by Eli Wright
Global markets climbed modestly yesterday after a bounce in oil prices, brought on by renewed speculation of an OPEC output deal. The news also pushed energy company shares higher.
Mirroring optimism seen in European and US markets yesterday, Japan closed higher this morning. The Nikkei rose 1.1% overnight, to 17,862.21. However, the Hang Seng and Shanghai Composite reversed early gains, ending 0.1% lower, at 22,301 and 3,204, respectively.
In Europe the FTSE is down 0.2%, trading at 6,777; the DAX off 0.27%, at 10,707; the Euro Stoxx 50 is down 0.3% to 3,041.
The S&P 500 closed yesterday at 2,180, up 0.75%; the Dow ticked 0.29% higher, to 18,923.09; the NASDAQ gained 1.1%, to 5,275/62. In pre-market trading today the S&P is down 0.15%, the Dow and NASDAQ are both down 0.13%.
Treasuries remain largely unchanged after moving up sharply on Monday: the 10-year yield is currently 2.256%, the 30-year yield is 2.981%.
The financial sector has already benefited from the Trump election, and there's optimism among some market participants that additional advantages will be forthcoming. SEC Chair Mary Jo White, who has who has been in favor of lengthening banking regulations and has overseen Dodd-Frank announced she will leave her post when Trump takes office. Newly-appointed NASDAQ CEO Adena Friedman called for a more “balanced approach to regulation,” saying that President-elect Donald Trump's economic policies may boost trading and allow banks to take more risks.
Forex
The US Dollar Index, which has been performing strongly since Trump's election, received an additional boost yesterday on better-than-expected October US retail sales. It's currently at 100.34.
The USD hasn’t broken 100.45 since 2015, but, should it break that level, it could signal that the two-year sideways trend in the currency has ended, and that a move to 102, which hasn’t occurred since April, 2003, is possible.
Commodities
Oil prices pushed higher yesterday on expectations of falling shale output and renewed optimism of OPEC production cuts. An attack on a major Nigerian pipeline have also contributed to the move. Crude is currently trading at $45.41; Brent is $46.65.
The weekly EIA Crude Oil Inventories report will be released today at 10:30 AM ET.
Gold, always sensitive to the rise and fall of the USD has recently fallen. As the date for the next Fed rate hike decision approaches in December, demand for the precious metal could fall once again. The yellow metal is currently trading at $1,223.75.
Base metals, including copper, iron ore, and aluminum, all retreated, following gains after the election surprise. Analysts speculate that the industrial metals gained too much too quickly, and profit-takers are now hedging their bets.
Stocks
Two major tech companies report earnings after the close today:
Tech pioneer Cisco (NASDAQ:CSCO) reports Q1 2017 earnings, with expected EPS of $0.59 on $12.65 billion in revenue. Though this represents a slight YoY decline, Cisco has beaten expectations in eight of the past nine quarters. Longer term, the major concern for Cisco is whether it can expand its software revenues. Cisco’s core business remains hardware, switches and routers, which account for 45% of the company’s revenue. Recently, however, that market has stagnated.
Potential growth areas for the tech giant—collaboration (which includes cloud, video and conferencing services), wireless, and security—representing 9%, 5%, and 4% of total respective revenues, did not increase significantly in 2016. Remaining revenue derives mostly from services. This past quarter Cisco cut its workforce by 7%. Investors will want to see how Cisco plans to reinvest those savings. Additionally, if Cisco brings back some of its overseas cash at the discounted tax rates that Trump has promised corporations in order to get them to repatriate assets back to the US, higher dividend payouts might be on the horizon.
Storage and data management company NetApp (NASDAQ:NTAP) reports Q2 2017 earnings, with expected EPS of $0.54 on revenues of$ 1.43 billion. Netapp has consistently missed revenue forecasts for the previous nine consecutive quarters. The rise of cloud computing has damaged NetApp’s data center storage hardware business.
The company recently announced plans to cut 6% of its workforce, this on the heels of a 12% staff reduction already announced earlier this year. Investors will be interested to see whether the cost-cutting is merely a way to enhance the company's bottom line in the short-term, or if it will help streamline operations in order to enhance future growth. The big question for NTAP is far more crucial, however, and speaks to its current core competence: will the rise of cloud computing kill the company's data storage business? NTAP is making a concerted effort to become the go-to player in flash storage technology, a burgeoning market, and last year they purchased SolidFire, and its cloud-capable all-flash systems for $870 million.