News Column

MARKET ANALYSIS: Lukewarm Bank Earnings May Fail To Lift Sentiment In Big Way

July 11, 2014



WASHINGTON (Alliance News) - The major US index futures are pointing to a mixed opening on Friday, with sentiment apprehensive despite yesterday's retreat. Wells Fargo reported lukewarm second quarter earnings relative to expectations and market reaction towards the earnings has been tepid. The domestic markets may also focus on the Fed speeches scheduled for the day. A strong reversal in sentiment is unlikely due to reduced visibility towards the reporting season, although the indexes could be supported by their key moving averages.

US stocks moved to the downside on Thursday, although they closed well off the lows of the session. The major averages started the session notably lower on worries about the Portuguese banking system. However, the averages recouped most of their losses by late afternoon trading before moving roughly sideways thereafter.

The Dow Industrials settled down 70.54 points or 0.42% at 16,915 and the S&P 500 Index ended 8.15 points or 0.41% lower at 1,965, while the Nasdaq Composite ended at 4,396, down 22.83 points or 0.52%.

Twenty-two of the Dow components closed lower and two stocks ended unchanged, while the remaining six stocks advanced. Home Depot (HD), Nike (NKE) and Exxon Mobil (XOM) fell sharply in the session, while Verizon (VZ) and Intel (INTC) advanced notably.

Gold, oil service, retail and financial stocks came under selling pressure, while computer hardware and airline stocks found some strength.

On the economic front, the Labor Department reported that jobless claims unexpectedly fell to 304,000 in the week ended July 5th from 315,000 in the previous week. The four-week average eased to 312,000 from 315,000. Meanwhile, continuing claims calculated with a week's lag rose for the third straight week, rising 10,000 to 2.584 million in the week ended June 28th.

The Commerce Department reported that wholesale inventories rose 0.5% month-over-month in May.

After yesterday's retreat, the Dow Industrials stopped short of its 21-day MA (currently at 16,890). If the index extends its slide, it could attempt to hold support around that level. The other key near-term supports are 16,841 and 16,772. Meanwhile, the index faces resistance around 16,953, 16,995 and 17,065.

Commodity, Currency Markets

Crude oil futures are sliding USD0.55 to USD102.38 a barrel after climbing USD0.64 to USD102.93 a barrel on Thursday. Meanwhile, gold futures are slipping USD2.50 to USD1,336.70 an ounce. In the previous session, gold rose USD14.90 to USD1,339.20 an ounce.

Among currencies, the US dollar is trading at 101.32 yen compared to the 101.34 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at USD1.3604 compared to yesterday's USD1.3609.

Asia

The Asian markets closed mixed, as risk aversion triggered by fears regarding the banking crisis in Portugal kept sentiment subdued. The Japanese market retreated as the yen remained firm and the Indonesian market fell sharply, while the Australian and Chinese markets bucked the downtrend with moderate advances.

The Nikkei 225 average languished below the unchanged line throughout the session before closing down 52.43 points or 0.34% at 15,164. Export stocks moved to the downside, while real estate, electric utility and financial stocks also saw weakness.

Hong Kong'sHang Seng Index ended at 23,234, down 5.54 points or 0.02%, while China's Shanghai Composite Index rose 8.62 points or 0.42% to 2,047.

Australia's All Ordinaries ignored a weak start and moved decisively into positive territory in late morning trading. Thereafter, the average held above the unchanged line, closing up 20.30 points or 0.37% at 5,475. Most sectors advanced, with the exception of consumer discretionary and real estate stocks.

On the economic front, a report released by the Australian Bureau of Statistics showed that the total number of home loans in Australia remained almost unchanged in May compared to the previous month following a 0.2% drop in April. Economists expected a 0.5% drop for the month.

Europe

At the open, European stocks rebounded from the previous session's steep declines but have since then turned mixed.

In corporate news, Volkswagen Friday said its vehicle deliveries for the month of June increased 3.9% from last year.

Revised estimates released by the German Federal Statistical Office showed that annual inflation in Germany rose at an unrevised rate of 1% in June, while on a month-over-month basis, consumer prices were up 0.4%. The annual and monthly comparisons of the harmonized index of consumer prices were also left unrevised at a 1% and a 0.4% increase, respectively.

The Bank of France reported that the French current account deficit widened to 3.1 billion euros in May from 2.3 billion euros in April, with the goods trade deficit widening and services trade surplus declining.

The UK Office for National Statistics reported that UK construction output fell 1.1% month-over-month in May, belying expectations for a 0.9% increase. The annual growth of 3.5% also trailed expectations.

US Economic Reports

Philadelphia Federal Reserve Bank President Charles Plosser is scheduled to moderate a panel on entrepreneurial issues at the Rocky Mountain Economic Summit in Jackson Hole, Wyoming at 11:15 am ET.

Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart are due to participate on a panel at the summit at 2 pm ET.

The Treasury Department is scheduled to release its monthly budgetary report for June at 2 pm ET. The report is expected to show a surplus of USD86.5 billion compared to a deficit of USD130 billion in the previous month.

Stocks in Focus

Whirlpool (WHR) announced a deal to acquire a majority interest in European domestic appliance manufacturer Indesit from Fineldo for a total purchase price of 758 million euros. The deal is expected to close by the end of 2014.

In its interim update, Chevron (CVX) said it expects its second quarter results to be higher than in the first quarter, helped by gains on asset sales and the absence of impairments. While the company expects net oil-equivalent production in the US to be higher than in the first quarter, international net oil-equivalent production is likely to be lower. The company also expects downstream earnings to be comparable to the previous quarter.

Infosys (INFY) reported an increase in its first quarter profits and sales that beat estimates. The company reaffirmed its 7-9% revenue growth guidance for the fiscal year ending March 2015.

Wells Fargo (WFC) reported second quarter earnings that were in line, while its revenues beat estimates.

Reynolds American (RAI) confirmed being in discussions to buy smaller rival Lorillard (LO). With the talks being consistent, Reynolds American's largest shareholder, British American Tobacco, is also participating in these discussions.

Gap (GPS) reported that its June sales rose to USD1.54 billion from USD1.53 billion last year, while its comparable store sales fell 2% compared to a 7% increase last year.

VOXX International (VOXX) reported first quarter net income of 2 cents per share on net sales of USD186.9 million. The results trailed estimates.

Occidental Petroleum (OXY) announced the appointment of Todd Stevens as the president and CEO and William Albrecht as the executive Chairman of its subsidiary California Resources. The company is planning to spin-off California Resources as a separately traded company subject to market conditions and regulatory approvals.



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Source: Alliance News


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