The Tuesday Market Minute
- U.S. equity futures suggest a weaker start to the trading today, with the S&P 500 dipping into the red after weaker-than-expected earnings from JPMorgan.
- Global stocks broadly firmer on reports of fresh fiscal stimulus from China following a string of data indicating a sharp slowdown in the world's second-largest economy.
- European markets gains capped by uncertainty surrounding Britain's Brexit future and the slowest pace of German GDP growth in five years.
- U.K. Prime Minister Theresa May faces a humiliating defeat in parliament later this evening as lawmakers are expected to vote down her proposed EU withdrawl agreement, triggering myriad options for the government including fresh national elections.
U.S. equity futures slipped lower Tuesday, following a softer session in European stocks triggered by weaker economic growth from Germany, after a weaker-than-expected fourth quarter earnings report from JPMorgan Chase. (JPM)
JPMorgan, Wall Street's biggest investment bank, said fourth quarter earnings came in at $1.98 per share, well shy of the Street consensus of $2.20 as CEO Jamie Dimon said market volatility and lower trading volumes hit its bottom line.
JPMorgan shares were marked 2.8% lower in pre-market trading following the release and changing hands at $98.14 each, a move that hit futures tied to the Dow Jones Industrial Average
Corporate earnings will likely dominate the day's trading, however, with fourth quarter updates expected from Wells Fargo (WFC) as well as Dow components JPMorgan Chase (JPM) and United Health (UNH) and airline majors Delta (DAL) and United (UAL) .
UnitedHealth posted stronger-than-expected fourth quarter earnings Tuesday, and held its 2019 outlook in place, as Optum revenues topped $100 billion for the first time on record last year.
UnitedHealth shares were marked 1.6% higher in pre-market trading following the earnings release, indicating an opening bell price of $252.00 each, a move that trims its three-month decline to around 3.2%.
Delta posted stronger-than-expected fourth quarters Tuesday, but forecast disappoint guidance for the first three months of the year, sending shares lower in pre-market trading.
Delta said it sees first quarter earnings of between 70 and 90 cents a share, however, and an adjusted total revenue per available seat mile, or TRASM, growth rate of 2%, both of which misses market estimates.
Delta shares were marked 1.6 lower in pre-market trading following the release, indicating an opening bell price of $46.99 each, a move that would extend the stock's three-month decline past 9.3%
Investors are expecting S&P 500 profits to grow by around 14.5% from the same period last year, according to I/B/E/S data from Refinitiv, before slowing to just 3.9% in the first quarter of 2019, a figure that would be significantly below the 26.8% growth rate recorded over the same period in 2018.
European stocks were firmer at the start of trading Tuesday, as well, but turned red after Germany's Federal Statistics Office reported 2018 GDP growth of 1.5%, the weakest in five years, but said the region's biggest economy likely escaped recession and "probably grew" in the final three months of last year.
The Stoxx 600 benchmark, the region's broadest measure of share prices, edged 0.05% higher by mid-day in Frankfurt led by strong gains for auto and basic resource stocks following reports of the planned China stimulus.
Britain's FTSE 100, meanwhile, gained 0.24% even as the pound rose to 1.2846 against the U.S. dollar on bets that a defeat for May would result in a "softer" form of Brexit that would maintains Britain's existing trade agreements with the bloc.
Stocks were hit by the overhang of political risk surrounding today's key Brexit vote in British parliament, as well, which promises to trigger myriad options for the region's third largest economy if, as expected, lawmakers vote down Prime Minister Theresa May's proposed withdrawl agreement later this evening.
The pound's move was also exaggerated by weakness in the U.S. dollar, which continues to slide in the face of fading rate hike prospects from the U.S. Federal Reserve, and the impact of the longest government shutdown on record, which has keep nearly 800,000 federal employees from receiving paychecks.
The moves in Europe and the US reversed earlier gains triggered by China's National Development and Reform Commission, a key government division, which said it aimed to create a "good start" for the economy over the first few months of the year, raising hopes that planned stimulus, including tax cuts and liquidity support equal to around $220 billion, could be deployed in order to arrest the slowest pace of growth in nearly a decade.
"We should strive for a good start in the first quarter to create conditions for completing the key full-year development targets and tasks," Premier Li Keqiang told China's state television. "Our country's development environment is becoming more complex this year, there are more difficulties and challenges and the downward pressure on the economy is increasing."
The comments boosted stocks in Asia, lifting the MSCI Asia ex-Japan benchmark 1.4% higher into the close of trading, while Japan's Nikkei 225 jumped 0.96% on its return from holiday to close at 20,555.29 points.
The dollar index, which tracks the greenback against a basket of its global peers, was marked at 95.84 in early trading, largely unchanged from yesterday's levels but down 1% over the past two months.
Global oil prices were also active, using the weaker dollar and reports of China stimulus to reverse yesterday's decline and continue the rally that has lifted U.S. crude around 20% since Christmas day as traders re-set markets for the impact of OPEC led production cuts.
Brent crude contracts for March delivery, the global benchmark, were marked 89 cents higher from their Monday close in New York and changing hands at $59.88 per barrel while WTI contracts for February were marked 77 cents higher at $51.28 per barrel.