Upbeat Earnings News May Generate Continued Buying Interest

(RTTNews) - The major U.S. index futures are pointing to a higher opening on Wednesday, with stocks poised to extend the rebound seen in the previous session. A positive reaction to the latest earnings news may once again contribute to strength on Wall Street. Traders are also likely to keep an eye on the Federal Reserve's Beige Book for clues about the outlook for monetary policy.

U.S. stocks advanced moderately on Tuesday, as traders reacted to mostly positive earnings announcements, an in line housing market reading and a rise in oil prices.

The major averages opened higher but gave back some their gains by late morning trading. Buying interest subsequently re-emerged, lifting the averages steadily higher until the mid-session. After going about a consolidation move until late trading, the averages gave back some ground yet closed higher.

The Dow Industrials added 75.54 points or 0.42 percent before ending at 18,162, the S&P 500 Index closed 13.10 points or 0.62 percent higher at 2,140 and the Nasdaq Composite ended at 5,244, up 44.01 points or 0.85 percent.

Twenty-one of the thirty Dow components closed the session higher, while the remaining stocks retreated. UnitedHealth (UNH) rallied 6.90 percent in reaction to its quarterly results. Goldman Sachs (GS), Intel (INTC) and DuPont (DD) also gained ground, but McDonald's (MCD), Johnson & Johnson (JNJ) and IBM (IBM) fell sharply.

Among the sectors, resource, airline, biotechnology, financial, semiconductor and retail stocks saw notable strength.

On the economic front, a Labor Department report showed that consumer prices rose 0.3 percent month-over-month in September, in line with expectations. In August, prices were up 0.2 percent. Core consumer prices edged up 0.1 percent, smaller than the 0.2 percent gain expected by economists and the 0.3 percent increase in August. Energy prices climbed 2.9 percent and owners' equivalent rent was up 0.4 percent. Annual core inflation edged down 0.1 percentage points to 2.2 percent.

Homebuilder sentiment receded in line with expectations in October, according to the results of a survey by the National Association of Home Builders. The housing market index based on the survey fell 2 points to 63 in October. The future sales expectations index rose 1 point to 72, but the current sales conditions index fell 2 points to 69. The index measuring prospective buyer traffic was down 1 point at 46.

Commodity, Currency Markets

Crude oil futures are rising $0.75 to $51.04 a barrel after moving up $0.35 to $50.29 a barrel on Tuesday, snapping a 2-session slide. Gold futures, which climbed $6.30 to $1,262.90 an ounce in the previous session, are currently advancing $8.30 to $1,271.20 an ounce.

Among currencies, the U.S. dollar is trading at 103.45 yen compared to the 103.87 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.0965 compared to yesterday's $1.0981.

Asia

The Asian markets ended mostly higher, as a slew of data from China came mostly in line with estimates and the positive close on Wall Street offered encouragement. However, the Hong Kong, Indian and Indonesian markets pulled back in the session.

The Japanese market advanced for the fourth straight session, as the yen remained subdued. The Nikkei 225 Index opened lower and went about a volatile run until early afternoon trading. Thereafter, the index held above the unchanged line before ending up 35.30 points or 0.21 percent at 16,999.

Construction, housing, utility, real estate and telecom stocks gained ground, while mining, export, chemical, financial and pharma stocks saw mixed sentiment. Meanwhile, energy, insurance and retail stocks moved to the downside.

Australia's All Ordinaries Index hovered in positive territory throughout the session before ending up 26.40 points or 0.48 percent at 5,518.

Consumer discretionary, industrial, material, real estate and telecom stocks rose notably. The financial, utility and healthcare spaces also saw modest strength. On the other hand, energy, consumer staple and IT stocks retreated.

China's Shanghai Composite Index ended at 3,085, up 0.84 points or 0.03 percent, while Hong Kong's Hang Seng Index lost 89.42 points or 0.38 percent before ending at 23,305.

On the economic front, data released by the China National Bureau of Statistics showed that GDP rose 6.7 percent year-over-year in the third quarter, matching the growth seen in the first and second quarters. The growth was also in line with estimates.

Separate reports from China showed that retail sales rose 10.7 percent year-over-year in September, in line with estimates and faster than the 10.6 percent growth in August. Fixed asset investment was up 8.2 percent in the 9-month period versus 9.1 percent for the January to the August period. Meanwhile, industrial output rose 6.1 percent, slower than the 6.3 percent increase in September and the 6.4 percent increase forecast by economists.

The Japanese Ministry of Economy, Trade and Industry said all industry activity rose slightly in August compared to the previous month. The corresponding index was up 0.2 percent in August, the same pace of growth as in July and in line with estimates. Industrial output was up 1.3 percent and services output was flat, while construction activity fell 0.8 percent.

A leading economic indicators index for Australia compiled by Westpac Bank showed a 0.06 percent month-over-month increase in September following a 0.01 percent increase in August.

Europe

After initially moving to the downside, European stocks have turned modestly higher over the course of the trading session.

In major corporate news, Dutch semiconductor equipment maker ASML (ASML) reported higher third quarter profits, margins and net system sales. The company expects fourth quarter sales to decline sequentially but margins to rise.

French retailer Carrefour said its third quarter sales rose 3.6 percent, excluding petrol and at a constant exchange rate. On a like-for-like basis, excluding petrol and calendar effects, sales were up 3.2 percent. Germany's Metro AG eked out a 0.1 percent sales increase on a like-for-like basis, but total sales fell 0.5 percent.

Akzo Nobel's third quarter net income was flat, although adjusted earnings per share fell. Rentokil Initial reported higher revenues and confirmed its full year forecast. Reckitt Benckiser reported 17 percent revenue growth for its third quarter and forecast 4 percent like-for-like revenue growth in the full year.

On the economic front, the U.K. unemployment rate held steady at 4.9 percent in the three months ended in August, data from the Office for National Statistics showed. This was unchanged from the three months to July and in line with the consensus estimate.

Average earnings including bonuses climbed 2.3 percent in August from a year ago, in line with expectations. The number of people claiming unemployment benefits grew by 700 month-over-month in September, below economists' forecast for an increase of 3,200.

Eurostat reported that construction output in the euro area fell 0.9 percent month-over-month in August, reversing the 1.5 percent increase in July. Annually, the growth in construction output fell to 0.9 percent from 4.1 percent.

U.S. Economic Reports

The Commerce Department released a report showing that new residential construction in the U.S. unexpectedly tumbled to its lowest level in well over a year in September.

The report said housing starts plunged by 9.0 percent to an annual rate of 1.047 million in September after slumping by 5.6 percent to a revised 1.150 million in August.

The continued decline came as a surprise to economists, who had expected housing starts to climb to a rate of 1.180 million from the 1.142 million originally reported for the previous month.

With the unexpected decrease, housing starts dropped to their lowest annual rate since hitting 964,000 in March of 2015.

Meanwhile, the Commerce Department also said building permits surged up by 6.3 percent to an annual rate of 1.225 million in September after rising by 0.7 percent to a revised 1.152 million in August.

Building permits, an indicator of future housing demand, had been expected to increase to 1.165 million from the 1.139 million that had been reported for the previous month.

The Energy Information Administration is due to release its weekly petroleum status report for the week ended October 14th at 10:30 am ET.

Crude oil stockpiles increased by 4.9 million barrels to 474 million barrels in the week ended October 7th. Stockpiles were at historically high levels for this time of year.

Meanwhile, distillate inventories declined by 3.7 million barrels but were above the upper limit of the average range for this time of the year. Gasoline inventories fell by 1.9 million barrels last week but were above the upper limit of the average range.

Refinery capacity utilization averaged 89 percent over the four weeks ended October 7th compared to 90.8 percent for the four weeks ended September 30th.

Dallas Federal Reserve Bank President Rob Kaplan will speak at a luncheon sponsored by the Fort Worth Chamber of Commerce in Fort Worth at 1:30 pm ET. A Q&A session will also follow.

The Federal Reserve is set to release its Beige Book report at 2 pm ET. The report consists of anecdotal evidence of economic conditions in the twelve Fed districts.

New York Fed President William Dudley is scheduled to speak at the Lotos Club in New York City on the city's economic history at 7:45 pm ET.

Stocks in Focus

Morgan Stanley (MS) reported third quarter earnings of $0.81 per share compared to analyst estimates for $0.63 per share. The investment banking giant also reported better than expected revenues for the quarter.

Oil service giant Halliburton (HAL) reported an unexpected third quarter profit but on revenues that came in below analyst estimates.

After the close of trading on Tuesday, Intel (INTC) reported better than expected third quarter earnings and revenues.

Yahoo! (YHOO) reported strong quarterly results, with the company's "Mavens" revenue rising notably.

Cree (CREE) reported better than expected first quarter adjusted earnings per share, but its revenues trailed estimates. The company's second quarter adjusted earnings per share guidance was negative.

Intuitive Surgical's (ISRG) third quarter results exceeded estimates and it maintained its procedure growth forecast for the year.

At a Securities Analyst Meeting, Hewlett Packard Enterprises (HPE) reaffirmed its 2016 non-GAAP earnings guidance of $1.90-$1.95 per share. For 2017, the company expects non-GAAP earnings of $2-$2.10 per share. The guidance is in line. The company also said it is committed to returning $3 billion to shareholders in 2017.

KB Home (KBH) reaffirmed its fourth quarter targets at its investor conference in Los Angeles. The company expects housing revenues to be in the range of $3.8 billion to $4.2 billion in 2017.

Linear Tech (LLTC) said its shareholders have approved its merger with Analog Devices (ADI). The deal is now expected to close in the first half of 2017. Separately, the company reported first quarter results that missed estimates. The company forecasts 7-8.5 percent revenue growth for its second quarter.

Steel Dynamics (STLD) announced board approval for buyback of up to $450 million worth of its shares. Lincoln Electric (LECO) said its board approved a 9.4 percent increase to its quarterly cash dividend to $0.32 per share.

American Express (AXP), BJ Restaurants (BJRI), eBay (EBAY), Kinder Morgan (KMI), Mattel (MAT), Packaging Corp. of America (PKG), Sallie Mae (SLM), Steel Dynamics (STLD), United Rentals (URI) and Xilinx (XLNX) are among the companies due to release their quarterly results after the close of the trading.