Earnings News Buoys Buying Interest on Wall Street

By Investors Hub

The major U.S. index futures are currently pointing to a slightly higher opening on Friday, with stocks likely to add to the modest gains posted in the previous session.

A positive reaction to the latest batch of earnings news may contribute to initial strength on Wall Street, with Coca-Cola (KO) moving notably higher in pre-market trading after reporting better than expected third quarter results and raised its full-year guidance.

Shares of American Express (AXP) may also move to the upside after the credit card giant reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Early buying interest may remain subdued, however, with disappointing Chinese economic data offsetting the positive sentiment.

Data from the National Bureau of Statistics showed China’s economy grew at the slowest rate in nearly three decades in the third quarter, raising pressure on policymakers to roll out more stimulus.

China’s GDP grew 6 percent year-on-year in the third quarter after rising 6.2 percent in the second quarter. This was the slowest growth since the early 1990s. Growth was forecast to slow marginally to 6.1 percent.

Lingering uncertainty about a possible U.S.-China trade deal may also weigh on the markets along with doubts about the Brexit deal getting through parliament.

Stocks fluctuated over the course of the trading session on Thursday but eventually ending the day modestly higher. The major averages all closed in positive territory, although buying interest was somewhat subdued.

The Dow bounced back and forth across the unchanged line before closing up 23.90 points or 0.1 percent to 27,025.88. The Nasdaq climbed 32.67 points or 0.4 percent to 8,156.85 and the S&P 500 rose 8.26 points or 0.3 percent to 2,997.95.

Early buying interest was generated in reaction to news that U.K. and European Union negotiators have reached a last-minute Brexit deal.

European Commission President Jean-Claude Juncker described the deal as “fair and balanced” for the EU and the U.K. and urged member nations to back the agreement.

The deal could eliminate some of the Brexit uncertainty hanging over the global markets, although it remains to be seen if the agreement will be approved by U.K. lawmakers.

Uncertainty about final approval of the deal helped to limit the upside for the markets along with the release of some disappointing U.S. economic data.

Just before the start of trading, the Federal Reserve released a report showing a bigger than expected decrease in industrial production, with the strike at General Motors (GM) contributing to a drop in manufacturing output.

The Fed said industrial production fell by 0.4 percent in September after climbing by an upwardly revised 0.8 percent in August.

Economists had expected production to edge down by 0.1 percent compared to the 0.6 percent increase originally reported for the previous month.

A separate report released by the Commerce Department showed a sharp pullback in housing starts in the month of September.

The Commerce Department said housing starts plunged by 9.4 percent to an annual rate of 1.256 million in September after soaring by 15.1 percent to a revised 1.386 million in August.

Economists had expected housing starts to drop by 3.2 percent to an annual rate of 1.320 million from the 1.364 million originally reported for the previous month.

The report said building permits also slumped by 2.7 percent to an annual rate of 1.387 million in September after jumping by 8.2 percent to a revised 1.425 million in August.

Building permits, an indicator of future housing demand, had been expected to tumble by 4.9 percent to a rate of 1.350 million from the 1.419 million originally reported for the previous month.

Tobacco stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Tobacco Index up by 2.8 percent.

The rally by tobacco stocks came as the Centers for Disease Control and Prevention said the death toll from a purportedly vaping-related illness has risen to 33.

Significant strength also emerged among gold stocks, as reflected by the 2.3 percent jump by the NYSE Arca Gold Bugs Index. The strength in the gold sector came amid an increase by the price of the precious metal.

Networking and telecom stocks also saw some strength on the day, while oil service stocks moved to the downside over the course of the session.