U.S. stock futures tread water as Dow attempts longest win streak this month

S&P 500 could drop to 2800 – Cardillo
August 19, 2019
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August 21, 2019

U.S. stock futures tread water as Dow attempts longest win streak this month

Investors eye Home Depot earnings for signs of consumer health

U.S. stocks looked set to edge higher Tuesday morning as investors contend with worries about the strength the of the U.S. economy and earnings news from the some of the last remaining major companies to report for the second quarter, including Dow component Home Depot, which could offer some clues about the health of the American consumer.

How are the major benchmarks faring?

Futures for the Dow Jones Industrial Average YMU19, -0.03% rose 11 points, or less than 0.1%, at 26,129, those for the S&P 500 ESU19, -0.09% added 1.6 point, or 0.1% to 2,925.25, while the Nasdaq Composite index NQU19, -0.04%rose 6 points, or 0.1%, to reach 7,734.25.

On Monday, the Dow DJIA, +0.96%  rose 249.78 points, or 1%, to end at 26,135.79, while the S&P 500 index  SPX, +1.21%  added 34.97 points, or 1.2%, to close at 2,923.65. The Nasdaq Composite Index COMP, +1.35%  advanced 106.82 points, or 1.4%, to finish at 8,002.81.

A fourth consecutive gain for the Dow and the S&P 500 would represent those indexes’ longest since the period ended July 15.

Read: Stock-market investors rattled by bond market’s ‘warning shot’ — here’s what’s next

What’s driving the market?

U.S. equity futures were treading water on Tuesday, with investors digesting earnings from Home Depot Inc. HD, +2.31%, which warned that lumber price deflation, as well as the impact of possible tariffs, will impact its fiscal year sales.

Home Depot still beat analyst expectations for second-quarter earnings, posting net income of $3.17 per share, while same-store sales rose 3%. The firm issued somewhat disappointing full-year sales guidance of 2.3%, versus forecasts of 2.8%. The stock rose 2% in premarket action.

Home Depot earnings come a day after the U.S. Commerce Department said it has given Chinese telecom giant Huawei Technologies Co. Ltd. another 90-day reprieve during which it can continue to do business with American companies, without the granting of case-by-case licenses that would otherwise be needed, after the Commerce Department added it to its “entity list” in May.

Meanwhile, President Donald Trump late Monday leveled fresh criticism against the Federal Reserve, asking that the central bank consider deeper cuts to key interest rates, of around 1%. Trump did, however, declare the U.S. economy in good shape, despite the trade clash with China, which economists and many executives from American companies highlight as a problem for business planning, one that could throw the U.S. into a recession. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money,” Trump said on Monday.

Stock-market investors have been focused on what the bond-market has been communicating about the overall health of the economy. Longer term bond yields briefly bell below short term yields last week, adding to concerns about the health of the economy. Such yield curve inversions have preceded the past seven recessions though often with a significant time lag.

“We see a mixed trading session as the movement in yields suggest the bond market is not convinced of the administrations pitch to dampen recession fears,” said Peter Cardillo, chief market economist at Spartan Capital Securities in a Tuesday research note.

Check outStocks could fall another 8% as ‘Trump put’ and ‘Fed put’ expire, says Morgan Stanley’s Mike Wilson

The 10-year Treasury note’s yield TMUBMUSD10Y, -4.25%   was down about 3 basis points Tuesday to 1.565%, while the 2-year Treasury noteTMUBMUSD02Y, -2.65%   yielded 1.525%, down less than a basis point.

Potentially weighing on technology shares is a report that as many as 20 states attorneys general will launch a joint antitrust investigation of large technology firms, according to the Wall Street Journal. This comes after Justice Department announced a separate antitrust review of the tech firms, which reportedly include Google parent Alphabet IncGOOG, +1.77%  and Facebook Inc.FB, -0.26%, among others.

Looking ahead, investors will watch for comments from Fed officials later in the day, including San Francisco Federal President Mary Daly, who will speak at 4 p.m. at an online question-and-answer session, and Federal Gov. Vice Chairman for Supervision Randal Quarles, who is slated to speak at 6 p.m.

Those speeches come ahead of the publication of the minutes from the most recent Fed gathering on July 31, which concluded with the first interest-rate cut in more than a decade. A gathering of central bankers in Jackson Hole that starts on Thursday will also be in focus.

Which stocks are in focus?

Shares of Kohl’s CorpKSS, -0.68%  rose 3.3% in premarket action, after the retailer reported second-quarter profits and revenues that beat Wall Street expectations.

Medtronic Plc MDT, +4.05%  stock rose 3.7%, after issuing the medical technology company beat analyst expectations for fiscal-fourth quarter earnings and sales, while raising its full-year outlook.

U.S.-traded shares of Sea LtdSE, -12.74%  tumbled 13% before the start of trade Tuesday, after the online gaming company reported second-quarter results.

TJX Cos IncTJX, -2.42%  will be in focus as the TJ Max-parent is set to report earnings before the opening bell.

How are other markets trading?

Stocks in Asia traded mixed overnight, with China’s CSI 300 000300, -0.09% falling 0.1%, Hong Kong’s Hang Seng index HSI, -0.23%  losing 0.2% and Japan’s Nikkei 225 NIK, +0.55%  rising 0.6%. In Europe, stocks edged higher, with the Stoxx Europe 600 SXXP, -0.29%  up 0.1%.

In commodities markets, the price of crude oil CLU19, +0.04%  fell 0.4% to roughly $56 per barrel, while gold prices GCZ19, +0.16%  rose 0.4% to about $1517 per ounce.

Source: https://www.marketwatch.com/story/us-stock-futures-edge-lower-threaten-to-snap-dows-three-day-win-streak-2019-08-20