Global Growth Hopes May Support Markets

(RTTNews) - The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment reflecting optimism that the global economy will weather any adverse developments, especially as the global central banks stand ready to support. Separate data released earlier in the global trading day showed that Chinese economic activity rose more than expected and German economic sentiment strengthened. Domestic earnings flow has been mixed. The markets may now turn their attention to a domestic housing reading due shortly after the start of trading.

At the same time, the International Monetary Fund downgraded its global growth outlook, citing weak investment in many advanced and emerging market economies. In its World Economic Outlook Update, the Washington-based lender said the global economy is set to grow 3.5 percent this year, down from the 3.8 percent expansion projected in October. The growth in 2016 is projected to be 3.7 percent instead of 4 percent.

U.S. stocks extended their weekly declines in the week ended January 16th, as a decline in oil prices, weak earnings reported by U.S. financial services giants and mixed economic data led to five straight sessions of declines before the averages staged a recovery in the last trading session of the week.

Last Monday, the major averages declined moderately, as oil continued to trend lower. The averages continued to see weakness on Tuesday, although by a more moderate margin, as oil extended its declines.

Hit by weak bank earnings, disappointing retail sales data and the World Bank's muted global growth forecast, the major averages declined notably on Wednesday. Notwithstanding the weak equity market sentiment, oil prices rebounded strongly in the session. Mixed economic data, a radical move by the Swiss National Bank doing away with its currency ceiling, and the resumption in the sell-off in oil pressured stocks on Thursday, sending them lower yet again. However, strong economic data and a recovery in oil prices helped the equity markets rebound on Friday.

For the week ended January 16th, the Dow Industrials and the S&P 500 Index were down 1.27 percent and 1.24 percent, respectively, while the Nasdaq Composite Index slid 1.48 percent.

Among the sector indexes, the KBW Bank Index declined 4.03 percent for the week, while the Philadelphia Oil Service Index, the Philadelphia Housing Sector Index, the NYSE Arca Broker/Dealer Index and the Philadelphia Semiconductor Index all receded over 3 percent. On the other hand, the NYSE Arca Gold Bugs Index rallied 7.82 percent and the Dow Jones Utility Average and the NYSE Arca Biotechnology Index gained over 2 percent each.

Currency, Commodity Markets

Crude oil futures are sliding $1.59 to $47.54 a barrel after rallying $2.44 or 5.3 percent to $48.69 a barrel last Friday. Meanwhile, gold futures are climbing $8.80 to $1,285.70 an ounce. Last Friday, gold gained $12.10 to $1,276.90 an ounce.

Among currencies, the U.S. dollar is trading at 118.57 yen compared to the 117.56 yen it fetched at the close of trading on Monday. Against the euro, the dollar is trading at $1.1600 compared to yesterday's $1.1606.

Asia

The major Asian markets closed mixed, with the Australian, New Zealand and Indonesian markets moving slightly lower, while most other major markets in the region advanced. Data showing that the Chinese economy did not slow down as much as feared offered some encouragement to traders even as commodity prices continued to drop.

The weakness of the yen offered an impetus to the Japanese market, as the Nikkei 225 average opened higher and advanced steadily throughout the session before closing up 352.01 points or 2.07 percent at 17,366.

A majority of stocks advanced, with Kobe Steel, Mitsui Mining, Daikin Industries, Nisshin Steel, Fujitsu and Mazda Motors leading the gains.

China's Shanghai Composite Index rallied 56.70 points or 1.82 percent before closing at 3,173, as the domestic GDP data and a few other government reports allayed fears that the economy fell off a cliff. The index fell close to 8 percent yesterday amid a sharp pullback in the real estate and financial spaces. Hong Kong's Hang Seng Index ended 212.67 points or 0.90 percent higher at 23,951.

Meanwhile, Australia's All Ordinaries languished below the unchanged line for much of the session before ending down 2.20 points or 0.04 percent at 5,287. Energy stocks paced the declines, while most other sectors, with the exception of financial, industrial and telecom stocks, also saw downside.

On the economic front, China's GDP growth came in at 7.3 percent in the fourth quarter, faster than the 7.2 percent growth expected by economists. Nevertheless, the growth rate was the weakest since early 2009. GDP growth of 7.4 percent for 2014 represented the slowest in about 25 years.

Meanwhile, Chinese retail sales and industrial production growth of 7.9 percent and 11.9 percent, respectively exceeded expectations, and fixed asset investment for the 12 months ended December was up 15.7 percent, in line with forecasts.

Europe

European stocks started the session higher, as traders digested mixed overseas cues, strong German economic sentiment and some domestic earnings.

In corporate news, German software maker SAP (SAP) reported a decline in fourth quarter profits and also lowered its profit guidance for 2017, as a shift to cloud based computing is hurting growth.

Unilever reported a decline in its full year revenues, although profits for the period improved. Citing weakness in China, the company said it expects performance in 2015 to be flat with last year.

On the economic front, a report released by the German Federal Statistical Office showed that producer prices in Germany fell 1.7 percent year-over-year in December, the biggest drop since March of 2010. Economists had expected a more modest 1.4 percent drop.

The results of Zew's survey showed that its indicator of economic sentiment for Germany rose sharply to 48.4 in January from 34.9 in December. The reading was forecast to rise to 40.

U.S. Economic Reports

The unfolding holiday shortened week's economic calendar is relatively light, with only a handful of economic reports due to be released. Of the items on the release calendar, the spotlight is likely to be on the National Home Builders' housing market index for January, the Commerce Department's housing starts data for December, the Federal House Finance Agency's house price index for November, the National Association of Realtors' existing home sales report for December and the weekly jobless claims report.

Some Fed speeches, the flash estimate of Markit's U.S. manufacturing purchasing managers' index for January, the Conference Board's leading economic indicators index for December and announcements concerning next week's auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

The National Association of Realtors is scheduled to release its housing market index for January at 10 am ET. Economists expect the index to increase 1 point to 58.

The housing market index eased 1 point to 57 in December, although it remained above 50 for the sixth straight month. The current sales conditions index and the future sales expectations index eased 1 point each to 61 and 65, while the index measuring prospective buyer traffic was unchanged at 45.

Federal Reserve Governor Jerome Powell and U.K. Financial Conduct Authority Chief Martin Wheatley are due to discuss financial market conduct and structure in Washington at 10 am ET.

Stocks in Focus

Morgan Stanley (MS) reported below consensus results for its fourth quarter.

Delta Airlines' (DAL) fourth quarter adjusted earnings exceeded estimate by a penny. Halliburton (HAL) reported better than expected fourth quarter earnings, while its revenues missed estimates.

Johnson & Johnson (JNJ) reported better than expected fourth quarter earnings, while its revenues were shy of estimates. The company's 2015 adjusted earnings per share guidance was positive.

ON Assignment (ASSGN) announced an agreement to sell its physician staffing segment VISTA Solutions to Envision Healthcare (EVHC) for $123 million. The company expects the deal to close in February.

Mosaic (MOS) said it expects fourth quarter adjusted earnings of 83-88 per share, as reported phosphate volume and phosphates and potash margin are expected to exceed previously provided guidance ranges.

Carlisle Companies (CSL) announced preliminary fourth quarter results, expecting a negative impact from certain unexpected circumstances at Carlisle Construction Material and Carlisle Brake & Friction. The company expects sales growth for the construction material segment to slip to a mid-single digit percent range from the 16 percent growth in the third quarter. Accordingly, the company expects the segment's net sales growth to be in the high single digit percent range for the full year. For the full year, the company now expects overall EBIT margin to be flat with last year.

ADTRAN (ADTN), AMD (AMD), CA Technologies (CA), Celestica (CLS), Cree (CREE), Fulton Financial (FULT), IBM (IBM) and Netflix (NFLX) are among the companies due to release their quarterly results after the close of trading.