Disappointing Caterpillar Earnings Weigh on Wall Street

By Investors Hub

The major U.S. index futures are pointing to a notably lower opening on Monday, with stocks likely to come under pressure after ending last week?s trading roughly flat.

A negative reaction to earnings news from Caterpillar (CAT) is likely to weigh on the markets, with the heavy equipment maker slumping by 5.8 percent in pre-market trading.

The drop by Caterpillar comes after the company reported weaker than expected fourth quarter earnings and forecast full-year 2019 earnings below analyst estimates.

Caterpillar Chairman and CEO Jim Umpleby said the outlook ?assumes a modest sales increase based on the fundamentals of our diverse end markets as well as the macroeconomic and geopolitical environment.?

Early trading activity may be somewhat subdued, however, as traders look ahead to key events later this week, including the release of the Labor Department?s closely watched monthly jobs report on Friday.

The Federal Reserve?s monetary policy decision on Wednesday is also likely to attract attention, although the central bank is widely expected to leave interest rates unchanged after last month?s rate hike.

Traders are also likely to watch closely for any news regarding a new round of trade talks between U.S. and Chinese officials in Washington this week.

Following the volatility seen over the two previous sessions, stocks moved significantly higher over the course of the trading day on Friday. The major averages all climbed firmly into positive territory after ending Thursday’s trading mixed.

While the major averages pulled back off their highs of the session, the Dow and the Nasdaq still ended the day at their best closing levels in well over a month.

The Dow climbed 183.96 points or 0.8 percent to 24,737.20, the Nasdaq jumped 91.40 points or 1.3 percent to 7,164.86 and the S&P 500 advanced 22.43 points or 0.9 percent to 2,664.76.

For the holiday-shortened week, the Dow and the Nasdaq both inched up by 0.1 percent, while the S&P 500 edged down by 0.2 percent.

The strength on Wall Street came after U.S. Treasury Secretary Steven Mnuchin reportedly said the U.S. and China are making “a lot of progress” in trade talks.

A report from Reuters said Mnuchin is looking forward to a meeting with Chinese Vice Premier Liu He next week, which will also include discussions on currency issues.

The comments from Mnuchin conflict with remarks by Commerce Secretary Wilbur Ross, who told CNBC on Thursday the U.S. is “miles and miles” from a trade deal with China.

“Frankly, that shouldn’t be too surprising,” Ross said in an interview on CNBC’s “Squawk Box,” noting the U.S. and China have “lots and lots of issues.”

Stocks remained firmly positive as President Donald Trump announced an agreement to end the record-setting government shutdown.

Trump revealed in a speech from the White House rose garden that lawmakers will vote later today on legislation to fund the shuttered parts of the government until February 15th.

The bill will not include money for Trump’s controversial border wall, which was the issue that led to the longest government shutdown in U.S. history.

Trump indicated that the three weeks of funding provided by the legislation would give lawmakers time to negotiate on the contentious issue of border security.

“Many disagree, but I really feel that, working with Democrats and Republicans, we can make a truly great and secure deal happen for everyone,” Trump said.

With the announcement, Trump seemed to give in to Democratic demands to re-open the government before negotiating on border security.

However, if an agreement on border security is not reached by February 15th, Trump suggested the government could shut down again or he could declare the situation on the border a national emergency.

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 3.8 percent. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Considerable strength was also visible among computer hardware stocks, as reflected by the 3.5 percent spike by the NYSE Arca Computer Hardware Index.

Hard drive maker Western Digital (WDC) posted a standout gain after reporting fiscal second quarter earnings that missed analyst estimates but forecasting stronger second half sales.

Oil service stocks also moved notably higher amid an increase by the price of crude oil, resulting in a 3.1 percent jump by the Philadelphia Oil Service Index.

Semiconductor, steel, and chemical stocks also saw significant strength on the day, while utilities stocks were among the few groups to buck the uptrend.