Upbeat Earnings, Stimulus Optimism May Generate Early Buying Interest

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks likely to add to the gains posted in the previous session.

A positive reaction to the latest earnings news may contribute to initial strength on Wall Street along with continued optimism about more fiscal stimulus.

Shares of Netflix (NFLX) are moving sharply higher in pre-market trading after the video streaming giant reported strong fourth quarter subscriber growth, with total subscribers exceeding 200 million.

Netflix reported fourth quarter earnings that missed estimates, although its revenues came in better than expected and the company said it will explore returning cash to shareholders through ongoing stock buybacks.

Consumer products giant Procter & Gamble (PG) is also likely to see initial strength after reporting better than expected fourth quarter results, as the pandemic increased demand for cleaning products.

Shares of Morgan Stanley (MS) may also move to the upside after the financial giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Traders are also likely to keep an eye on developments in Washington as former Vice President Joe Biden is sworn in as the 46th President of the United States.

Biden has called for additional stimulus and an accelerated coronavirus vaccine rollout, which has helped offset concerns about higher taxes and increased regulation under a Democratic administration.

The incoming president is expected to sign several executive orders shortly after taking office, including orders to rejoin the Paris climate agreement and end President Donald Trump’s Muslim travel ban as well as the construction of the U.S.-Mexico border well.

Stocks moved mostly higher during trading on Tuesday as traders returned to their desks following the long holiday weekend. The tech-heavy Nasdaq ended the session just shy of the record closing high set earlier this month.

The major averages all closed in positive territory, with the Nasdaq outperforming its counterparts. While the Nasdaq jumped 198.68 points or 1.5 percent to 13,197.18, the Dow rose 116.26 points or 0.4 percent to 30,930.52 and the S&P 500 climbed 30.66 points or 0.8 percent to 3,798.91.

The strength on Wall Street came following the losses seen last week, when the Dow slid by 0.9 percent and the Nasdaq and the S&P 500 both slumped by 1.5 percent.

The major averages saw notable weakness last Friday after turning lower over the course of the session on Thursday, with the Dow and the Nasdaq pulling back after reaching record intraday highs.

The markets also benefited from continued optimism about additional stimulus as well as a faster rollout of coronavirus vaccines under incoming President Joe Biden.

Traders kept an eye on remarks from Treasury Secretary nominee Janet Yellen during her confirmation hearing before the Senate Finance Committee.

In prepared remarks, Yellen called for additional stimulus to address the impact of the ongoing coronavirus pandemic, arguing the government needs to “act big.”

Yellen acknowledged the mounting national debt facing the incoming administration but claimed the benefits of another relief package will far outweigh the costs.

Meanwhile, a steep drop by shares of Goldman Sachs (GS) limited the upside for the Dow, with the financial giant slumping by 2.3 percent despite reporting better than expected fourth quarter results.

Bank of America (BAC) also moved to the downside after reporting better than expected fourth quarter earnings but on revenues that missed estimates.

Semiconductor stocks moved sharply higher over the course of the session, driving the Philadelphia Semiconductor Index up by 3.4 percent to a new record closing high.

Considerable strength was also visible among oil stocks, as reflected by the 2.4 percent jump by the NYSE Arca Oil Index. The rally by oil stocks came amid an increase by the price of crude oil.

Biotechnology stocks also saw significant strength on the day, resulting in a 1.8 percent advance by the NYSE Arca Biotechnology Index. The index reached its best closing level in six months.

Housing, software and pharmaceutical stocks also moved notably higher, while some weakness was visible among natural gas stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.51 to $53.49 a barrel after climbing $0.62 to $52.98 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,839.60, down $0.60 compared to the previous session’s close of $1,840.20. On Tuesday, gold advanced $10.30.

On the currency front, the U.S. dollar is trading at 103.80 yen compared to the 103.90 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2103 compared to yesterday’s $1.2129.

Asia

Asian stocks ended mostly higher on Wednesday after U.S. Treasury Secretary nominee Janet Yellen backed major fiscal stimulus to help workers and businesses battered by the coronavirus pandemic.

Investors remained optimistic about additional stimulus and a faster rollout of coronavirus vaccines under incoming U.S. President Joe Biden, who will be sworn into office later today.

Chinese shares fluctuated before finishing higher as the country’s central bank left lending rates unchanged, as widely expected. The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

The benchmark Shanghai Composite Index rose 16.71 points, or 0.5 percent, to 3,583.09, while Hong Kong’s Hang Seng Index jumped 320.19 points, or 1.1 percent, to 29,962.47.

Meanwhile, Japanese shares closed lower as the dollar slipped against the yen amid the beginning of the Biden administration in the U.S.

The Nikkei 225 Index dropped 110.20 points, or 0.4 percent, to 28,523.26, while the broader Topix closed 0.3 percent lower at 1,849.58.

ANA Holdings tumbled 3.4 percent after reports that the airline will likely report a record ordinary loss for the nine months through December. Japan Airlines gave up 1.8 percent.

Tokyo Electric Power surged 7.6 percent after Japan’s wholesale electricity prices hit the maximum possible for a third day on the back of colder winter weather and dwindling fuel supplies.

Australian markets eked out modest gains amid expectations that Covid-19 restrictions will soon be eased in New South Wales and Queensland.

The benchmark S&P/ASX 200 Index rose 27.80 points, or 0.4 percent, to 6,770.40, while the broader All Ordinaries Index ended up 36 points, or 0.5 percent, at 7,051.

Energy stocks such as Woodside Petroleum, Santos, Origin Energy and Oil Search climbed 1-2 percent as oil prices rose on U.S. stimulus hopes.

Tech stocks followed their U.S. peers higher, with Afterpay surging as much as 5.2 percent after Netflix topped subscriber growth expectations in the past quarter.

Mining giant BHP Group gained 0.9 percent after forecasting record iron ore output. Banks ANZ, Commonwealth and NAB fell between half a percent and 0.9 percent amid bets the Australian central bank will extend its A$100 billion ($77.05 billion) government bond-buying program beyond April.

Aged care services provider Regis Healthcare slumped 8.1 percent after investment firm Washington H. Soul Pattinson and Co. withdrew a A$556.4 million ($428.3 million) takeover offer.

Consumer confidence in Australia took a hit in January, the latest survey from Westpac Bank revealed, with a consumer confidence index score of 107.0 – down from 112.0 in December.

Seoul stocks rose for the second straight day, with the benchmark Kospi gaining 21.89 points, or 0.7 percent, to settle at 3,114.55. Kia Motors rose over 5 percent after a 17 percent rise the previous day.

Home appliance maker LG Electronics soared 12.8 percent after saying it was considering all options to decide what to do with its loss-making mobile business.

Europe

European stocks have risen Wednesday on the back of a slew of positive earnings releases and U.S. Treasury Secretary nominee Janet Yellen’s pledge to “act big” on stimulus to reinvigorate the world’s largest economy.

Joe Biden will be sworn-in as the 46th President of the U.S later today after a long stint in politics spanning over four decades. He has already outlined a $1.9 trillion economic relief package to jump-start the economy.

While the U.K.’s FTSE 100 Index has inched up by 0.1 percent, the French CAC 40 Index is up by 0.4 percent and the German DAX Index is up by 0.7 percent.

Dutch semiconductor equipment maker ASML Holding has moved notably higher. The company reported that its fourth-quarter net income rose to 1.35 billion euros from 1.13 billion euros in the same quarter last year.

Similarly, Swiss luxury goods group Compagnie Financiere Richemont has also rallied after revenue rose in its third quarter.

Nicox SA shares have also risen. The ophthalmology company reported net revenue for the full year 2020 of 8.9 million euros compared to 6.9 million euros, prior year.

Chemical company BASF Group has also climbed. The company reported that its preliminary sales for the fourth quarter of 2020 increased 8 percent to 15.91 billion euros from last year’s 14.69 billion euros, driven by higher volumes and prices.

Hochschild Mining has also surged higher. The company reported that its overall 2020 attributable production was 289,293 gold equivalent ounces or 24.9 million silver equivalent ounces, at the high end of the company’s revised forecasts.

Meanwhile, Bilfinger has fallen. The civil engineering company announced that CEO Tom Blades has decided not to extend his contract beyond June 30, 2021 for personal reasons and against the background of his reaching the age of 65.

IWG, an operator of workspace brands, has also slumped. The company said its Group revenue for the year 2020 is anticipated to be approximately 2.45 billion pounds.

In economic news, U.K. consumer price inflation doubled in December on higher transport and recreation costs, data released by the Office for National Statistics showed.

Inflation accelerated to 0.6 percent from 0.3 percent in November. The rate was above economists’ forecast of 0.5 percent. Month-on-month, consumer prices advanced 0.3 percent, reversing a 0.1 percent drop in November and faster than the expected rate of 0.2 percent.

U.S. Economic Reports

The National Association of Home Builders is due to release its report on homebuilder confidence in the month of January at 10 am ET. The housing market index is expected to come in unchanged at 86.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $24 billion worth of twenty-year bonds.

Stocks In Focus

Shares of Pearson (PSO) are moving notably higher in pre-market trading after the education company reported an increase in fourth quarter sales due strong growth in online learning and said its sees sales and profit in line with expectations for the full year.

Chinese e-commerce giant Alibaba (BABA) is also likely to see initial strength after billionaire founder Jack Ma made his first public appearance in nearly three months.

Shares of Disney (DIS) may also move to the upside after the entertainment giant revealed it has eliminated bonuses for top executives, including Executive Chairman Bob Iger due to the impact of the COVID-19 pandemic.

On the other hand, shares of UnitedHealth (UNH) are seeing pre-market weakness even though the health insurer reported better than expected fourth quarter results.