Mixed Earnings News May Push Markets In Opposite Directions

Mixed Earnings News May Push Markets In Opposite Directions

The major U.S. index futures are pointing to a mixed opening on Friday, as the Nasdaq futures are moving higher but the Dow and S&P 500 futures are moving to the downside.

A mixed batch of earnings news may push the markets in opposite directions, with tech giants such as Amazon (AMZN), Microsoft (MSFT) and Intel (INTC) reporting better than expected quarterly results, while energy giant ExxonMobil (XOM) reported weaker than expected earnings.

Traders are also digesting a report from the Commerce Department showing U.S. economic growth slowed by less than expected in the first quarter of 2018.

Stocks moved sharply higher over the course of the trading session on Thursday, as traders reacted positively to latest batch of earnings news. The major averages climbed firmly into positive territory after ending the previous session mixed.

The major averages pulled back off their best levels in the final hour of trading but held on to strong gains. The Dow jumped 238.51 points or 1 percent to 24,322.34, the Nasdaq soared 114.94 points or 1.6 percent to 7,118.68 and the S&P 500 surged up 27.54 points or 1 percent to 2,666.94.

The rally on Wall Street came following the release of upbeat earnings news from several big-name companies, with shares of Facebook (FB) surging up by 9.1 percent.

The jump by Facebook came after the social media giant reported first quarter results that beat analyst estimates on both the top and bottom lines.

Chipmaker Advanced Micro Devices (AMD) also moved sharply higher after reporting better than expected first quarter results.

Shares of Visa (V) also moved to the upside after the credit card giant reported fiscal second quarter results that exceeded expectations and raised its full-year guidance.

Stocks also benefited from a pullback by treasury yields, with the yield on the benchmark ten-year moving lower after ending the previous session above 3 percent for the first time in well over four years.

The drop by treasury yields came despite the release of some upbeat economic data, including a report from the Labor Department showing initial jobless claims fell to their lowest level in nearly five decades in the week ended April 21st.

The report said initial jobless claims dropped to 209,000, a decrease of 24,000 from the previous week’s revised level of 233,000. Economists had expected jobless claims to edge down to 230,000.

With the much bigger than expected decrease, jobless claims slid to their lowest level since hitting 202,000 in December of 1969.

A separate report from the Commerce Department showed another jump in orders for transportation equipment contributed to a bigger than expected increase in durable goods orders in the month of March.

The Commerce Department said durable goods orders surged up by 2.6 percent in March after spiking by an upwardly revised 3.5 percent in February.

Economists had expected durable goods orders to climb by 1.6 percent compared to the 3.0 percent jump that had been reported for the previous month.

Excluding the skyrocketing orders for transportation equipment, however, durable goods orders came in unchanged in March compared to a 0.9 percent increase in February. Ex-transportation orders had been expected to rise by 0.5 percent.

Retail stocks showed a substantial move to the upside on the day, driving the Dow Jones Retail Index up by 2.5 percent. Despite the gain, the index remained stuck in a recent trading range.

Significant strength was also visible among semiconductor stocks, as reflected by the 2.1 percent jump by the Philadelphia Semiconductor Index. The index bounced off its lowest closing level in well over two months.

Steel, energy, biotechnology, and real estate stocks also saw considerable strength on the day, while transportation stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are slipping $0.24 to $67.95 a barrel after inching up $0.14 to $68.19 a barrel on Thursday. Meanwhile, after falling $3.90 to $1,317.90 an ounce in the previous session, gold futures are rising $2.50 to $1,320.40 an ounce.

On the currency front, the U.S. dollar is trading at 109.52 yen compared to the 109.30 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2060 compared to yesterday’s $1.2103.

Asia

Asian shares advanced on Friday as a rebound by technology stocks on strong earnings and a drop in U.S. Treasury yields helped improve investors’ risk appetite.

The European Central Bank and the Bank of Japan maintained their policy mix, as widely expected, helping support underlying sentiment.

Chinese shares reversed early losses to finish higher, led by healthcare stocks. The benchmark Shanghai Composite Index rose 7.15 points or 0.2 percent to 3,082.18, while Hong Kong’s Hang Seng Index climbed 272.99 points or 0.9 percent to 30,280.67.

Japanese shares closed near three-month highs after the Bank of Japan kept its monetary policy steady, as widely expected, but dropped its target date for achieving its 2 percent inflation target. Investors also digested a raft of economic data.

Japan’s industrial output rose 1.2 percent sequentially in March to beat forecasts and the jobless rate held flat at 2.5 percent, in line with expectations, while retail sales and consumer inflation figures fell short of expectations.

Ahead of a long holiday weekend, the Nikkei 225 Index ended 148.26 points or 0.7 percent higher at 22,467.87, the highest closing level since early February. The broader Topix index rose 0.3 percent to finish at 1,777.23.

Tech stocks led the surge, with Advantest jumping 13.6 percent and Kyocera rallying 12.6 percent after the companies forecast strong profits this fiscal year. On the flipside, industrial robot maker Fanuc Corp. lost 9.3 percent after a profit warning.

Australian shares ended notably higher as healthcare stocks extended the previous session’s gains, helping offset losses in the banking sector.

The benchmark S&P/ASX 200 Index climbed 42.80 points or 0.7 percent to 5,953.60, while the broader All Ordinaries Index ended 39.90 points or 0.7 percent higher at 6,042.90.

Private hospital operator Healthscope rallied 2.2 percent after receiving a $4.11 billion takeover proposal from a private equity consortium, while biotechnology firm CSL advanced 2.9 percent and medical device company Cochlear added 2.8 percent.

AGL Energy jumped 3.2 percent. The company said it would spend up to A$400 million to build a new gas-fired power station near Newcastle in NSW even as it goes ahead with plans to shut down its ageing Liddell coal-fired power plant.

Material stocks eked out modest gains, and gold miner Newcrest jumped 3.1 percent after its quarterly update.

On the other hand, lender Commonwealth Bank lost 1 percent on growing concerns about the quality of its mortgage book, while the other three banks closed firmly in positive territory.

Seoul stocks closed higher on the heels of the historic inter-Korean summit to discuss issues of mutual cooperation. The benchmark Kospi gained 16.76 points or 0.7 percent to finish at 2,492.40.

Europe

European stocks are mostly higher on Friday as U.S. bond yields eased, the latest run of earnings from major tech companies topped forecasts and the euro sank against the dollar on a dovish policy statement from the European Central Bank.

The pound also drifted lower against the dollar as weak GDP data helped reduce the chances of a rate hike at the Bank of England’s monetary policy meeting on May 10th.

The U.K. economy expanded at the slowest pace in more than five years in the first quarter, the Office for National Statistics reported. GDP grew only 0.1 percent in the first quarter, the weakest since the fourth quarter of 2012.

Separately, survey data from European Commission showed that Eurozone economic sentiment remained stable in April. The economic sentiment index held steady at 112.7 in April, while economists expected the index to drop to 112.0.

While the French CAC 40 Index has edged up by 0.2 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.8 percent.

France’s Capgemini has rallied after its first quarter consolidated revenues grew 7.2 percent year-over-year on constant exchange rates.

French construction materials group Saint-Gobain has also jumped after affirming its 2018 earnings target.

Salzgitter shares have advanced in Frankfurt. The company increased its earnings forecast for the year after its first quarter pre-tax profit exceeded market expectations.

Meanwhile, Italian oil and gas company Eni has dropped after its first quarter earnings fell from last year despite higher hydrocarbon production.

Electrolux shares have also slumped. The Swedish home appliance manufacturer said its first quarter net profit fell 46 percent due to rising raw material costs and hefty restructuring charges in its North American appliances business.

U.S. Economic Reports

Economic growth in the U.S. continued to slow in the first quarter of 2018, according to a report released by the Commerce Department on Friday, although the pace of growth during the quarter still exceeded economist estimates.

The Commerce Department said real gross domestic product climbed by 2.3 percent in the first quarter compared to the 2.9 percent jump in the fourth quarter. Economists had expected GDP to increase by about 2.0 percent.

At 10 am, the University of Michigan is scheduled to release its revised report on consumer sentiment in the month of April.

The consumer sentiment index for April is expected to be upwardly revised to 98.0 from the preliminary reading of 97.8, although that would still be down from 101.4 in March.

Stocks In Focus

Shares of Amazon (AMZN) are moving significantly higher in pre-market trading after the online retail giant reported first quarter results that exceeded analyst estimates on both the top and bottom lines.

Software giant Microsoft (MSFT) is also likely to see early strength after reporting better than expected fiscal third quarter results and providing upbeat guidance.

Shares of Intel (INTC) are also likely to move to the upside after the semiconductor giant beat first quarter earnings estimates and raised its full-year revenue and profit forecasts.

On the other hand, shares of U.S. Steel (X) may come under pressure after the steel maker reported better than expected first quarter earnings but provided disappointing guidance for the current quarter.

Consumer products maker Colgate-Palmolive (CL) is also seeing pre-market weakness after reporting first quarter earnings that exceeded estimates but on weaker than expected revenues.

Shares of ExxonMobil (XOM) may also move to the downside after the energy giant reported first quarter earnings that came in below expectations.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

Related posts