Upbeat Earnings News May Generate Continued Buying Interest

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks poised to resume the upward trend seen in recent sessions.

Early buying interest may be generated in reaction to another batch of upbeat earnings news from a number of big-name companies.

Social media giant Twitter (TWTR) is seeing significant pre-market strength after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Coca-Cola (KO) may also move to the upside after the beverage giant reported better than expected fourth quarter earnings and forecast a return to sales growth in 2021.

Auto giant General Motors (GM) also reported fourth quarter earnings that beat expectations but warned a global semiconductor shortage could reduce its earnings this year.

Mattel (MAT), Yelp (YELP) and Bunge (BG) are among the other companies that reported better than expected quarterly results.

Traders also continue to express optimism about more fiscal stimulus, which has helped to propel stocks to new record highs in recent sessions.

After moving sharply higher over the past several sessions, stocks turned in a lackluster performance during trading on Tuesday. Despite the choppy trading, the tech-heavy Nasdaq inched up to a new record closing high.

The major averages ended the day on opposite sides of the unchanged line. While the Nasdaq crept up 20.06 points or 0.1 percent to 14,007.70, the Dow edged down 9.93 points or less than a tenth of a percent to 31,375.83 and the S&P 500 slipped 4.36 points or 0.1 percent to 3,911.23.

Traders seemed to be taking a breather following the advance seen in recent days, which drove all of the major averages to new record closing highs on Monday.

The Dow and the S&P 500 had both closed higher for six consecutive sessions, while the Nasdaq rose in five out of the six previous sessions.

Profit taking contributed to some initial weakness on Wall Street, although selling pressure was relatively subdued as traders worry about missing out on further upside.

Optimism about more fiscal stimulus also helped support the markets along with the recent slowdown in coronavirus infection rates.

House Democrats have unveiled a proposal providing $1,400 stimulus checks to individuals making up to $75,000 a year and couples who earn up to $150,000 a year.

Those income levels are unchanged from previous stimulus checks, although the proposal would phase out payments faster than previous bills and completely cut off individuals making more than $100,000 and couples making more than $200,000.

Among individual stocks, shares of Glu Mobile (GLUU) moved sharply higher after the mobile game developer agreed to be acquired by Electronic Arts (EA) for $12.50 per share in cash.

Apparel maker HanesBrands (HBI) also saw substantial strength after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Coty (COTY) came under pressure after the cosmetics company reported fiscal second quarter adjusted earnings that beat estimates but its revenues came in slightly below expectations.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Energy stocks saw considerable weakness, however, with traders cashing in on recent gains even as the price of crude oil once again rose to its highest closing level in over a year.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index slumped by 1.9 percent and the NYSE Arca Oil Index slid by 1.4 percent.

Profit taking also contributed to weakness among airline stocks, with the NYSE Arca Airline Index falling by 1.6 percent after ending the previous session at a nearly one-year closing high.

Housing and chemical stocks also moved to the downside on the day, while tobacco and networking stocks extended their upward trends.

Commodity, Currency Markets

Crude oil futures are rising $0.29 to $58.65 a barrel after climbing $0.39 to $58.36 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,855.10, up $17.60 compared to the previous session’s close of $1,837.50. On Tuesday, gold rose $3.30.

On the currency front, the U.S. dollar is trading at 104.57 yen compared to the 104.59 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2134 compared to yesterday’s $1.2119.

Asia

Asian stocks rose on Wednesday despite U.S. stocks finishing on a lackluster note overnight. Optimism about more fiscal stimulus and falling coronavirus infections rates helped to underpin investor sentiment to some extent.

Chinese shares posted strong gains in the last trading session before the Lunar New Year holiday as the latest inflation and bank lending data underscored a recovery in the world’s second-largest economy.

The benchmark Shanghai Composite Index jumped 51.60 points, or 1.4 percent, to 3.655.09, while Hong Kong’s Hang Seng Index ended up 562.53 points, or 1.9 percent, at 30,038.72.

Consumer prices in China were up 1.0 percent month-on-month in January, the National Bureau of Statistics said, in line with expectations following the 0.7 percent increase in December.

On a yearly basis, consumer prices fell 0.3 percent – shy of expectations for a flat reading following the 0.2 percent gain in the previous month.

The bureau also said that producer prices rose 0.3 percent year-on-year in January – missing forecasts for an increase of 0.4 percent after sinking 0.4 percent a month earlier.

China’s new bank loans surged to new highs in January, boosted by seasonal demand, while broad credit growth slowed, separate data showed.

Japanese shares edged up slightly to close at a fresh 30-year high, helped by robust corporate earnings. The Nikkei 225 Index inched up 57.00 points, or 0.2 percent, to 29,562.93, marking its highest finish since August 2, 1990. The broader Topix closed 0.3 percent higher at 1,930.82.

Automaker Toyota Motor climbed 1.7 percent and auto-parts supplier Denso edged up slightly after start-up Aurora agreed to a long-term strategic partnership with the firms. Nissan Motor surged 3.7 percent after revising its full-year outlook.

Honda Motor soared 5.1 percent as it reported a 144 percent surge in profit for the third quarter and raised its full-year outlook.

Australian markets advanced as investors cheered strong domestic earnings reports. The benchmark S&P/ASX 200 Index rose 35.70 points, or 0.5 percent, to 6,856.90, while the broader All Ordinaries Index ended up 31.70 points, or 0.5 percent, at 7,133.80.

Tech stocks followed their U.S. peers higher, with Afterpay climbing 4.2 percent and Wisetech Global adding 2.2 percent.

Commonwealth Bank of Australia, the nation’s largest lender, declined 1.5 percent despite reporting better than expected first-half cash profit and declaring a higher dividend.

Insurance Australia Group shares jumped 4.6 percent after the insurer posted impressive half-yearly results.

Northern Star Resources advanced 1.6 percent as the gold miner reported record profit, cashflow and interim dividends in its first-half results.

Viva Energy shares surged 6.3 percent and Origin Energy gained 1.4 percent after oil prices rose for a seventh straight session Tuesday to hit a 13-month high.

In economic news, a government report showed the total number of building permits issued in Australia climbed a seasonally adjusted 10.9 percent month-on-month in December, matching expectations.

Separately, the latest survey from Westpac Bank and the Melbourne Institute showed that a measure of consumer confidence in the country rose 1.9 percent to a reading of 109.1, following the 4.5 percent drop in January.

Seoul stocks gained ground to snap a two-session losing streak, with tech companies and automakers pacing the gainers ahead of the Lunar New Year holiday period, which runs from Thursday to Sunday.

The Kospi rose 15.91 points, or 0.5 percent, to 3,100.58. Naver rallied 2.2 percent, Hyundai Motor jumped 3.6 percent and its affiliate Kia Motors added 1.8 percent.

Europe

European stocks are showing a lack of direction on Wednesday as investors react to a mixed bag of earnings and watch for developments on U.S. coronavirus stimulus.

While the U.K.’s FTSE 100 Index is up by 0.1 percent, the German DAX Index and the French CAC 40 Index are nearly unchanged.

Maersk, the world’s largest container shipping line, has slumped after its EBITDA outlook for 2021 missed analyst estimates.

Homebuilder Persimmon has also dropped. The company said it has made a provision of 75 million pounds in its 2020 results to pay for its contribution to any necessary work on 26 buildings that may be affected by cladding safety issues.

Industrial gases company Air Liquide has also moved to the downside. After posting better than expected full-year sales, the company said it aims to deliver recurring net profit in 2021.

Online takeaway food company Delivery Hero has edged lower after cutting its full-year investments goals during the course of 2020.

On the other hand, British retail company Dunelm has moved sharply higher after announcing it would resume dividend payouts.

Ashmore Group has also moved to the upside. The emerging markets specialist group announced a pre-tax profit increase of 14 percent for the last six months of the year.

Societe Generale has also climbed after the French bank reported a forecast-beating net profit of 470 million euros for the fourth quarter, helped by “significant improvement” in the business during the second half of 2020.

German conglomerate Thyssenkrupp has also surged after raising its full-year outlook, citing improved demand.

In economic news, German consumer price inflation turned positive for the first time in seven months in January, as the temporary reduction in VAT rates ended in December, final data from Destatis showed.

The consumer price index rose 1.0 percent year-on-year after a 0.3 percent drop in December. A positive inflation rate was last seen in June 2020, when prices were up 0.9 percent.

U.S. Economic Reports

With gasoline prices continuing to spike, the Labor Department released a report on Wednesday showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Labor Department said its consumer price index rose by 0.3 percent in January after edging up by a revised 0.2 percent in December.

Economists had expected consumer prices to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Excluding food and energy prices, core consumer prices came in unchanged for the second consecutive month. Core prices were expected to rise by 0.2 percent.

At 10 am ET, the Commerce Department is due to release its report on wholesale inventories in the month of December. Wholesale inventories are expected to inch up by 0.1 percent.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 5th at 10:30 am ET.

Crude oil inventories are expected to increase by 1.3 million barrels after dipping by 1.0 million barrels in the previous week.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $41 billion worth of ten-year notes.

Federal Reserve Chair Jerome Powell is scheduled to speak before a virtual Economic Club of New York event at 2 pm ET.

Stocks In Focus

Shares of Under Armour (UAA) are moving sharply higher in pre-market trading after the athletic apparel maker reported an unexpected fourth quarter profit on revenues that exceeded analyst estimates.

Ride-sharing service Lyft (LYFT) is also seeing significant pre-market strength after reporting a narrower than expected fourth quarter loss.

On the other hand, shares of Cisco (CSCO) may move to the downside after the networking giant reported fiscal second quarter earnings that beat estimates but investors seem disappointed by a continued drop in revenues.