The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to see further upside following the strength seen in the previous session.
A batch of positive earnings news is likely to generate early buying interest, with several big name companies reporting better than expected quarterly results.
With traders reacting positively to earnings and economic news, stocks moved notably higher over the course of the trading session on Monday. The major averages added to the strong gains posted last week.
The major averages ended the day firmly in positive territory but off their highs of the session. The Dow jumped 212.90 points or 0.9 percent to 24,573.04, the Nasdaq climbed 49.63 points or 0.7 percent to 7,156.28 and the S&P 500 advanced 21.54 points or 0.8 percent to 2,677.84.
The strength on Wall Street partly reflected a positive reaction to earnings news from financial giant Bank of America (BAC), which reported first quarter earnings that beat analyst estimates on strong loan growth.
Positive sentiment was also generated by a report from the Commerce Department showing stronger than expected retail sales growth in the month of March.
The report said retail sales climbed by 0.6 percent in March after edging down by 0.1 percent in February. Economists had expected retail sales to rise by 0.4 percent.
Excluding a rebound in auto sales, retail sales edged up by 0.2 percent in March, matching the uptick seen in the previous month as well as economist estimates.
“Overall, consumer spending has been disappointing in 1Q18, which is partially weather-related, but today’s report suggests the slowdown was transitory,” said James Knightley, Chief International Economist at ING.
“We remain upbeat for the coming months,” he added. “Consumer confidence is high, supported by strong employment gains, rising wages and tax cuts. As such we look for a more positive contribution from consumer spending to overall GDP growth in 2Q18.”
Meanwhile, traders have largely shrugged off a separate report from the National Association of Home Builders unexpectedly showing a modest drop in homebuilder confidence in the month of April.
The report said the NAHB/Wells Fargo Housing Market Index edged down to 69 in April from 70 in March. Economists had expected the index to come in unchanged.
Stocks remained positive in afternoon trading as traders digested news that President Donald Trump intends to nominate Richard Clarida as Federal Reserve Vice Chairman.
Clarida is currently an economics professor at Columbia University and also serves as Global Strategic Advisor for PIMCO.
Trump also intends to nominate Kansas State Bank Commissioner Michelle Bowman as a member of the Fed’s Board of Governors.
Transportation stocks showed a substantial move to the upside on the day, driving the Dow Jones Transportation Average up by 2.3 percent. With the jump, the average reached its best closing level in almost a month.
Trucking company J.B. Hunt Transport Services (JBHT) led the transportation sector higher after reporting first quarter earnings growth on better than expected revenues.
Significant strength was also visible among tobacco stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Tobacco Index. The index ended the session at a record closing high.
Chemical, utilities, brokerage, and telecom stocks also saw considerable strength, moving higher along with most of the other major sectors.
Commodity, Currency Markets
Crude oil futures are slipping $0.04 to $66.18 a barrel after plunging $1.17 to $66.22 a barrel on Monday. Meanwhile, after rising $2.80 to $1,350.70 an ounce in the previous session, gold futures are falling $6 to $1,344.70 an ounce.
On the currency front, the U.S. dollar is trading at 107.16 yen compared to the 107.12 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2353 compared to yesterday’s $1.2380.
Asian stocks turned in another mixed performance on Tuesday as a slew of Chinese data proved to be a mixed bag and investors watched developments in Syria.
China’s Shanghai Composite Index tumbled 43.14 points or 1.4 percent to 3,067.52 after the release of mixed data. Hong Kong’s Hang Seng Index slid 252.84 points or 0.8 percent to 30,062.75 as the Hong Kong Monetary Authority stepped in to support the local currency for a sixth time in less than a week.
Official data showed China’s gross domestic product rose 6.8 percent in the first quarter on a yearly basis, in line with expectations but down from 6.9 percent in the previous quarter.
Chinese industrial production and fixed asset investment rose in March, but missed forecasts, while retail sales growth exceeded expectations.
Japanese shares ended roughly flat as the dollar softened against the yen ahead of a meeting between Prime Minister Shinzo Abe and U.S. President Donald Trump. The Nikkei 225 Index edged up 12.06 points or 0.1 percent to 21,847.59, while the broader Topix Index closed 0.4 percent lower at 1,729.98.
Takeda Pharmaceutical rallied 2 percent after Shire, which faces a potential bid from the Japanese firm, agreed to sell its oncology business to French pharma group Servier for $2.4 billion.
Financial stocks fell broadly, with Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and MS&AD Insurance all ending down over 1 percent.
Australian shares closed marginally higher, led by miners after aluminum prices surged to their highest level in six years on Monday amid concerns about supply disruptions because of U.S. sanctions against Russian producer RUSAL.
Markets gave up early gains following the Reserve Bank’s comments that the country’s inflation rate will pick up gradually and the next move for its benchmark lending rate was likely to be an increase rather than another cut.
Both the benchmark S&P/ASX 200 Index and the All Ordinaries Index closed marginally higher at 5,841.50 and 5,934.30, respectively. Rio Tinto, Fortescue Metals Group and South32 rose between 0.2 percent and 0.8 percent.
Whitehaven Coal surged up 3 percent after saying it expects thermal coal prices to remain buoyant. Wesfarmers inched up 0.2 percent after confirming it did not hold any shares in troubled New Zealand builder Fletcher Building.
Meanwhile, wealth manager AMP tumbled 4.4 percent after it admitted to misleading the corporate regulator 20 times about its business practices.
European stocks are broadly higher on Tuesday amid easing Syria tensions. Traders also remained optimistic about the earnings season.
While the U.K.’s FTSE 100 Index has edged up by 0.2 percent, the French CAC 40 Index is up by 0.6 percent and the German DAX Index is up by 0.9 percent.
On the data front, a government report showed U.K. wages grew faster than inflation for the first time in almost a year in February, helping cement expectations for a rate hike at the next MPC meeting in May. The jobless rate in the month ticked down to 4.2 percent from 4.3 percent previously.
Elsewhere, the German ZEW headline numbers for April showed that German economic sentiment deteriorated more than expected in April. The corresponding index dropped to -8.2 from 5.1.
Sweden’s Intrum Justitia has soared after it filed a binding bid for Intesa Sanpaolo’s debt collection unit.
Associated British Foods has also jumped as it posted three percent growth in revenue in the 24 weeks to March 3rd despite a challenging retail environment.
Ashmore Group has climbed after the emerging markets-focused asset manager reported 10 percent growth in its third-quarter assets under management.
JD Sports Fashion has also rallied after its preliminary profit before tax for the 53 weeks ended February 3rd increased by 24 percent.
Bayer has advanced after Singapore’s state investment company Temasek agreed to buy a 3.6 percent stake in the German drug maker for 3 billion euros.
U.S. Economic Reports
After reporting a sharp pullback in new residential construction in the U.S. in the previous month, the Commerce Department released a report showing housing starts rebounded in the month of March.
The report said housing starts jumped by 1.9 percent to an annual rate of 1.319 million in March after tumbling by 3.3 percent to a revised 1.295 million in February.
Economists had expected housing starts to increase by 2.1 percent to a rate of 1.262 million from the 1.236 million originally reported for the previous month.
The Commerce Department said building permits also surged up by 2.5 percent to an annual rate of 1.354 million in March after slumping by 4.1 percent to a revised 1.321 million in February.
Building permits, an indicator of future housing demand, had been expected to climb by 1.9 percent to a rate of 1.323 million from the 1.298 million originally reported for the previous month.
At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of March. Production is expected to rise by 0.3 percent.
San Francisco Federal Reserve President John Williams is also due to speak at a NABE-Bank of Spain Event in Madrid at 9:15 am ET.
At 10 am ET, Fed Vice Chairman for Supervision Randal Quarles is scheduled to give semi-annual testimony before the House Financial Services Committee.
Philadelphia Fed President Patrick Harker is due to speak at Saint Joseph’s University in Philadelphia, Pennsylvania, at 11 am ET.
At 1:10 pm ET, Chicago Fed President Charles Evans is scheduled to speak at a Chicago Rotary Club Luncheon in Chicago, Illinois.
Stocks In Focus
Shares of Netflix (NFLX) are moving sharply higher in pre-market trading after the video streaming service reported strong subscriber growth in the first quarter and provided upbeat guidance for the current quarter.
Health insurer UnitedHealth (UNH) may also see early strength after reporting first quarter results that exceeded analyst estimates and raising its full-year earnings guidance.
Shares of Johnson & Johnson (JNJ) may also move to the upside after the healthcare giant reported better than expected first quarter results and boosted its sales outlook for the year.
On the other hand, shares of PepsiCo (PEP) may see initial weakness after Goldman Sachs downgraded its rating on the food and beverage company’s stock to Sell from Neutral.
by RTTNews Staff Writer
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