European shares looked downbeat this morning while futures on the S&P 500, Dow and NASDAQ 100 pointed to a firmer open in the upcoming U.S. session, as investors tried to find a clearer path across multi-layered themes such as positive economic data from China and mixed corporate earnings results from the U.S.
In the earlier Asian session, China’s Shanghai Composite (+0.29%) and Hong Kong’s Hang Seng (-0.02%) experienced some volatility after data showed China’s economy rebounded in the first three months of the year, with GDP, industrial production and retail sales all beating analysts' expectations.
While seeing the beneficial effects of the recent boost by Chinese policy makers to economic stimulus—with some domestic stocks also well positioned to benefit from renewed economic optimism—should help ease concerns about flagging global output, it also may have led investors to assume that additional pro-cyclical measures are unlikely.
In reaction to the news, the yield on China’s 10-year sovereign notes climbed to its highest level since November, crossing over the 200 DMA, after bottoming out earlier in the month.
Japan’s Nikkei 225 rose 0.25%.
Yesterday’s U.S. session saw all four major indices cling onto green territory as some high-profile companies posted conflicting signals on earnings momentum as well as on the broader economic outlook.
The S&P 500 eked out a 0.05% gain. Real Estate, which tumbled 2.36% despite the slower path to higher interest rates, Health Care, which gave up 2.05% in the absence of any positive catalyst, and Utilities, which slid 1.24% as traders sought risk, all weighed down on the index, preventing a more meaningful advance.
Financials (+1.41%) stocks led gains, boosted by BlackRock (NYSE:BLK) (3.25%) earnings results, with $6.61 EPS beating the $6.12 consensus and a $3.35 billion revenue coming in $2 billion above estimates. BlackRock’s surge offset weakness in Bank of America's (NYSE:BAC), which posted slightly better-than-expected EPS ($0.7 vs $0.66) but missed revenue expectations ($23 billion vs $23.2). Trading revenue fell 13% but topped analysts’ estimates. The stock still managed to pare early losses, posting a 0.13% gain. However, it was the group's subdued forward outlook that weighed the most on sentiment, as it reminded investors of the gloomy soft-guidance tone that spread among corporate's executives last year on the backdrop of trade war jitters, rising interest rates and a strengthening dollar.
Besides, we've recently discussed the fact that corporate profits are set to normalize and their net interest income is likely to grow at half the rate as last year—ironically just as the Fed halts its own path to normalization.
Overall, the SPX closed 0.81% below its Sept. 20 record close.
The Dow Jones Industrial Average climbed 0.26%, with Boeing (NYSE:BA) gaining ground (+1.67%) after the Federal Aviation Administration released its initial review of the anti-stall software—which was thought to have played a role in the company's two fatal 737 MAX plane crashes—finding the software is "operationally suitable." Earnings announcements by the aircraft company will be closely watched next week as shareholders look for clues as to how the aftermath of the plane crashes has impacted earnings momentum and long-term growth.
The NASDAQ Composite inched 0.3% higher to within 1.35% from its Aug. 20 record close. While Apple (NASDAQ:AAPL) pared gains to close flat, Qualcomm (NASDAQ:QCOM) jumped 23.21% on the news the two companies reached a settlement that will see Apple return to using Qualcomm's modem chips. The agreement also envisages a six-year patent license and a payment from Apple to Qualcomm. The latter stock gained a further 6.81% in after-trading.
Conversely, Apple dropped 0.26%. after market close. Technically, however, the stock may be setting itself up for a rally, as buyers absorb all the supply at these levels, developing a falling flag—bullish in its uptrend.
Netflix (NASDAQ:NFLX) added 3.04% after beating forecasts both on EPS ($0.76 vs $0.57) and on revenue ($4.52 billion vs $4.5 billion). However, the price slipped 0.75% after-hours, after the company warned rising prices may slow down growth.
Yields on 10-year Treasurys climbed for a second day, overtaking the downtrend line since early November, approaching the 100 DMA and, above that, the bottom-side of a symmetrical triangle.
The dollar wiped out yesterday’s gains, but held above the lows of the congestion since April 9—the bottom of a falling flag, bullish after the jump since late March.
Oil bounced over the $64 mark—perhaps completing a falling-flag pattern, bullish in the climb since March 29—after the latest Energy Information Administration's report showed a surprise drop in crude inventories.
In other news, the New Zealand dollar retreated after inflation slowed more than forecast, while the Australian dollar received a boost from China's upbeat figures, crossing above the 200 DMA for the first time in 13 months.
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