To Initial Strength On Wall Street
11/18/2021 8:53 AM

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move back to the upside after ending the previous session modestly lower.

The markets may benefit from a positive reaction to the latest batch of earnings news, including strong results from chipmaker Nvidia (NVDA).

Shares of Nvidia are moving sharply higher in pre-market trading after the company reported better than expected third quarter results and provided upbeat guidance.

Retailers Macy’s (M) and Kohl’s (KSS) are also likely to move to the upside after reporting quarterly results that exceeded analyst estimates.

On the other hand, shares of Cisco Systems (CSCO) may come under pressure after the networking giant reported better than expected fiscal first quarter earnings but provided disappointing guidance.

Early trading may also be impacted by reaction to a report from the Labor Department showing first-time claims for U.S. unemployment benefits were nearly unchanged in the week ended November 13th.

Stocks saw modest weakness during trading on Wednesday, giving back ground after ending Tuesday’s trading mostly higher. Selling pressure was somewhat subdued, however, limiting the downside for the major averages.

The major averages fluctuated over the course of the session but closed in negative territory. The Dow slid 211.17 points or 0.6 percent to 35,931.05, the Nasdaq fell 52.28 points or 0.3 percent to 15,921.57 and the S&P 500 dipped 12.23 points or 0.3 percent to 4,688.67.

The modest weakness on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets following recent volatility.

While worries about inflation contributed to a pullback by stocks last week, the Nasdaq and S&P 500 ended Tuesday's trading just shy of their record closing highs following upbeat retail sales and industrial production data.

With the economy seemingly holding up well in the face of elevated inflation, traders remain concerned the Federal Reserve could accelerate its plans to tighten monetary policy.

Meanwhile, traders showed a mixed reaction to earnings news from retail giants Target (TGT) and Lowe's (LOW).

Shares of Target moved sharply lower even though the retailer reported third quarter results that beat expectations on both the top and bottom lines.

On the other hand, shares of Lowe's (LOW) closed modestly higher after the home improvement retailer reported better than expected third quarter results and raised its full-year revenue guidance.

In U.S. economic news, the Commerce Department released a report showing an unexpected decrease in new residential construction in the month of October, although the report also showed a bigger than expected spike in building permits.

The report showed housing starts slid by 0.7 percent to an annual rate of 1.520 million in October after tumbling by 2.7 percent to a revised rate of 1.530 million in September.

The continued decline came as a surprise to economists, who had expected housing starts to jump by 1.6 percent to an annual rate of 1.580 million from the 1.555 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits surged up by 4.0 percent to an annual rate of 1.650 million in October after plummeting by 7.8 percent to a revised rate of 1.586 million in September.

Oil service stocks moved sharply lower over the course of the session, dragging the Philadelphia Oil Service Index down by 3.2 percent to its lowest intraday level in well over a month. The sell-off by oil service stocks came amid a steep drop by the price of crude oil.

Significant weakness also emerged among steel stocks, as reflected by the 1.9 percent drop by the NYSE Arca Steel Index. The index slid to an eight-month closing low.

Brokerage, transportation and natural gas stocks also saw considerable weakness on the day, while some strength was visible among housing and gold stocks.

Commodity, Currency Markets

Crude oil futures are inching up $0.19 to $78.55 a barrel after plunging $2.40 to $78.36 a barrel on Wednesday. Meanwhile, after climbing $16.10 to $1,870.20 an ounce in the previous session, gold futures are edging down $2.90 to $1,867.30 an ounce.

On the currency front, the U.S. dollar is trading at 114.28 yen versus the 114.08 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1340 compared to yesterday’s $1.1319.


Asian stocks retreated on Thursday amid persistent concerns about inflation and fears that global central banks may be forced to raise rates sooner rather than later.

China's Shanghai Composite Index dropped 16.66 points, or 0.5 percent, to 3,520.71, as indebted China Evergrande Group and developer Country Garden Services Holdings Co. announced plans to raise funds.

Hong Kong's Hang Seng Index tumbled 330.36 points, or 1.3 percent, to 25,319.72, as Baidu Inc. and Bilibili Inc. reported weak earnings, sparking concerns about slowing advertising revenue.

Japanese shares slipped but ended off their day's lows after the Nikkei business daily reported about a bigger than expected economic stimulus package. The Nikkei 225 Index ended down 89.67 points, or 0.3 percent, at 29,598.66, while the broader Topix dipped 0.1 percent to settle at 2,035.52.

Cyclical shares such as shippers led losses, with Kawasaki Kisen plunging 7.2 percent and Nippon Yusen tumbling 4.4 percent. Steelmaker Nippon Steel declined 1.9 percent and JFE Holdings gave up 1.7 percent.

Oil firm Inpex plummeted 7.1 percent and Idemitsu Kosan lost 3.6 percent as oil prices slid to a six-week low on news China was moving to release some oil from its strategic reserves.

Eisai slumped 9 percent after a European Medicines Agency panel voted against approval of an Alzheimer's drug the Japanese drugmaker developed with Biogen Inc.

Australian markets ended a choppy session slightly higher, snapping a two-day losing streak. The benchmark S&P/ASX200 Index edged up 9.30 points, or 0.1 percent, to 7,379.20, while the broader All Ordinaries Index ended up 9.20 points, or 0.1 percent, at 7,713.20.

Energy stocks ended broadly lower after oil prices fell sharply overnight. Gold miner Evolution Mining jumped 9.7 percent after it signed a pact with Swiss giant Glencore to acquire the Ernest Henry copper-gold mine northeast of Cloncurry in Queensland for $1 billion.

Medical laboratory company Sonic Healthcare rallied 3 percent after providing a healthy trading update at its annual general meeting. Crop protection provider Nufarm climbed 5.2 percent after revenue and profit surged for the year to September 30.

Seoul stocks retreated as the country reported its biggest daily jump in coronavirus infections since the start of the pandemic, despite a high rate of inoculation. The Kospi slipped 15.04 points, or 0.5 percent, to close at 2,947.38.


European stocks are turning in a lackluster performance on Thursday, although U.K. stocks have fallen as weakness in oil and metal prices hits commodity-related stocks.

While the U.K.’s FTSE 100 Index has fallen by 0.3 percent, the German DAX Index and the French CAC 40 Index are little changed.

Online gambling software developer Playtech has moved notably higher after it received a takeover bid from JKO Play Ltd, a firm co-owned by former F1 boss Eddie Jordan.

Royal Mail has also. The postal service and courier company forecast higher annual earnings in its U.K. business following a strong first half.

ThyssenKrupp has also surged. The industrial conglomerate said sales and orders recovered in the fourth quarter on the back of increased steel prices.

For fiscal 2022, the company expects net income of at least 1 billion euros, which would be the highest since fiscal year 2007/2008.

Automakers area also broadly higher even as industry data showed European new car registrations fell at a faster double-digit pace in October. BMW rose over 1 percent and Daimler was up 2 percent.

On the other hand, Halma has shown a notable move to the downside despite the safety equipment provider reporting record first-half results.

BP Plc and Royal Dutch Shell have also dropped as oil prices hit fresh six-week lows after reports that the U.S. has been reaching out to all major oil consumer nations to release their strategic petroleum reserves to temper rallying crude oil prices.

Anglo American, Antofagasta and Glencore have also fallen as London copper prices drop to their lowest level in more than a month on concerns over rising inventories.

German auto supplier Continental has also slumped after terminating the appointment of Chief Financial Officer Wolfgang Schaefer following a probe into the illegal use of defeat devices in diesel engines.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits were nearly unchanged in the week ended November 13th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims edged down to 268,000, a decrease of 1,000 from the previous week’s revised level of 269,000.

Economists had expected jobless claims to dip to 260,000 from the 267,000 originally reported for the previous week.

With the slight decrease and the revision to the previous week’s number, jobless claims once again hit their lowest level since the week ended March 14, 2020.

A separate report released by the Federal Reserve Bank of Philadelphia showed a significant acceleration in the pace of growth in regional manufacturing activity in the month of November.

The Philly Fed said its diffusion index for current activity jumped to 39.0 in November from 23.8 in October, with a positive reading indicating growth. Economists had expected the index to inch up to 24.0.

Looking ahead, the report said the future indexes continue to indicate that the firms expect growth over the next six months.

At 9:30 am ET, New York Federal Reserve President John Williams is due to participate in a fireside chat before a virtual Transatlantic Economic Policy Responses to the Pandemic and the Road to Recovery event.

The Conference Board is scheduled to release its report on leading economic indicators in the month of October at 10 am ET. The leading economic index is expected to climb by 0.8 percent.

At 11 am ET, the Treasury Department is due to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Chicago Federal Reserve President Charles Evans is scheduled to discuss current economic conditions and monetary policy in a moderated Q&A at the 2021 BKD Financial Services Symposium at 2 pm ET.

At 3:30 pm ET, San Francisco Federal Reserve President Mary Daly is due to participate in a virtual Fed Listens 2021: Pandemic Recovery and the role of Care Work event.

Stocks In Focus

Shares of Victoria’s Secret (VSCO) are moving sharply higher in pre-market trading after the lingerie, clothing, and beauty retailer reporter better than expected third quarter earnings in its first quarterly report as a standalone company.

Personal care products retailer Bath & Body Works (BBWI) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Alibaba (BABA) may come under pressure after the Chinese e-commerce giant reported fiscal second quarter results that missed analyst estimates and provided disappointing guidance.
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