MARKET ANALYSIS: Upbeat Earnings, Economic News May Lead To Initial Strength On Wall Street

WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on ...

Alliance News 16 April, 2018 | 1:56PM
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WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on Monday, with stocks poised to add to the strong gains posted last week.

Early buying interest may be generated in reaction to upbeat quarterly results from financial giant Bank of America (BAC), which reported first quarter earnings that beat analyst estimates on strong loan growth.

The markets may also benefit from the release of a Commerce Department report showing stronger than expected retail sales growth in the month of March.

Geopolitical concerns may keep trading activity somewhat subdued, however, as traders digest the weekend's US-led airstrikes against Syria.

Reports of the US imposing new economic sanctions on Russia and a tweet from President Donald Trump accusing China of currency devaluation may also limit any upside for the markets.

After failing to sustain an initial upward move, stocks moved mostly lower over the course of the trading session on Friday. With the downturn on the day, the major averages partly offset the gains posted in the previous session.

The major averages climbed off their worst levels going into the close but still ended the day in the red. The Dow slid 122.91 points or 0.5% to 24,360.14, the Nasdaq dropped 33.60 points or 0.5% to 7,106.65 and the S&P 500 fell 7.69 points or 0.3% to 2,656.30.

Despite the pullback on the day, the major averages moved sharply higher for the week. The Nasdaq soared by 2.8%, while the S&P 500 and the Dow jumped by 2% and 1.8%, respectively.

The initial strength on Wall Street came as traders reacted positively to earnings news from financial giants JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC).

Before the start of trading, JPMorgan, Citigroup, and Wells Fargo all reported first quarter earnings that came in above analyst estimates.

Buying interest waned shortly after the open, however, with traders reluctant to make significant moves ahead of a slew of earnings news next week.

Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), IBM (IBM), American Express (AXP), and General Electric (GE) are among the companies due to report their quarterly results.

The subsequent pullback by the markets may have been partly due to the release of a report from the University of Michigan showing a bigger than expected drop in consumer sentiment in the month of April.

The report said the preliminary reading on the consumer sentiment index for April came in at 97.8 compared to the final March reading of 101.4. Economists had expected the index to edge down to 100.5.

"Consumer sentiment slipped in early April, largely reversing the gains recorded in the prior two months," said Richard Curtin, the survey's chief economist. "The small decline was widely shared by all age and income subgroups and across all regions of the country."

He added, "Importantly, confidence still remains relatively high, despite the recent losses that were mainly due to concerns about the potential impact of Trump's trade policies on the domestic economy."

Banking stocks showed a significant move to the downside on the day, dragging the KBW Bank Index down by 2.1%. JPMorgan, Citigroup, and Wells Fargo all slid into negative territory despite reporting better than expected earnings.

Considerable weakness was also visible among brokerage stocks, as reflected by the 1.1% loss posted by the NYSE Arca Broker/Dealer Index.

On the other hand, gold stocks moved notably higher, driving the NYSE Arca Gold Bugs Index up by 1.7%. The index ended the session at its best closing level in nearly two months. The rally by gold stocks came amid an increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are sliding USD0.70 to USD66.69 a barrel after rising USD0.32 to USD67.39 a barrel last Friday. Meanwhile, an ounce of gold is trading at USD1,347.60, down USD0.30 from the previous session's close of USD1,347.90. On Friday, gold climbed USD6.

On the currency front, the US dollar is trading at 107.29 yen compared to the 107.35 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at USD1.2375 compared to last Friday's USD1.2331.

Asia

Asian stocks ended mixed on Monday as worries about slowing growth in China and higher interest rates offset easing concerns about the geopolitical risks over Syria.

Investors veered around to the view that weekend missile strikes against Syria by the US, France and Britain may be a one-off event. U.S President Donald Trump tweeted, "Mission Accomplished" on Saturday, implying that there will not be another strike soon.

Chinese shares hit a fresh six-month low on concerns that mounting risks in the financial system will weigh on growth further down the road.

The benchmark Shanghai Composite Index tumbled 48.30 points or 1.5% to 3,110.75, posting its worst loss in three weeks, while Hong Kong's Hang Seng Index tumbled 492.79 points or 1.6% to 30,315.59.

Meanwhile, Japanese shares finished modestly higher after Russia did not respond to the US-led missile strike on Syria. Investors shrugged off polls showing waning support for Japanese Prime Minister Shinzo Abe's government.

The Nikkei 225 Index rose 56.79 points or 0.3% to 21,835.53, while the broader Topix Index closed 0.4% higher at 1,736.22. Drugmakers, retailers and food companies were among the prominent gainers. Sony gained 0.8% and Canon added half a % despite a firmer yen.

Australian shares rose as investors took Syria tensions in stride. The benchmark S&P/ASX 200 Index gained 12.20 points or 0.2% to finish at 5,841.30, and the broader All Ordinaries Index edged up 8.30 points or 0.1% at 5,933.

Mining heavyweights ended on a mixed note as investors awaited quarterly production reports. BHP Billiton advanced 0.8%, while Rio Tinto shed 0.3% and Fortescue Metals Group declined 0.9%. South32 climbed 3.2% after a surge in aluminum prices on concerns about supply disruptions.

The big four banks also closed mixed, while energy stocks such as Woodside Petroleum, Oil Search and Origin Energy gained 1-2% after crude oil prices posted their largest weekly gain in almost a year.

Europe

European stocks have moved modestly lower on Monday amid concerns over the prospect of imminent US sanctions against Moscow.

As far as developments in Syria are concerned, fears of an escalation appear to have faded following the weekend's US-led airstrikes.

While the UK's FTSE 100 Index has fallen by 0.5%, the French CAC 40 Index and the German DAX Index are both down by 0.1%.

Advertising conglomerate WPP has fallen in London after its CEO Martin Sorrell stepped down following an allegation of personal misconduct.

Sage shares have also moved to the downside, extending Friday's 8% loss, after the company cut its annual forecast for revenue growth.

Germany's Software AG has tumbled after posting weaker than expected quarterly revenues at its Digital Business Platform business.

Meanwhile, Hammerson has rallied after Dutch pension fund APG said it would vote against the firm's proposed 3.4 billion pound takeover of rival shopping centre owner Intu Properties.

Shares of Whitbread have also soared after Elliott Advisors said it has become the largest shareholder in the company.

US Economic Reports

With auto sales rebounding strongly, the Commerce Department released a report showing retail sales in the US increased by more than anticipated in the month of March.

The report said retail sales climbed by 0.6% in March after edging down by 0.1% in February. Economists had expected retail sales to rise by 0.4%.

Excluding the jump in auto sales, retail sales edged up by 0.2% in March, matching the uptick seen in the previous month as well as economist estimates.

A separate report released by the Federal Reserve Bank of New York showed a notably slower pace of growth in New York manufacturing activity in the month of April.

The New York Fed said its general business conditions index fell to 15.8 in April from 22.5 in March, although a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to drop to 18.6.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of April. The housing market index is expected to come in unchanged in April after edging down to 70 in March.

The Commerce Department is also due to release its report on business inventories in the month of February at 10 am ET. Business inventories are expected to climb by 0.6%.

At 1:15 pm ET, Atlanta Federal Reserve President Raphael Bostic is scheduled to speak at the Shoals Chamber of Commerce in Florence, Alabama.

Stocks In Focus

Shares of M&T Bank (MTB) are moving significantly lower in pre-market trading after the company reported weaker than expected first quarter earnings on higher costs.

Trucking company J.B. Hunt Transport Services (JBHT) may also see early weakness after reporting first quarter earnings that came in just below analyst estimates.

On the other hand, shares of Bank of America (BAC) are likely to move to the upside after the financial giant reported first quarter earnings that exceeded expectations.

Copyright RTT News/dpa-AFX

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