Earnings Woes And Commodity Pullback May Hurt Markets

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Friday, with sentiment nervous after yesterday's strong advance and amid the release of mostly negative earnings. GE's earnings came as a saving grace amid a slew of disappointing earnings reports from companies such as Mattel and Wynn Resorts. Revenues of Honeywell and Schlumberger were light. European stocks are holding up, although the major averages have given back much of their early gains. Commodities are on the retreat, as the dollar bounces back. The consumer sentiment reading and the industrial production data due for the day will also provide some direction to the markets.

U.S. stocks advanced solidly on Thursday amid mostly negative news that tempered rate hike expectations. The major averages opened modestly higher and moved sideways until the mid-session. Thereafter, stocks embarked on a steep rally and ended notably higher.

The Dow Industrials ended 217 points or 1.28 percent higher at a roughly 2-month high of 17,142, and the S&P 500 Index added 29.62 points or 1.49 percent before ending at 2,024. The Nasdaq Composite Index ended at a 1-month high of 4,870, up 87.25 points or 1.82 percent.

Twenty-seven of the thirty Dow components closed higher, while the remaining two stocks retreated. Boeing (BA), Disney (DIS), Goldman Sachs (GS), Johnson & Johnson (JNJ), JP Morgan Chase (JPM), Merck (MRK), Nike (NKE), Pfizer (PFE) and Travelers (TRV) were among the biggest gainers of the session. On the other hand, UnitedHealth (UNH) and Visa (V) declined notably.

Biotechnology, airline and financial stocks saw notable strength, while computer hardware stocks came under selling pressure.

On the economic front, the Labor Department's consumer prices report showed a 0.2 percent monthly drop in consumer prices in September. The drop was in line with expectations. The core reading was up 0.2 percent, bigger than the 0.1 percent increase expected by economists. The annual rate for the headline number was 0 percent and the core rate was 1.9 percent, slightly ahead of estimates.

The New York Federal Reserve's regional manufacturing survey showed that manufacturing conditions remained depressed in October. The business conditions index rose to -11.36 from -14.67 in September but continued to indicate a contraction.

The inner details were far more depressing. The new orders index fell 6 points to -18.91, the shipments index was also down about 6 points to -13.61 and the number of employees index slipped 2 points to -8.49, marking the weakest level since December 2012. The 6-month outlook index was little changed.

The Philadelphia Federal Reserve's survey showed that its diffusion index of business activity rose to -4.5 in October from -6 in September, while economists expected a reading of -2. The news orders index fell 20 points to -10.6, the lowest level since June 2012 and shipments index was down a steeper 21 points to -6.1, the lowest reading since March. The number of employees index also fell 12 points to -1.7.

A separate Labor Department report showed that initial jobless claims fell by 7,000 to 255,000 in the week ended October 10th, while economists expected a reading of 270,000. The four-week average fell to 265,000 from 267,250. Continuing claims calculated with a week's lag slid by 50,000 to 2.158 million in the week ended October 3rd.

Currency, Commodity Markets

Crude oil futures are climbing $0.79 to $47.14 a barrel after rising $0.23 to $46.87 a barrel on Thursday. The previous session's gain came amid the release of the weekly petroleum status report, which showed that crude oil stockpiles rose by 7.6 million barrels to 468.6 million barrels in the week ended October 9th. Inventories remained near levels not seen for this time of year in at least the last 80 years.

Meanwhile, distillate stockpiles declined by 1.5 million barrels but were in the middle of the average range for this time of the year. Gasoline inventories fell by 1.9 million barrels but were above the upper limit of the average range.

Refinery capacity utilization averaged 88.60 percent over the four weeks ended October 9th compared to 90.40 percent over the four weeks ended October 2nd.

An ounce of gold is currently trading at $1,176.50, down $11.80 from the previous session's close of $1,188.30. On Thursday, gold rose $8.50.

On the currency front, the U.S. dollar is trading at 119.17 yen compared to the 118.90 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1369 compared to yesterday's $1.1386.

Asia

The major Asian markets ended mostly higher, encouraged by the positive performance on Wall Street overnight. The Chinese market rally also perked up optimism. However, the South Korean market bucked the uptrend with a modest loss.

The Japanese market rose for the second day, as the yen was weaker against the dollar. The Nikkei 225 Index opened higher and moved steadily higher before going about a consolidation move in the afternoon. The index ended up 194.90 points or 1.08 percent at 18,292.

A majority of stocks advanced, led by export, financial, food and utility stocks. On the other hand, retail and housing stocks came under selling pressure.

Australia's All Ordinaries Index hovered in positive territory throughout the session before ending 38.10 points or 0.72 percent higher at a 1-week high of 5,304.

The market witnessed broad based strength, with utility, financial, real estate, energy and consumer discretionary stocks all closing notably to the upside. Meanwhile, material stocks retreated modestly.

China's Shanghai Composite Index ended at 3,391, up 53.28 points or 1.60 percent. With the gain, the index reached its highest level since August 20th, 2015.

The optimism came despite the slew of key domestic data releases scheduled for next week. The Chinese GDP data for the third quarter is expected to show 6.8 percent year-over-year growth, slower than the 7 percent growth in the second quarter.

Hong Kong's Hang Seng Index ended up 179.20 points or 0.78 percent at 23,067.

Europe

European stocks opened higher and have seen further upside since then. The major averages in the region are moderately higher ahead of U.S. industrial production data.

In corporate news, French retailer Casino reported third quarter sales that were in line, with a healthy showing in Europe helping to boost its top line.

Nestle reported a decline in its sales for the nine months ended in September and also lowered its organic sales growth guidance for the full year, citing the franc's strength and recall issues in India.

On the economic front, final estimates released by Eurostat showed that annual eurozone inflation turned negative in September. The annual inflation rate was a negative 0.1 percent compared to a positive 0.1 percent reading in August. The September rate was well off the European Central Bank's target of below but close to 2 percent.

A separate report showed that the eurozone trade surplus fell more than forecast in August, as exports declined and imports increased.

Demand for passenger cars in the EU increased for the 25th consecutive month in September, underpinned by ongoing scrappage schemes and the economic recovery of Southern Europe, the European Automobile Manufacturers Association said.

Car registrations advanced 9.8 percent year-over-year in September, slower than the 11.2 percent growth seen in August.

U.S. Economic Reports

The Federal Reserve is due to release its industrial production report for September at 9:15 am ET. Economists expect a 0.3 percent month-over-month drop in industrial output in September, with manufacturing production expected to drop 0.2 percent. Capacity utilization is expected at 77.4 percent, down from 77.6 percent in the previous month.

Industrial production fell 0.4 percent month-over-month in August, according to a report released by the Federal Reserve. This was worse than the 0.2 percent drop expected by economists. Manufacturing output fell 0.5 percent, with auto production falling 6.4 percent and serving as a drag. Mining output fell 0.6 percent, while production by utilities rose 0.6 percent. Capacity utilization slipped to 77.6 percent from 78 percent.

The University of Michigan is due to release the results of its preliminary U.S. consumer sentiment survey at 10 am ET. Economists expect the consumer sentiment index to rise to 89.5 in October from 87.2 in September.

Stocks in Focus

General Electric (GE) reported better than expected third quarter operating earnings and revenues.

Honeywell (HON) reported better than expected third quarter earnings, while its revenues missed expectations. The company confirmed its full year earnings per share guidance.

AMD (AMD) reported an adjusted loss of 17 cents per share on revenues of $1.06 billion for its third quarter. The loss was wider than expected. However, revenues were ahead of expectations. For the fourth quarter, the company expects revenues to decline 10 percent sequentially, plus or minus 3 percent.

Schlumberger (SLB) reported better than expected third quarter results but its revenues were shy of estimates.

Wynn Resorts' (WYNN) third quarter results were shy of estimates. WD-40's (WDFC) fourth quarter results also trailed expectations. Mattel (MAT) also reported below-consensus results for its third quarter.

Yum Brands! (YUM) announced that it is nearing the completion of its strategic review and lowered its full year earnings growth guidance, citing foreign exchange headwinds. The company also said it expects Chinese same store sales growth to be in the low single digits or be negative and adjusted operating profit to be flat.