Stronger corporate earnings prompt US rebound

Wednesday, February 05, 2014

US equity markets staged a recovery after the worst losses in six months on stronger than expected corporate earnings and a smaller than expected decline in factory orders. Both the S&P 500 and DJIA snapped a two day losing streak, managing to add 0.76% and 0.47% respectively, encouraged by stronger profits from Yum! Brands and an increased profit forecast from Michael Kors. Investors were also coaxed back to the market by the smaller than expected decline in factory orders, which fell 1.5% m/m in December against a 1.8% expectation. Crude prices were also lifted by the anticipation of further drawdowns in distillate stockpiles owing to the colder weather, with front month WTI prices rising 0.7% yesterday as they recovered much of the previous session’s losses.

Japanese stocks followed Wall Street higher, encouraged by the improving investor sentiment as Panasonic rallied 19% after posting Q3 profits that beat expectations. The Nikkei gained 1.23% while the TOPIX added 2.05% during overnight trade in a move that recovered some of the previous session’s heavy losses.

Sugar futures rallied higher yesterday as drier conditions in Brazil threatened yields while India’s decision to postpone exports further weighed on fundamentals. Second month raw sugar contracts rallied 2.38% yesterday, rising for the fourth consecutive session after prices hit 15.00 for the first time since early 2010 towards the end of last month. Prices have recovered almost 9% as a heat wave in Brazil threatens farmer’s crop yields amid the lowest levels of January rainfall in 20 years.

Spot gold prices halted their rally yesterday as investors, encouraged by better than expected earnings, turned away from the perceived safe haven. Intraday price moves tested the area just above $1,260 before pulling back and closing slightly below $1,255, posting an inside day as investors mulled over recent data releases. With Chinese markets still absent owing to the New Year holidays, appetite may further deteriorate with investors accordingly looking towards services PMI and ISM non-manufacturing data due out today for further signs of growth.

Stronger corporate earnings support a partial recovery in the S&P 500 

SPX Index SP 500 Index 2014 02 05 07 53 33

Sugar futures rally higher on drought concerns in Brazil 

SB2 Comdty Generic 2Nd SB Fut 2014 02 05 07 53 59 

Events for today: Wednesday, 5 February 2014

CN Market Holiday




Services PMI




Services PMI




Services PMI




ISM Non-Manufacturing




EIA Energy Stocks



Topics: Equities, Gold, PMI, Sugar
More from: Kash Kamal