Earnings Optimism May Give Another Leg Up To Rally

(RTTNews) - The major U.S. index futures are pointing to higher opening on Monday, with sentiment suggesting that the upward momentum is still intact. Earnings optimism has been the main reason behind the markets' buoyancy. Analysts expect Apple, which is slated to repot after the market close, to come with a stellar quarterly earnings report. Crude oil prices are still holding near their 4-month highs, while most commodities are higher against the dollar weakness. Traders also harbor hopes that the Fed isn't likely to act preemptively and will show patience while charting the course for monetary policy normalization.

U.S. stocks moved higher in the week ended April 24th, with the notable event of the week being the tech-heavy Nasdaq Composite hitting a new all-time closing high. Oil's extended rally, some positive earnings, especially from the tech space, Greek fears and mixed economic data charted the course of the markets during the week.

Last Monday, the major averages advanced solidly, benefiting from a few positive catalysts, including China's decision to lower the reserve requirement ratio by 100 basis points, some upbeat earnings announcement and oil's rally. However, stocks meandered to a mixed close on Tuesday, directed by a mixed reaction to earnings and the specter of a Greek default.

Positive existing home sales data and earnings catalyzed a strong upward move by the markets on Wednesday. With traders choosing to focus on some positive earnings and higher oil prices, the major averages ignored some negative overseas and domestic data, ending Thursday's trading higher. The averages advanced yet again on Friday amid the release of strong tech earnings and a mixed durable goods orders report.

For the week ended April 24th, the Dow Industrials and the S&P 500 Index rose 1.42 percent and 1.75 percent, respectively, while the Nasdaq Composite rallied 3.25 percent.

Among the sectors, the NYSE Arca Airline rallied 5.21 percent for the week and the Dow Jones Transportation and the Dow Jones Utility Average gained over 2 percent each. Additionally, the NYSE Arca Biotechnology Index, the NYSE Arca Broker/Dealer Index and the KBW Bank Index all gained over 1 percent. On the other hand, the NYSE Arca Gold Bugs Index retreated 1.65 percent and the Philadelphia Housing Sector Index slipped about 1 percent.

Currency, Commodity Markets

Crude oil futures are rising $0.24 to $56.91 a barrel after advancing $1.41 or 2.5 percent to $57.15 a barrel in the week ended April 24th.

Last Monday, oil rose moderately, adding to the previous week's gains. However, the commodity pulled back by over $1-a-barrel on Tuesday. After declining moderately on Wednesday, oil rallied close to $1.60-a-barrel on Thursday and saw some further upside on Friday.

Gold futures, which fell $28.10 or 2.3 percent to $1,175 an ounce in the previous week, are currently climbing $11.50 to $1,186.50 an ounce.

Among currencies, the U.S. dollar ended the week ended April 24th mostly lower, with the dollar slipping 0.62 against the euro to $1.0873. At the same time, the greenback inched up 0.08 percent against the yen before ending the week at 118.99 yen. The dollar suffered in wake of some negative U.S. data.

The U.S. dollar is currently trading at 119.35 yen and is valued at $1.0837 versus the euro.

Asia

The Asian markets closed mixed, with the Australian, Chinese, Hong Kong, New Zealand and Taiwanese markets advancing, while the Japanese, Indonesian, South Korean and Malaysian markets settled lower.

Even as the positive close on Wall Street last Friday offered encouragement, traders remained wary ahead of some key economic data and central bank decisions.

The Japanese market ended lower amid subdued trading in the yen. The Nikkei 225 average languished below the unchanged line for much of the session before ending down 36.72 points or 0.18 percent at 19,983.

Export stocks ended mostly lower, while financial and real estate stocks also came under selling pressure.

At the same time, Australia's All Ordinaries Index hovered in positive territory throughout the session before closing 48 points or 0.81 percent higher at 5,955. Most sectors advanced, led by energy and material stocks, while IT stocks came under selling pressure.

Hong Kong's Hang Seng jumped 372.61 points or 1.33 percent before settling at 28,434 and China's Shanghai Composite Index soared 133.71 points or 3.04 percent before closing at a fresh 7-year high of 4,527.

On the economic front, a report released by the National Bureau of Statistics showed that the profits of Chinese industrial enterprises fell 2.7 percent year-over-year in the three months ended March. Profits for March were down 0.4 percent.

Europe

After a strong start, European stocks reversed course and retreated sharply and was seeing lackluster sentiment since the mid session. Subsequently, the averages recovered and are currently trading notably higher.

In corporate news, Cap Gemini announced a deal to acquire iGATE in a $4 billion deal. The companies expect the deal to close in the second half of 2015. Cap Gemini also raised its revenue growth guidance for 2015.

Deutsche Bank revealed the outlines of a strategy overhaul, including plans to cut its ownership in the Postbank consumer unit and shrink the securities business. The actions are expected to result in annual cost savings of 3.5 billion euros, and the company also lowered its return on equity target to at least 10 percent from 12 percent.

On the economic front, German import prices continued to decrease in March but the rate of decline slowed for the second month, data from Destatis showed. Import prices fell by a less-than-expected 1.4 percent year-over-year in March, following a 3 percent drop in February. Prices were expected to fall 2 percent.

Excluding crude oil and mineral oil products, import prices gained 1 percent on a monthly basis, taking the annual growth to 2.3 percent.

U.S. Economic Reports

While the Federal Reserve's monetary policy announcement is likely to be in the spotlight in the unfolding week, traders are also likely to keep an eye on some key economic data.

The results of the Institute for Supply Management's national manufacturing survey for April, the Chicago-area business barometer for April, the results of two separate consumer confidence surveys for April, the Commerce Department's personal income and spending reports for March and the weekly jobless claims data are likely to be in focus.

Some Fed speeches scheduled following the Fed decision, the advance first quarter GDP estimate, auto sales for March and the National Association of Realtors' pending home sales index for March may also attract some attention.

The results of some regional manufacturing surveys, the results of the S&P/Case-Shiller house price index for February, the Labor Department's employment cost index for the first quarter, the Commerce Department's construction spending report for March and the results of Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

Markit is set to publish its final U.S. service sector PMI for April at 9:45 am ET. Economists expect the PMI to improve to 59.5 from 59.2 in March, also up from the flash estimate of 58.6.

The Dallas Federal Reserve is scheduled to release its manufacturing survey for March. Economists expect the index to improve to -12 in March from -17.4 in February.

The Treasury Department is due to release the results of its auctions of 2-year notes at 1 pm ET.

Stocks in Focus

Perfect World (PWRD) announced a deal to be acquired by a company run by its founder Michael Yufeng Chi in a going-private transaction valued at about $20.20 in cash per ADS.

Applied Materials (AMAT) is falling and Tokyo Electron have agreed to terminate their Business Combination Agreement as the U.S. Department of Justice has advised the parties that the coordinated remedy proposal submitted to all regulators would not be sufficient to replace the competition lost from the merger.

Sohu.com (SOHU) forecast second quarter revenues below Street view. The company's first quarter net loss narrowed from the year-ago quarter, while its total revenues grew 25 percent.

Windstream (WIND) announced that it has successfully completed the tax-free spin-off of select telecom network assets into Communications Sales and Leasing (CSAL), a publicly traded REIT. The company also announced the near completion of a 1-for-6 stock split of Windstream's shares.

Amkor (AMKR), Apple (AAPL), Barrick Gold (ABX), Boston Properties (BXP), C.H. Robinson (CHRW), Crane (CR), Everest Re (RE), General Growth Properties (GGP), Hartford Financial (HIG), J&J Snacks Food (JJSF), Owens & Minor (OMI), Partner Re (PRE), Plum Creek (PCL), PMC-Sierra (PMCS), Rent-A-Center (RCII), SWIFT Transportation (SWFT) and Waster Connections (WCN) are among the companies due to release their quarterly results after the close of trading.