News Column

MARKET ANALYSIS: Markets May Sustain Momentum As Catalysts Remain Supportive

August 19, 2014



WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on Tuesday, with sentiment remaining buoyant as geopolitical concerns are relegated to the backburner and corporate and economic tidings remain good. An economic report released earlier in the day showed that housing starts rebounded strongly. Earnings of retailers and other companies have been encouraging.

The easing of geopolitical tensions triggered strong buying in the US markets on Monday, with all three major averages ending notably higher. The major averages opened higher and saw a steady advance in early trading before moving roughly sideways.

The Dow Industrials ended up 175.83 points or 1.06% at 16,834 and the Nasdaq Composite ended 43.39 points or 0.97% higher at 4,508, while the S&P 500 Index ended at 1,971, up 16.68 points or 0.85%.

Twenty-six of the thirty Dow components closed higher, with Visa (V), United Technologies (UTX), Nike (NKE), 3M (MMM), Goldman Sachs (GS), General Electric (GE) and Boeing (BA) leading the advance.

Transportation, biotechnology, basic material, housing, retail and financial stocks were among the best performers of the session.

On the economic front, the National Association of Home Builders reported that its housing market index rose 2 points to 55 in August, while it was expected to remain unchanged. The index measuring prospective buyer traffic climbed 3 points to 42, although it remained below the cut-off mark of 50.

Commodity, Currency Markets

Crude oil futures are rising USD0.44 to USD96.85 a barrel after receding USD0.94 to USD96.41 a barrel on Monday. Meanwhile, gold futures are climbing USD1.70 to USD1,301 an ounce. On Monday, gold fell USD6.90 to USD1,299.30 an ounce.

Among currencies, the US dollar is trading at 102.68 yen compared to the 102.57 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at USD1.3328 compared to yesterday's USD1.3364.

Asia

The major Asian markets advanced solidly, encouraged by the positive close on Wall Street overnight.

The alleviation of geopolitical and economic concerns led to a retreat by the yen, which sent Japanese stocks higher. The Nikkei 225 average opened higher and moved roughly sideways for the rest of the session. The index ended up 127.19 points or 0.83% at 15,450.

A majority of stocks advanced in the session, led by export stocks. However, some pharma, retail, construction and banking stocks declined.

Australia's All Ordinaries also hovered in positive throughout the session before ending at 5,618, up 37.80 points or 0.68%.

Most sectors advanced, with the exception of telecom and IT stocks. Material stocks advanced strongly ahead of BHP Billiton's (BHP) results. After the close of trading, the miner announced full year earnings that were in line with expectations. The company also announced plans to divest some non-core assets, including coal mines, in a spin-off.

After trading with modest gains for much of the session, Hong Kong'sHang Seng Index rallied strongly in late trading, closing 167.49 points or 0.67% higher at 25,123. China's Shanghai Composite ended up 5.86 points or 0.26% at 2,245.

On the economic front, the minutes of the Reserve Bank of Australia's August meeting showed that interest rates could be maintained at record low levels in the near future, given an uncertain economic outlook. The central bank also dwelled on the notable degree of spare capacity in the labor market.

Revised data released by Japan'sCabinet Office showed that its leading economic indicators index rose 1.1 points to 105.9 in June, upwardly revised from the preliminary estimate of 105.5. The coincident index was also upwardly revised to 109.7 from 109.4, although it marked a decline from May's reading of 111.2.

Europe

European stocks are higher for the second straight session, as optimism concerning the economic recovery lingered. The mood was also rendered positive by some upbeat domestic corporate news.

A.P. Moeller-Maersk raised its full year earnings outlook after reporting better than expected second quarter profit. Homebuilder Persimmon also reported a strong increase in its first half underlying earnings. CRH reversed to a profit on an after-tax basis in the first half. Meanwhile, Cairn Energy's first half loss narrowed.

On the economic front, data released by the European Central Bank showed that the eurozone's current account surplus fell to 13.1 billion euros in June from 19.8 billion euros in May. The drop reflected a steep decline in the surplus on services trade and the widening of the deficit on current transfers.

The UK Office for National Statistics reported that annual consumer price inflation came in at 1.6% in July compared to expectations for a 1.8% rate. On a monthly basis, consumer prices were down 0.3%.

Meanwhile, output price inflation was down 0.1% both on a monthly and annual basis. This contrasts with expectations for a 0.2% monthly increase and unchanged prices compared to a year ago. Input price inflation fell more than expected.

US Economic Reports

Consumer prices saw only a modest increase in the month of July, according to a report released by the Labor Department, with higher prices for shelter and food offset by decreases in prices for energy and airline fares.

The Labor Department said its consumer price index ticked up by 0.1% in July after rising by 0.3% in June. The modest increase by the index matched economist estimates.

Excluding food and energy prices, the core consumer price index also inched up by 0.1% in July, matching the increase seen in the previous month. Economists had been expecting the core index to edge up by 0.2%.

After reporting a notable decrease in new residential construction for the previous month, the Commerce Department released a report showing a substantial rebound by US housing starts in the month of July.

The report said housing starts jumped 15.7% to an annual rate of 1.093 million in July after falling 4% to a revised 945,000 in June. Economists had been expecting housing starts to climb to a rate of 963,000 from the 893,000 originally reported for the previous month. With the substantial increase, housing starts rose to their highest level reaching a rate of 1.105 million in November of last year.

Stocks in Focus

Home Depot (HD) reported second quarter results that beat estimates and it also raised its earnings outlook for 2014. Dicks Sporting Goods' (DKS) second quarter results also exceeded expectations. The company confirmed its growth outlook for 2014. TJX Companies (TJX) also reported second quarter results that were ahead of expectations and raised its adjusted earnings guidance for fiscal year 2015,

Medtronic (MDT) also reported better than expected first quarter results and backed its outlook for the full year.

Eli Lilly (LLY) said the FDA has given tentative approval for Basaglar, an injectible form of insuline glargine, which is indicated to improve glycemic control in adults with type 2 diabetes. A tentative approval means the treatment has met all regulatory requirements for approval but is subject to an automatic stay of up to 30 months as a result of litigation filed by Sanofi (SNY) claiming patent infringement.

Amgen (AMGN) announced that the Phase III study of its treatment candidate for hyperparathyroidism in patients with chronic kidney disease has met its primary endpoint.

Aeropostale (ARO) said that Julian Geiger has rejoined the company as its CEO, effective immediately after its board and Thomas Johnson mutually agreed to Johnson stepping down from the post of CEO.

PDL BioPharma (PDLI) reported second quarter earnings and revenues that exceeded estimates. The company also stated that it will provide revenue guidance for the third quarter in September.

Urban Outfitters' (URBN) second quarter earnings were in line, while its revenues beat estimates.

American Financial Group (AFG) announced a 14% increase to its annual dividend to USD1 per share.

Kulicke & Soffa (KLIC) announced the appointment of Garrett Pierce as the Chairman of its board, replacing MacDonell Roehm Jr., effective September 28, 2014. Pierce is retiring after having reached the company's customary retirement age.



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Source: Alliance News


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