Opening Bell: U.S. Futures Waver Ahead Of Fed Minutes; Oil Slips

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  • European, Asian indices gain
  • US futures reverse early gains ahead of FOMC minutes release
  • Dollar consolidates as Treasury yields hold above 3.1 percent

Key Events

Global stocks gained ground this morning after US equities posted their best performance in six months yesterday, as upbeat earnings reports dispelled fears that the US-China trade war would hamper corporate growth. However, futures tracking the S&P 500, Dow and NASDAQ 100 started edging lower as the European morning session progressed, as US investors’ attention moved to the upcoming release of the minutes from the Fed’s latest monetary policy meeting.

Opening Bell: U.S. Futures Waver Ahead Of Fed Minutes; Oil Slips

Netflix Daily Chart

Netflix (NASDAQ:NFLX) shares spiked 14 percent in after hours trading after the media company reported a seven million surge in subscribers to 137 million—a third more than expected. Net profit for the July to September period more than tripled compared to the same quarter last year, from $130 million to $403 million.

Revenues gained $ 4 billion, or 34 percent. The stock had already rallied 4 percent ahead of its Q3 2018 report, closing at $346.40 for an aggregate surge of 78 percent this year, which brings the company’s market cap to almost $154 billion. As of 3:38 EDT, the futures price of the stock is $384.10, an additional 10.88 percent rise since yesterday’s close.Technically, it is below the $386.680 peak posted on October 2, suggesting potential supply might still push back.

European shares on the STOXX Europe 600 are building on yesterday’s US technology rally, with tech and and chemical company shares edging higher after positive earnings results from chipmaker ASML Holding (AS:ASML) and Roche Holding (SIX:RO).

Earlier, during Asian trade, the MSCI Asia Pacific Index rebounded from its lowest level since May 2017, helped via a leap forward by Japan’s Nikkei 225) (+1.29), the leader of the regional pack. Australia’s S&P/ASX 200 (+1.18 percent) came in a close second, followed by South Korea’s KOSPI (+1.04 percent).

Recent threats of further tariffs by US President Donald Trump seem to have kept China’s equity market bulls at bay. The Shanghai Composite posted a moderate 0.6 percent gain and Hong Kong’s Hang Seng barely eked out a profit of 0.07 percent.

Global Financial Affairs

Conversely, during yesterday’s US session, corporate optimism helped bulls resume Friday’s run, propelling prices to their highest in six months.

Opening Bell: U.S. Futures Waver Ahead Of Fed Minutes; Oil Slips

SPX Daily Chart

The S&P 500 surged 2.15 percent, with all sectors closing in the green and even “laggard” Utilities (+1.03 percent) gaining over a full percentage point. Technology (+3.01 percent) was the clear leader, followed by Communication Services (+2.64 percent). The SPX’s aggregate gains from last week’s selloff stands at 3 percent, which pares the drop since the record close of a little over a month ago to 4.3 percent. Technically, the price jumped back over the 200 DMA and is below the 100 DMA.

The Dow Jones Industrial Average leaped even higher, gaining 2.17 percent. All 30 stocks that make up the mega cap industrial index advanced. The total rebound from last week’s selloff is 2.95 percent, which has trimmed the slide since the index’s record close two weeks ago to 3.7 percent. Technically, the price jumped back above the 100 DMA and is below the 50 DMA. It crossed back above the 200 DMA last Friday.

The NASDAQ Composite outperformed its peers, climbing 2.89 percent—the most since March. Technically, the price opened above the 200 DMA and advanced toward the 100 DMA. UnitedHealth Group (NYSE:UNH) jumped 4.83 percent to a new all-time high, bolstering health care firms, while Adobe’s (NASDAQ:ADBE) upbeat forecasts lifted the software maker’s stock by a whopping 9.53 percent, a gain of 5.69 percent from the stock’s record close two weeks ago.

IBM (NYSE:IBM) slipped lower in late trading as the IT company’s revenue missed analyst targets.

The Russell 2000 edged 2.82 percent higher, its sharpest climb since the day after the 2016 presidential election. Technically, it closed below its broken uptrend line since the February 2016 bottom, after being the only major US benchmark to violate that trend line.

So far, stocks have been falling on fear and speculation over ongoing geopolitical issues but gaining on fundamentals. As long as macroeconomic data continues to show an expanding economy and companies keep demonstrating growth, prompting demand to outpace supply as can be seen on the technical charts, stocks should continue to advance.

The only fundamental caveat comes from rising interest rates. Investors will need to decide at what point the cost of borrowing offsets the benefit of economic and company growth. Meanwhile, we can expect continued volatility as investors shift positions according to a fluid decision-making process and speculators react to rumors.

Commodities and FX markets remained steady this morning, ahead of economic data and the EIA oil inventory report.

WTI slipped lower, as renewed global headwinds outweighed supply concerns.

The dollar is consolidating for a fourth day, following a sideways move on US Treasury yields above 3.1 percent, for the fifth consecutive session.

Up Ahead

  • Minutes from the Fed will be published on Wednesday.
  • Also today, the EIA crude oil inventory report is due
  • Euro area CPI was released today
  • China’s third-quarter GDP come out on Friday, in addition to last month’s retail sales and factory output.

Market Moves

Stocks

  • Futures on the S&P 500 advanced 0.2 percent.
  • The STOXX Europe 600 ticked 0.5 percent higher to the highest level in a week.
  • The UK’s FTSE 100 edged 0.3 percent higher to the highest level in a week.
  • Germany’s DAX gained 0.4 percent to the highest level in more than a week.
  • The MSCI Asia Pacific Index climbed 0.9 percent to the highest level in a week.
  • The MSCI Emerging Market Index inched 0.3 percent higher to the highest level in more than a week.

Currencies

  • The Dollar Index gained less than 0.05 percent.
  • The euro dropped less than 0.05 percent to $1.1571.
  • The British pound climbed less than 0.05 percent to $1.3186.
  • The Japanese yen was unchanged at 112.25 per dollar, the strongest level in a week.

Bonds

  • The yield on 10-year Treasuries dropped one basis point to 3.16 percent.
  • Germany’s 10-year yield slipped two basis points to 0.47 percent, the lowest level in more than two weeks.
  • Britain’s 10-year yield slid two basis points to 1.587 percent, hitting the lowest level in two weeks with its fifth straight decline.
  • The spread of Italy’s 10-year bonds over Germany’s fell 12 basis points to 2.9624 percentage points to the smallest premium in a week.

Commodities

  • West Texas Intermediate crude climbed 0.2 percent to $72.09 a barrel, the highest level in a week.
  • Gold fell 0.1 percent to $1,223.31 an ounce.

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