Earnings Season Underway, EU Moves Lower On Trade Concerns, Uncertainty Dominant Theme On Wall Street

Global indices retreat as trade woe resurfaces and corporate earnings roll in.
Thomas Hughes

Futures Flat As Earnings Season Gets Underway

The U.S. futures are flat in early Wednesday trading as the 2nd quarter earnings season ramps to full speed. So far the average S&P 500 company has beaten its consensus EPS estimate but by a smaller margin than expected. Over the past five years, the average S&P 500 company beat consensus by 4.5%, this quarter that rate is closer to 3.0%. The tech-heavy NASDAQ Composite is in the lead with a gain of 0.11% followed by a 0.05% advance in the Dow Industrials and S&P 500. The Dow Jones Transportation Average continues to lag the market in what looks like a classic Dow Theory indication of an imminent reversal.

In earnings news, Bank of America reported this morning and beat on the top and bottom lines. The company says strength in retail banking offset weakness in trading and other non-core businesses. Shares shot higher after the release but quickly reversed course to shed nearly -0.25%. Shipping giant CSX reported a miss driven by trade-related woe. The company also lowered full-year guidance as it expects revenue to fall -1% to -2%. Cintas, a provider of labor-force services, beat on the top and bottom line and drove its shares up by 5.0% in premarket trading.

In trade news, Trump’s off-the-cuff Tweets during the Tuesday session has put the market on edge. Trump says the U.S. may increase tariffs on $325 billion worth of Chinese goods despite the truce put in place by himself and Xi.

EU Stocks Move Lower On Trade Concerns

EU stocks are broadly lower in Wednesday trading as trade concerns rear their head again. Trump’s late-day Tweet’s on Tuesday have raised concerns on the timing of a U.S./China trade deal. Trump says the two nations have a long way to go and that the U.S. could raise tariffs if it “wanted to”.  The UK FTSE 100 led the decline with a loss of -0.25% while the DAX and CAC both shed about -0.15%. Oil and gas stocks led the rout with a loss of -1.3%, food and beverage stocks led advancing issues with a gain of 0.70%.

In economic news, EU CPI came in hotter than expected. The headline CPI read came in a tenth hotter than expected for the MoM and YoY comparison. The data did little to alter ECB outlook though because core CPI was on the weak side of consensus.

Asia Lower, Trade Woe Weighs On Sentiment

Asian indices were mostly lower following Tuesday’s session on Wall Street. The Korean Kospi fell more than -0.90% as trade relations with Japan remain tense. The Nikkei, Shanghai Composite, and Hang Seng all fell -0.10% to -0.30%. The Australian ASX was the only index to advance in Wednesday trading.

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