The Wednesday Market Minute
- Global stocks trade firmly higher, although many major markets remain closed for May Day holidays, following Apple's stronger-than-expected second quarter earnings report.
- The U.S. dollar ticks higher ahead of the Federal Reserve's rate decision later today, which comes amid increasing pressure to ease from President Donald Trump.
- U.S.-China trade talks resume in Beijing, with reports suggesting a deal remains stuck on the cancellation of U.S. tariffs and enforcement mechanisms placed on China.
- Global oil prices slip after a bigger-than-expected build in U.S. crude inventories, but Saudi comments on OPEC cuts and the ongoing political crisis in Venezuela could trigger quick prices moves later in the session.
- U.S. equity futures suggest a triple-digit gain for the Dow and another record high for the S&P 500 ahead of quarterly earnings from CVS, Hilton, Marriott, Kraft Heniz and Humana and the ADP employment change data for April at 8:15 am Eastern Time.
Global stocks kicked off the month with solid gains Wednesday, following another record close on Wall Street last night for the S&P 500, as investors extended the best start to any year in nearly a decade for U.S. stocks following a robust earnings report from tech giant Apple Inc. (AAPL - Get Report) and ongoing bets for a dovish Federal Reserve rate decision.
Apple's second quarter earnings beat sent shares in the world's most valuable company more than 5% higher in after-hours trading last night as the group posted forecast-toppings sales of $58.02 billion, a dividend increase to 77 cents a share and announced a stock buyback program worth $75 billion.
Apple's earnings cap a solid run for the so-called FAANG complex of tech-focused stocks, which have led the first quarter reporting season from a forecast of falling profits to expectations of a modest increase in collective S&P 500 earnings now that we have reached the mid-point.
The stronger earnings performance, set against better-than-expected readings for first quarter economic growth in both Europe and the United States suggests U.S. equities could have more room to run, particularly given the fact that the Fed is expected to make no changes to its key lending rate later today and Chairman Jerome Powell could signal a dovish stance on monetary policy well into the start of next year.
President Donald Trump shared his views on interest rates in Tweet late Wednesday that called for a full-point reduction in the Fed Funds rate and the return of bond purchases from the central bank's quantitative easing program.
China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go...— Donald J. Trump (@realDonaldTrump) April 30, 2019
....up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!— Donald J. Trump (@realDonaldTrump) April 30, 2019
U.S. equity futures are clearly reflecting that bullish tone Thursday, with contracts tied to the Dow Jones Industrial Average, which has gained 14% so far this year, suggesting a 103 point gain at the start of trading today while those linked to the S&P 500, which has booked a nine-year best year-to-date gain of 17%, indicating a further 11.3 point advance from its current al-time high.
CVS Health Corp. (CVS - Get Report) , Humana (HUM - Get Report) , Hilton (HLT - Get Report) and Estee Lauder (EL - Get Report) are set to report quarterly earnings prior to the start of trading today, with Qualcomm (QCOM - Get Report) slated to update investors after the closing bell.
Apple shares were indicated to open at a six-month high of 211.37 aech after the tech giant posted stronger-than-expected second quarter earnings as record services revenue offset a worryings slump in iPhone sales.
Apple was able to offset a record decline in iPhone revenues, which fell 17% to $31.05 billion, with the best growth in services revenue the company has ever booked and a near-term forecast that topped analysts forecasts and remains on track for the group's stated aim of doubling the size the services business from 2016 levels to around 500 million paid subscribers by 2020.
Stocks in Asia were solid in the overnight session, as well, with investors taking their cue from Apple's better-than-expected earnings, and comments from CEO Tim Cook that he was "optimistic" on the outcome of trade talks between Washington and Beijing, which continued today in the Chinese capital.
With markets in Japan closed to mark the ascension of new Emperor Naruhito, and various markets in the Asia region closed for the May 1 holiday, trading was muted overnight, although the MSCI ex-Japan benchmark was seen 0.24% higher heading into the start of the European session.
Europe's Stoxx 600, which have booked a solid 15.94% gain since the start of the year, will only be influenced by U.K. stocks today, as major European bourses will remain closed for the traditional 'May Day' workers holiday.
Britain's FTSE 100, the European stock market laggard with only a 10.7% year-to-date gain, was marked 0.3% higher at the start of trading Wednesday, led by shares in grocery store chain J. Sainsbury's Plc (JSAIY) , which rose 4.5% after it reported a better-than-expected full-year profit just days after its planned merger with Walmart Inc.'s (WMT - Get Report) Asda unit was rejected by U.K. competition regulators.
Global oil prices were weaker in the overnight session, following a bigger-than-expected buildup in U.S. crude stocks reported by the American Petroleum Institute, although markets are expected to be pressured again by comments from Saudi Arabia's influential oil minister, Khalid Al-Falih, who hinted yesterday that OPEC members might extend their production cut agreement into the end of 2019.
The ongoing political crisis in Venezuela, where supporters of opposition leader Juan Guaido are expected to take to the streets later today to force the ouster of defeated President Nicolas Maduro, could also clip global supplies and push prices higher ahead of OPEC's June meeting in Vienna
Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 26 cents lower from their Tuesday close in New York and changing hands at $71.80 per barrel while WTI contracts for the same month were seen 46 cents lower at $63.45 per barrel.