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MARKET ANALYSIS: Market Optimism Could Temper Amid Mixed Earnings News
[July 23, 2014]

MARKET ANALYSIS: Market Optimism Could Temper Amid Mixed Earnings News


(Alliance News Via Acquire Media NewsEdge) WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on Wednesday, with sentiment mildly positive following the release of some mixed earnings news. While tech earnings have been mixed, earnings from Boeing, Pepsi and some defense contractors have been positive. Geopolitical tensions could escalate following a pause yesterday, as reports emerged that fresh fighting picked up pace in the rebel controlled region in Ukraine. With limited economic catalysts to sway to, the markets could go about a consolidation move as they digest the mixed earnings catalyst.



US stocks advanced on Tuesday, with some positive earnings news, an easing of geopolitical tensions and upbeat existing home sales data providing an upward thrust to the markets. With the gains, the Dow Industrials and the S&P 500 Index climbed back toward their record closing highs.

The major averages opened higher and saw further upside in early trading before moving roughly sideways for the rest of the session. The Dow Industrials ended up 61.81 points or 0.36% at 17,114, the S&P 500 Index closed 9.90 points or 0.50% higher at 1,984 and the Nasdaq Composite added 31.31 points or 0.71% before closing at 4,456.


Twenty of the thirty Dow components closed higher, with Intel (INTC), Goldman Sachs (GS) and IBM (IBM) leading the gains. On the other hand, United Technologies (UTX), Travelers (TRV), McDonald's (MCD) and Coca-Cola (KO) came under pressure in reaction to their financial results.

Transportation, biotechnology, computer hardware, housing and oil service stocks saw notable strength, while gold stocks bucked the uptrend.

On the economic front, the Labor Department reported that consumer prices rose 0.3% month-over-month in June, while core consumer prices were up 0.1%. The annual consumer and core consumer inflation rates were 2.1% and 1.9%, respectively. While food prices were nearly flat, energy prices rose sharply, led by a jump in gasoline prices.

The National Association of Realtors reported that existing home sales rose to a seasonally adjusted annual rate of 5.04 million units in June from a 4.91 million-unit rate in May. Inventories measured in terms of months of supply were unchanged at 5.5 months. The median sales price of an existing home was up 4.3% year-over-year, the slowest rate of growth since 2012. First time buyers accounted for 28% of the total sales, up from 27% in May.

The results of the Federal Housing Finance Agency's house price survey showed that its house price index rose a better than expected 0.4% month-over-month in May. The annual increase by the index was 5.5%.

Commodity, Currency Markets Crude oil futures are inching up USD0.10 to USD102.49 a barrel after sliding USD0.47 to USD102.39 a barrel on Tuesday. Meanwhile, an ounce of gold is currently trading at USD1,309.40, up USD3.10 from the previous session's close of USD1,306.30. On Tuesday, gold fell USD7.60.

Among currencies, the US dollar is trading at 101.38 yen compared to the 101.46 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at USD1.3465 compared to yesterday's USD1.3455.

Asia Most Asian markets closed higher, although the Japanese and South Korean markets saw modest weakness. The markets in the region drew inspiration from Wall Street, which ended higher overnight.

Australia's All Ordinaries opened higher and advanced steadily in the morning. After the mid-session, the index gradually gave back some of its gains yet closed 33 points or 0.60% higher at 5,567. The market witnessed broad based strength, with material and real estate stocks leading the gains.

Hong Kong's Hang Seng Index added 189.76 points or 0.80% before closing at 23,972, and China's Shanghai Composite Index ended up 3.01 points or 0.14% at 2,079.

Meanwhile, after holding mostly above the unchanged line till the mid-session, Japan's Nikkei 225 Index retreated in the afternoon before closing down 14.72 points or 0.10% at 15,329. Export stocks saw mixed sentiment, while chemical, utility, telecom, retail, real estate and bank stocks saw weakness.

On the economic front, a report released by the Australian Bureau of Statistics showed that consumer prices in Australia rose 3% year-over-year in the second quarter, in line with estimates. The trimmed median measure of inflation compiled by the Reserve Bank of Australia was up 2.7% in the second quarter, also in line with estimates. The trimmed mean measure of inflation accelerated more than expected to 2.9%.

Europe After a weak start, European stocks have recovered and have recouped their losses amid the release of some key domestic earnings news. While the French and the German markets are moderately higher, the UK market is witnessing a modest loss.

Switzerland's ABB reported a decline in its second quarter earnings that came in below estimates by most analysts. Syngenta reported a small drop in its first half profits, with cold weather in North America impacting its performance. Akzo Nobel reported better than expected second quarter earnings, while its sales declined due to adverse currency effects.

Alstom's second quarter sales declined, while the company reported strong growth in orders. STMicroelectronics reported a profit for its second quarter and predicted 3% sales growth for the third quarter. Daimler reported strong results for its second quarter.

The minutes of the Bank of England's July Monetary Policy Committee meeting showed that the members unanimously decided to keep rates unchanged. Although the members concurred that there is no preset time scheduled for the first rate hike, there were divergent opinions, with one view emerging that the risk resulting from a rate a small rate increase is receding, while it was also felt that premature monetary policy normalization will leave the economy vulnerable.

US Economic Reports The Energy Information Administration is scheduled to release its weekly petroleum status report for the week ended July 18th at 10:30 am ET.

Crude oil stockpiles fell by 7.5 million barrels to 375 million barrels in the week ended July 11th. Inventories dropped near the upper limit of the average range for this time of the year.

Meanwhile, gasoline stockpiles increased by 0.2 million barrels and were in the middle of the average range. Distillate inventories rose by 2.5 million barrels but were near the lower limit of the average range.

Refinery capacity utilization averaged 91.3% over the four weeks ended July 11th compared to 89.6% over the four weeks ended July 4th.

Stocks in Focus Earnings Apple (AAPL) reported third quarter earnings that exceeded estimates, while its revenues were slightly shy of expectations. The company's fourth quarter revenue guidance was also a touch soft.

Boeing (BA) reported second quarter earnings that were ahead of estimates, while its revenues were slightly below estimates. The company raised its core earnings per share guidance for 2014. Among defense contractors, Northrop Grumman (NOC) and General Dynamics (GD) reported better than expected second quarter earnings. Northrop Grumman raised its earnings guidance for 2014.

Delta Airlines' (DAL) second quarter earnings and revenues were in line with estimates.

Pepsi (PEP) reported better than expected second quarter results and raised its full year core earnings per share guidance.

Meanwhile, Whirlpool's (WHR) second quarter results trailed estimates and the company trimmed its earnings forecast for 2014. Microsoft (MSFT) reported fourth quarter profits that fell year-over-year and came in below estimates, hurt by weakness in its recently acquired Nokia Devices and Services business, while its revenues were above estimates.

Among other tech companies, Unisys (UIS) reported first quarter results that trailed estimates. Programmable chipmaker Xilinx (XLNX) reported first quarter earnings that were ahead of estimates, while its revenues trailed expectations. The company also issued weak revenue guidance for its second quarter. Broadcom's (BRCM) second quarter adjusted earnings beat estimates, but its revenues were below estimates.

Linear Technology (LLTC) reported fourth quarter adjusted earnings and revenues that were ahead of estimates. The company expects first quarter revenues to rise 1-3% sequentially.

Juniper's (JNPR) second quarter results were better than expected, while its third quarter guidance was weak. VMWare's (VMW) second quarter results were also better than expected.

Insurer ACE (ACE) reported second quarter operating earnings and net premiums that were ahead of estimates.

AT&T (T), CA Tech (CA), Cheesecake Factory (CAKE), E*TRADE (ETFC), F5 Networks (FFIV), Facebook (FB), Gilead Sciences (GILD), Hanesbrand (HBI), Illumina (ILMN), MB Financial (MBFI), O'Reilly Auto (ORLY), Qualcomm (QCOM), Sallie Mae (SLM), Terex (TEX) and TripAdvisor (TRIP) are among the companies due to release their quarterly results after the close of trading.

Other Corporate News Manitowoc (MTW) said it has received a favorable initial determination from the US International Trade Commission in a patent infringement case filed against Sany.

TreeHouse Foods (THS) announced that it has completed an underwritten public offering of 4.95 million shares of its common stock. The net proceeds from the offering are to be used in part to fund the company's impending acquisition of Flagstone Foods.

Copyright RTT News/dpa-AFX

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