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Upbeat Earnings, Retail Sales Data May Generate Buying Interest
US Market
The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to regain ground following the sell-off seen last Friday.
A positive reaction to earnings news from Goldman Sachs (GS) may generate early buying interest, as the investment banking company is surging by 4.1 percent in pre-market trading.
The jump by Goldman Sachs comes after the company reported first quarter earnings that far exceeded analyst estimates on better than expected revenues.
Positive sentiment may also be generated in reaction to a Commerce Department report showing much stronger than expected U.S. retail sales growth in the month of March.
The Commerce Department said retail sales climbed by 0.7 percent in March after advancing by an upwardly revised 0.9 percent in February.
Economists had expected retail sales to rise by 0.3 percent compared to the 0.6 percent increase originally reported for the previous month.
Excluding a pullback by sales by motor vehicle and parts dealers, retail sales jumped by 1.1 percent in March after climbing by 0.6 percent in February. Ex-auto sales were expected to rise by 0.4 percent.
Bargain hunting may also contribute to an early rebound on Wall Street, as traders pick up stocks at relatively reduced levels.
The steep drop seen last Friday dragged the Dow down to its lowest closing level in well over two months, while the S&P 500 fell to a nearly one-month closing low.
U.S. stocks closed sharply lower on Friday, as geopolitical tensions, inflation worries and mixed earnings and guidance from major banks rendered the mood a bit bearish.
The major averages all ended in the red. The Dow ended with a loss of 475.84 points or 1.2 percent at 37,983.24. The S&P 500 tumbled 75.65 points or 1.5 percent to 5,123.41, while the Nasdaq settled at 16,175.09, plunging 267.10 points or 1.6 percent.
The Dow shed nearly 2.5 percent for the week, while the S&P 500 and the Nasdaq dropped by about 1.6 percent and 0.5 percent, respectively.
Shares of Citigroup (C) fell by about 1.7 percent after the company reported a 27 percent drop in net income in the first quarter, due to lower non-interest revenue, as well as higher expenses and cost of credit.
JPMorgan Chase & Co. (JPM) tumbled nearly 6.5 percent, weighed down by lower net interest income. The lender reported a 6 percent increase in first quarter profit. For the first quarter, net income increased to $13.42 billion or $4.44 per share from $12.62 billion or $4.10 per share in the prior-year quarter.
Wells Fargo Inc (WFC) reported first-quarter net income of $4.62 billion or $1.20 per share, down from last year’s $4.99 billion or $1.23 per share. The stock ended modestly lower.
Inflation concerns continued to weigh on the markets, as the Labor Department released a report showing import prices in the U.S. increased by slightly more than expected in the month of March.
The report said import prices climbed by 0.4 percent in March after rising by 0.3 percent in February. Economists had expected import prices to increase by another 0.3 percent.
Import prices also rose by 0.4 percent compared to the same month a year ago, marking the first year-over-year increase since January 2023.
Meanwhile, the Labor Department said export prices rose by 0.3 percent in March after climbing by a revised 0.7 percent in February. The increase in export prices matched economist estimates.
Compared to the same month a year ago, export prices were down by 1.4 percent in March following a 1.8 percent slump in February.
A report showing a bigger than expected drop in consumer sentiment in April also generated selling pressure. The University of Michigan said its consumer sentiment fell to 77.9 in April from 79.4 in March. Economists had expected the index to edge down to 79.0.
The report also said year-ahead inflation expectations rose to 3.1 percent in April from 2.9 percent in March, climbing just above the 2.3-3.0 percent range seen in the two years prior to the pandemic.
U.S. Economic Reports
The Commerce Department released a report on Monday showing U.S. retail sales increased by much more than expected in the month of March.
The report said retail sales climbed by 0.7 percent in March after advancing by an upwardly revised 0.9 percent in February.
Economists had expected retail sales to rise by 0.3 percent compared to the 0.6 percent increase originally reported for the previous month.
Excluding a pullback by sales by motor vehicle and parts dealers, retail sales jumped by 1.1 percent in March after climbing by 0.6 percent in February. Ex-auto sales were expected to rise by 0.4 percent.
A separate report released by the Federal Reserve Bank of New York showed regional manufacturing activity has contracted at a slower rate in the month of April.
The New York Fed said its general business conditions index climbed to a negative 14.3 in April from a negative 20.9 in March, although a negative reading still indicates contraction. Economists had expected the index to jump to a negative 9.0.
Looking ahead, the New York Fed said firms still expect conditions to improve over the next six months, but the index for future business conditions fell to 16.7 in April from 21.6 in March.
At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of April. The housing market index is expected to come in unchanged in April after climbing to 51 in March.
The Commerce Department is also due to release its report on business inventories in the month of February at 10 am ET. Business inventories are expected to rise by 0.3 percent in February after coming in unchanged in January.
At 8 pm ET, San Francisco Federal Reserve President Mary Daly is scheduled to speak a before hybrid Associates Meeting of the 2024 Stanford Institute for Economic Policy Research.
Europe
European stocks are mostly higher on Monday as investors weigh Israel’s possible response to Iran’s unprecedented drone and missile attack, which the Israeli government said caused limited damage.
There was some cheer on the data front as the latest Eurostat figures showed industrial production in the eurozone rebounded in February, led by output increases in larger nations.
While the French CAC 40 Index and the German DAX Index have both jumped by 1.3 percent, the U.K.’s FTSE 100 Index has inched up by 0.1 percent.
Swiss software firm Temenos has soared. The company said a “special committee” formed by its board found that accusations in a report by Hindenburg Research were incorrect and misleading.
Ageas has also jumped on news that France’s BNP Paribas would acquire Fosun Group’s 9 percent shareholding in the Belgian insurer for around €730 million.
British nutrition company Glanbia has also surged after it inked a deal to acquire U.S.- based Flavor Producers LLC for an initial consideration of $300 million.
Facilities management firm Mitie Group has also shown a significant move to the upside after launching a share buyback.
Inchcape has also spiked. The automotive distributor has agreed to sell its UK retail operations to Group 1 Automotive UK for 346 million pounds.
German sportswear maker Adidas has also jumped after Morgan Stanley upgraded its rating on the stock to Overweight from Underweight.
Meanwhile, emerging markets fund manager Ashmore Group has tumbled after its assets under management fell 4 percent over the third quarter of fiscal 2024.
Telenor ASA has also fallen. The Norwegian telecom major said its CFO, Tone Hegland Bachke has decided to leave the company to join SHV Holdings N.V.
Asia
Asian stocks retreated on Monday as Iran’s drone attack against Israel sparked worries about inflation and the outlook for interest rates.
Risk appetite weakened, while the dollar held firm and gold prices surged amid speculation over whether Israel will retaliate against Iran’s unprecedented drone and missile attack on Saturday night, which marked the first time Iran had ever launched a military assault on Israel.
Oil prices fell slightly in Asian trading but there were fears that Brent could surpass $100 a barrel on concerns over potential supply disruptions, as the conflict escalates.
Mainland Chinese stocks rallied after the government pledged more support to stabilize the country’s stock markets. Also helping underpin sentiment, developer China Vanke Co. said it’s making plans to resolve liquidity pressure and short-term operational difficulties.
The benchmark Shanghai Composite Index jumped 1.3 percent to 3,057.38, while Hong Kong’s Hang Seng Index settled 0.7 percent lower at 16,600.46.
Earlier today, the People’s Bank of China left a key policy interest rate unchanged as widely expected when rolling over maturing medium-term loans.
Japanese markets fell notably amid Middle East tensions and uncertainty over the pace of Fed rate cuts this year.
The Nikkei 225 Index ended down 0.7 percent at 39,232.80, recouping much of the day’ losses as data showed Japan’s core machinery orders rose a much stronger-than-expected 7.7 percent in February from the previous month. The broader Topix Index settled 0.2 percent lower at 2,753.20.
Tech stocks such as Advantest and SoftBank Group fell 1-2 percent, while drugmaker Astellas plunged 8 percent and department store operator Takashimaya plummeted 6.7 percent on disappointing earnings.
Seoul stocks closed lower, while the won hit a 17-month low as investors awaited Israel’s future course of response. The Kospi dropped 0.4 percent to 2,670.43.
Korean Airlines, Samsung Electronics and Asian Airlines lost 1-3 percent, while refiner S-Oil gained 1.7 percent on hopes for higher petrochemical product prices.
Australian markets finished lower, though a surge in metal prices boosted some mining stocks. The benchmark S&P ASX 200 Index slipped 0.5 percent to 7,752.50, while the broader All Ordinaries Index ended down 0.5 percent at 8,009.40.
Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index edged down 0.1 percent to 11,916.78 after the release of weak service sector activity data for March.
Commodities
Crude oil futures are falling $0.62 to $85.04 a barrel after climbing $0.64 to $85.66 a barrel last Friday. Meanwhile, after inching up $1.40 to $2,374.10 an ounce in the previous session, gold futures are edging down $2.70 to $2,371.40 an ounce.
On the currency front, the U.S. dollar is trading at 154.30 yen versus the 153.23 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0636 compared to last Friday’s $1.0643.
