Upbeat Earnings News May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside in early trading following the pullback seen in the previous session.

A positive reaction to the latest batch of earnings news from several big-name companies may contribute to early strength on Wall Street.

Shares of Boeing (BA) are seeing significant pre-market strength after the aerospace giant reported an unexpected second quarter profit on better than expected revenues.

Google parent Alphabet (GOOGL) is also likely to move to the upside after reporting quarterly results that exceeded analyst estimates on both the top and bottom lines.

Microsoft (MSFT), Advanced Micro Devices (AMD) and Mattel (MAT) are also moving higher in pre-market trading after reporting their quarterly results.

On the other hand, shares of Apple (AAPL) may move to the downside after the tech giant reported better than expected quarterly results but warned the negative impact of the semiconductor shortage could worsen this quarter.

Overall trading may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement this afternoon.

Traders are likely to pay close attention to the Fed’s statement for clues about the outlook for the central bank’s asset purchase program.

Stocks moved to the downside during trading on Tuesday, giving back ground after closing higher for five consecutive sessions. With the drop on the day, the major averages pulled back off the record closing highs set on Monday.

The major averages all closed in negative territory, although the tech-heavy Nasdaq underperformed its counter parts by a wide margin. While the Nasdaq tumbled 180.14 points or 1.2 percent to 14,660.58, the S&P 500 fell 20.84 points or 0.5 percent to 4,401.46 and the Dow dipped 85.79 points or 0.2 percent to 35,058.52.

The pullback on Wall Street partly reflected uncertainty ahead of the Federal Reserve’s monetary policy announcement.

On the earnings front, shares of UPS (UPS) moved sharply lower after the delivery giant reported second quarter earnings that beat estimates but weaker than expected domestic revenue.

Electric car maker Tesla (TSLA) also moved to the downside despite reporting second quarter results that exceeded analyst estimates.

Meanwhile, shares of General Electric (GE) moved higher on the day after the conglomerate reported better than expected second quarter results.

Negative sentiment may also have been generated in reaction to news that the CDC has recommend that people vaccinated for the coronavirus resume wearing masks indoors in areas of substantial or high transmission, particularly the South and West.

The revised guidance comes amid the rapid spread of the delta variant of the coronavirus in regions with low vaccination rates.

In economic news, the Commerce Department released a report showing new orders for U.S. manufactured durable goods saw continued growth in the month of June, although the increase came in well below expectations.

The report said durable goods orders climbed by 0.8 percent in June after spiking by an upwardly revised 3.2 percent in May.

Economists had been expecting orders to surge up by 2.1 percent compared to the 2.3 percent jump that had been reported for the previous month.

Excluding orders for transportation equipment, durable goods orders rose by 0.3 percent in June following a 0.5 percent increase in May. Ex-transportation orders were expected to climb by 0.8 percent.

A separate report from the Conference Board showed consumer confidence in the U.S. saw a slight improvement from an upwardly revised level in the month of July.

The Conference Board said its consumer confidence index inched up to 129.1 in July from an upwardly revised 128.9 in June. Economists had expected the index to drop to 124.9 from the 127.3 originally reported for the previous month.

With the unexpected uptick, the consumer confidence index reached its highest level since hitting 132.6 in February of 2020.

Computer hardware showed a substantial move to the downside on the day, dragging the NYSE Arca Computer Hardware Index down by 2.3 percent.

Significant weakness was also visible among transportation stocks, as reflected by the 2.2 percent slump by the Dow Jones Transportation Average.

Semiconductor stocks also saw considerable weakness on the day, resulting in a 1.9 percent drop by the Philadelphia Semiconductor Index.

Oil service, steel and natural gas stocks also showed notable moves to the downside, while some strength emerged among utilities and tobacco stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.48 to $72.14 a barrel after falling $0.26 to $71.65 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,798.30, down $1.50 compared to the previous session’s close of $1,799.80. On Tuesday, gold inched up $0.60.

On the currency front, the U.S. dollar is trading at 110.14 yen compared to the 109.78 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1797 compared to yesterday’s $1.1817.

Asia

Asian stocks fell broadly on Wednesday amid worries that Beijing’s regulation of its tech firms and online education industries may spread to other industries.

The downside remained limited after U.S. megacap technology companies Google, Microsoft and Apple reported record-breaking profits.

Investors also awaited the Fed’s policy guidance on inflation and interest rates.

Chinese shares ended lower for a fourth consecutive session as an ongoing regulatory crackdown stirred questions about how far Beijing will go to curb big companies.

The benchmark Shanghai Composite index slid 19.59 points, or 0.58 percent, to settle at 3,361.59 while Hong Kong’s Hang Seng index rose as much as 1.54 percent to 25,473.88 after being on the verge of a bear market.

Japanese shares tumbled to end near six-month lows as daily COVID-19 cases in Olympic host city Tokyo hit a record high for a second straight day.

The Nikkei average fell 388.56 points, or 1.39 percent, to 27,581.66, edging near a 6-1/2-month low hit last week. The broader Topix index ended 0.95 percent lower at 1,919.65.

Heavyweight SoftBank Group tumbled 4.8 percent on concerns about China’s tech rout. Shin-Etsu Chemical dropped 1.3 percent despite the silicon wafer manufacturer reporting upbeat Q1 earnings and forecasting higher FY results.

Apple suppliers retreated as the tech giant posted its strongest June quarter ever, but projected slower growth for the current period. Ibiden declined 2.5 percent and Murata Manufacturing shed 0.6 percent.

Bicycle maker Shimano surged 4.2 per cent after raising its operating income forecast. Automaker Mitsubishi Motors soared 8.4 percent after revising up its earnings outlook.

Australian markets fell notably as authorities extended the lockdown of Greater Sydney by four weeks to curb rising COVID-19 cases.

The benchmark S&P/ASX 200 dropped 52.10 points, or 0.70 percent, to 7,379.30 after closing at a record high the previous day. The broader All Ordinaries index ended down 54.40 points, or 0.71 percent, at 7,649.60.

Electricity poles-and-wires firm Spark Infrastructure surged 5.4 percent after it received a sweetened buyout offer from a consortium.

Mining heavyweight BHP fell 1.7 percent after it trumped a bid by mining magnate Andrew Forrest to buy Canada’s Noront Resources. Rio Tinto ended modestly lower after announcing plans to build a lithium mine in Serbia.

Energy stocks such as Origin Energy, Santos and Woodside Petroleum gave up 1-2 percent while tech stocks such as Afterpay and Appen lost around 4 percent each.

In economic news, consumer prices in Australia were up 0.8 percent sequentially in the second quarter of 2021, official data showed. That was above expectations for 0.7 percent rise and up from 0.6 percent in the previous quarter.

Seoul stocks ended a choppy session slightly higher as hopes of strong corporate earnings helped offset renewed concerns about China’s move to regulate tech firms. The Kospi average inched up 4.33 points, or 0.13 percent, to 3,236.86.

Market bellwether Samsung Electronics gained 0.9 percent while No. 2 chipmaker SK Hynix dropped 1.7 percent and internet portal giant Naver lost 2.2 percent.

Consumer confidence in South Korea took a hit in July, the Bank of Korea said with a consumer sentiment index score of 103.2 – down from 110.3 in June.

Europe

European stocks were moving higher in cautious trade on Wednesday, as a slew of upbeat earnings updates outweighed renewed concerns about Beijing’s regulatory crackdown on tech and education companies.

Investors await the outcome of a Federal Reserve meeting later in the day for clues on stimulus tapering.

The pan European Stoxx 600 rose 0.3 percent to 460.15, snapping a two-session losing streak as Google, Apple and Microsoft all reported record earnings.

The German DAX edged up 0.2 percent, France’s CAC 40 index climbed 0.6 percent and the U.K.’s FTSE 100 was up 0.3 percent.

U.K. lender Barclays jumped 4.2 percent as interim net profits surged more than five-fold on lower-than-expected credit losses linked to the COVID pandemic.

German peer Deutsche Bank edged down slightly despite posting better-than-expected second-quarter profits and raising its revenue outlook for next year.

Wholesale retailer Metro AG climbed 3.1 percent after raising its outlook for the fiscal year.

French information technology firm Capgemini rallied 3 percent after raising its 2021 targets.

Wizz Air Holdings surged 5.2 percent. The London-listed airline said it expects to operate at around 90 percent to 100 percent of its 2019 capacity for July and August.

In economic releases, Germany’s consumer confidence is set to remain unchanged in August as the weakness in economic and income expectations were offset by the improvement in the propensity to buy, survey results from the market research group GfK showed.

The forward-looking consumer sentiment held steady at -0.3 in August while economists had forecast the index to improve to +1.0. The survey was conducted between July 1 and 12.

Elsewhere, U.K. house prices grew 10.5 percent year-on-year in July, slower than the 13.4 percent increase posted in June, data published by Nationwide Building Society revealed. This was also weaker than the economists’ forecast of 12.1 percent.

A measure of French consumer confidence index fell to 101 from a revised 103 in June. Economists had expected the reading to remain steady at June’s initial score of 102.

U.S. Economic Reports

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended July 23rd at 10:30 am ET.

Crude oil inventories are expected to decrease by 3.4 million barrels after rising by 2.1 million barrels in the previous week.

At 2 pm ET, the Federal Reserve is due to announce its latest monetary policy decision, followed by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.