Thursday July 25th

25-07-2019

Dow futures jump 100 points on better-than-expected earnings, ECB plans for more easing

U.S. stock index futures pointed to a higher open on Thursday as investors digested the latest batch of corporate earnings results while the European Central Bank signaled a rate cut could be on the horizon. Dow futures gained 107 points, indicating a rise of 91 points at the open. S&P 500 and Nasdaq 100 futures also pointed slight gains. Shares of 3M jumped 4.7% after the company reported better-than-expected earnings and revenue for the previous quarter. CEO Mike Roman said the company cost-management efforts and improved cash flow contributed to the strong quarter. Facebook gained 2.2% in the premarket after its second-quarter earnings and revenue beat analyst expectations. The social media giant’s average revenue per user, a key metric for the company — came in at $7.05, well above a FactSet estimate of $6.87. About a third of S&P 500 companies have reported second-quarter earnings so far. Of those companies, 75% have posted a better-than-forecast profit, according to FactSet. Alphabet, Amazon, Intel, Starbucks and Mattel are all scheduled to report after the close Thursday. Meanwhile, the European Central Bank kept interest rates unchanged by hinted that further monetary easing as well as a rate cut. “At the very least, a rate cut is coming,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities. “Overall, they’re throwing the kitchen sink at their current economic situation.” “This is clearly setting the stage for what we’re going to see next week from the Federal Reserve,” he added. “We’re in an environment in which central banks are defending their home turf.” The Fed is scheduled to hold a monetary policy meeting July 30-31 in which a rate cut of at least 25 basis points is expected. Both the S&P 500 and Nasdaq Composite reached all-time highs Wednesday, buoyed by a rally in chip stocks, while the Dow Jones Industrial Average closed lower following disappointing earnings from Boeing and Caterpillar. Investors continue to monitor trade developments with U.S. and Chinese negotiators set to meet next week. However, U.S. Treasury Secretary Steven Mnuchin told CNBC on Wednesday that the two nations still have a lot of issues to work out. In terms of data, the number of people who applied for unemployment benefits last week fell to the lowest level in more than three months, reflecting the persistent strength of a U.S. labor in which layoffs have fallen to the lowest level in decades. Initial jobless claims, a rough way to measure layoffs, dropped 10,000 to 206,000 in the seven days ended July 20, the government said Thursday. Economists polled by MarketWatch estimated new claims would total a seasonally adjusted 218,000. Orders for long-lasting manufactured goods such as autos and computers rose in June for the first time in three months, but business spending and investment is still much weaker than a year ago as companies try to navigate a more unsettled global economy. Durable-goods orders rose 2% last month, the government said Thursday. The increase was higher than 0.7% forecast of economists polled by MarketWatch, but the decline in May also turned out to be deeper than initially reported. That took some shine off last month’s increase. Second-quarter housing vacancies data is due at 10 a.m. while July’s Kansas City Fed survey is scheduled for 11 a.m. Most major Asia Pacific stock markets closed higher on Thursday as semiconductor stocks in Japan and South Korea rose. Mainland Chinese stocks saw gains on the day. The Shanghai composite added 0.48% to about 2,937.36 and the Shenzhen component edged up 0.85% to 9,344.82. The Shenzhen composite gained 0.629% to approximately 1,572.80. Hong Kong’s Hang Seng index gained 0.25% to end its trading day at 28,594.30. Meanwhile, the Nikkei 225 in Japan rose 0.22% to close at 21,756.55, with shares of index heavyweight Softbank Group advancing 1.8%. The Topix index gained 0.18% to finish its trading day at 1,577.85. Oil prices rose on Thursday amid Middle East tensions and a big fall in U.S. crude stocks, but gains were capped as weak Western manufacturing data indicated slowing economic growth and in turn the potential for reduced fuel demand. Brent crude futures rose 36 cents or 0.6% to $63.54 a barrel by 0855 GMT, after dropping 1% on Wednesday - the first fall in four sessions. U.S. West Texas Intermediate crude was up 31 cents, or 0.6%, at $56.19 a barrel, having dropped 1.6% in the previous session. Gold held steady on Thursday in cautious trading before a European Central Bank meeting where the bank is expected to provide clarity on its stance on monetary policy easing amid tepid economic data from the region. Spot gold rose 0.1% to $1,426.76 per ounce. Prices were short of last week’s peak at $1,452.60. Meanwhile, U.S. gold futures rose 0.2% to $1,427 per ounce.