by Eli Wright
In the face of ongoing global political and economic uncertainty, as well as falling oil prices after yesterday's API weekly crude oil stock release showed a bigger than expected build in inventories, traders appear to be playing it safe. Neither bulls nor bears can be said to definitively hold the reins right now. Of course, this could also be the calm before the next storm.
The Dollar Index is up a scant 0.15% this morning, back over the 100 mark, albeit barely, at 100.40; equity markets are mixed; and gold has dipped lower.
Overnight in Asia, the Nikkei rose 0.45% to 18,996; the Shanghai Composite gained 0.46% to 3,167.45; and the Hang Seng moved 0.82% higher, to 23,524.
In Europe, the FTSE is 0.25% lower, at 7,168.75; the DAX is up 0.05%, at 11,555; and the Stoxx 50, is 0.06% higher, at 3,236.50.
Wall Street indices pared gains yesterday after the Department of Commerce reported that the US recorded a $502B trade deficit in 2016, the largest in four years. Though the Dow reached an intraday record high of 20,155.35, it closed lower at 20,090.29, for a daily gain of 0.19%. The NASDAQ also notched a midday record of 5,196.27; but it ended the day at 5,185.88, up 0.35%. The S&P 500 eked out a 0.02% gain, closing at 2,293.08; it’s still hovering near its record high, the benchmark 2,300.
Technical charts echo the current market malaise: the recent spate of indecisive candles—culminating in yesterday’s doji stars—indicate a lack of clear direction for traders.
Indeed, since the US election on November 8, there have been only two days where the S&P moved more than one percent. In both cases, it pushed higher. As Bespoke Investment Group points out, it’s been more than 80 days since the S&P last saw a decline of more than one percent.
Source: Bespoke Investment Group
Given these conditions, traders might very well react strongly to decisive market changes in either direction: if markets go markedly higher, profit-taking would certainly occur; conversely, a greater than 1% drop could see traders using the opportunity to enter new positions. For now though, despite the uncertainty, there are those who advise not betting against the S&P 500 just yet.
In pre-market trading, the major US indices are mixed: the Dow is 0.15% higher, the NASDAQ is flat; and the S&P is down 0.12%.
Looking at US Treasurys: 2- and 30-year yields are flat at 1.169% and 3.019% respectively, while the 10-year yield has increased to 2.397%.
Forex
The euro is down 0.15% against the dollar this morning, trading at 1.0663. The single currency continues to be pressured by anxiety surrounding upcoming elections in the Netherlands, France, Germany, and other EU nations, as well as by a deadlock among IMF members regarding the current terms of the Greek bailout; EU lenders want more austerity measures, while the IMF disagrees.
The USD is also higher against the Japanese yen, up 0.06%, at 112.47. Further upside exists for the pair at 113.72. However, we might not see any big moves until Friday, when President Trump meets with Japan’s Prime Minister Shinzo Abe.
The New Zealand Dollar is flat at 0.73, ahead of the Reserve Bank of New Zealand’s Interest Rate Decision.
Bitcoin is down 0.5%, to $1,047 as China's central bank called in several of the country’s exchanges for closed door meetings. On the upside, the crypto-currency is currently only seven percent off its recent high of $1,135 reached on January 4 and it could challenge that mark again before traders decide whether to take profits or look to further gains.
The digital currency could also receive a boost if, next month, the SEC decides in favor of a rule adjustment that would pave the way for the Winklevoss Bitcoin Trust ETF to trade on the Bats Global Markets exchange.
Commodities
Many analysts expected OPEC's production cuts to boost the price of oil, but crude has been moving lower since yesterday; it's down 0.81%, to $51.75, ahead of today’s EIA weekly crude inventory data. The forecast calls for an increase of 2.529M.
Brent is also trading lower, down 0.54%, to 54.76.
Natural gas rose 2.3% yesterday, to $3.13, but it’s down 0.26% today, to $3.122. Gas prices often fluctuate based on short-term weather forecasts. Approximately 50% of US homes rely on gas for heating and with predictions calling for mostly warmer-than-usual temperatures for the rest of the winter in significant parts of the US, prices could continue to fall. NatGas's next level of support can be found at $2.843.
Gold is down 0.25%, at $1,233.55, but the precious metal is still close to three-month highs and could move higher to $1,260.
Stocks
More than 150 companies report earnings today, including:
- Media and entertainment giant Time Warner (NYSE:TWX) which is expected to report Q4 2016 earnings per share of $1.19 on $7.71 billion in revenue.
- Fast food restaurant operator Yum! Brands (NYSE:YUM), which owns and licenses Pizza Hut, KFC, and Taco Bell among others, is slated to report Q4 2016 earnings, with expected EPS of $0.74 on revenue of $4.11 billion.
- Natural and organic foods supermarket chain Whole Foods (NASDAQ:WFM) is expected to announce Q1 2017 earnings per share of $0.39 on revenue of $4.98 billion.
- Goodyear Tire & Rubber (NASDAQ:GT) is expected to report Q4 2016 EPS of $0.87 on $3.93 billion in revenue/
- Two telecom and internet service providers also report: Level 3 Communications (NYSE:LVLT) expects Q4 2016 EPS of $0.44 on revenue of $2.07B while CenturyLink (NYSE:CTL) expects Q4 2016 EPS of $0.57 on revenue of $4.32B
- Four pharma giants report on Q4 2016: Sanofi (NYSE:SNY) expects EPS of $0.66 on revenue of $10.3B; GlaxoSmithKline (NYSE:GSK) expects EPS of $0.64 on revenue of $9.23B, Allergan (NYSE:AGN) expects EPS of $3.76 on revenue of $3.81B, and Mylan (NASDAQ:MYL) expects EPS of $1.42 on revenue of $3.22B
President Trump continues to wield a heavy hand in the markets: yesterday Big Pharma was jolted after White House Press Secretary Sean Spicer clarified Trump’s position on drug pricing during a press briefing by saying the president was "absolutely" in favor of programs like Medicare negotiating lower drug prices.
The S&P’s pharmaceutical sector fell 0.31% in the aftermath.
Source: Fidelity.com
Among the losers: Endo (NASDAQ:ENDP) fell 4.15%; Merck (NYSE:MRK) dropped 1.14%; Mallinckrodt (NYSE:MNK) declined 0.89%; Vertex Pharmaceuticals (NASDAQ:VRTX) finished down 0.66%; and Pfizer (NYSE:PFE) closed 0.47% lower.