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On 4 February 2019 - Tech sector drives solid US stock gains; Alphabet earnings beat estimates after trading close

Anne D Picker

Anne D Picker - Econoday

German Chancellor Merkel suggests “creative” response to Brexit impasse. 

US markets

US stocks closed higher Monday, with the tech sector outperforming ahead of fourth-quarter results from Alphabet. The Dow and S&P both gained 0.7 percent, while the Nasdaq advanced 1.2 percent and is now up 10.7 percent since the end of 2018.

Nasdaq’s gains were partly driven by expectations that solid fourth-quarter results from other tech giants would be repeated by Google parent company Alphabet. Reporting shortly after the close of trading, Alphabet announced fourth-quarter earnings of US$12.77 per share, well above analysts’ expectations of US$10.82 per share and up from US$9.70 a year earlier. Revenue and traffic acquisitions costs were was close to expectations. General Motors posted a moderate gain after announcing more layoffs in its US operations ahead of the release of fourth-quarter earnings later in the week. 

Delayed factory orders data for November published Monday showed a fall of 0.6 percent on the month, weaker than the consensus forecast for a rise of 0.2 percent. Although durable goods orders rose 0.7 percent on the month largely reflecting the impact of aircraft orders, this was outweighed by a 1.9 percent drop in non-durable goods orders. These data are consistent with other indicators that pointed to weaker activity in November, but more recent data suggest that conditions improved in December.

These data reflect observations at 4:00 PM US ET. Gold fell US$5.60 to US$1,316.50 and dated Brent spot crude was down US$0.01 to US$62.74. The US dollar made moderate gains against most major currencies but was flat against the yuan, with trading in the yuan closed over lunar new year holidays. The yield on the US Treasury 30 year bond gained 3 basis points to 3.06 percent while the 10 year note increased 4 basis points to 2.72 percent.

European markets

Most European markets were little changed Monday. The FTSE and Switzerland’s SMI closed 0.2 percent higher, the DAX was flat on the day, and the CAC underperformed with a fall of 0.4 percent. Auto stocks were among the weaker performers after subdued Chinese service sector PMI data released over the weekend.

The European data calendar was light Monday. Eurozone producer price inflation fell from 4.0 percent in November to 3.0 percent in December, while Italian consumer price inflation moderated from 1.1 percent in December to a preliminary estimate of 0.9 percent in January. In both cases, weaker energy prices were the main factor weighing on headline inflation. The United Kingdom construction PMI survey showed activity in the sector was almost flat in January, with the headline index falling to just 50.6 from 52.8 in December. Survey respondents reported that Brexit uncertainty remained a significant factor weighing on activity and sentiment. 

German Chancellor Angela Merkel indicated in comments made Monday that she may be prepared to support some elements of a future agreement governing the relationship between that United Kingdom and the European Union that could break the deadlock that has prevented the UK parliament from approving the Brexit deal agreed last November. With the land border between the UK and the Republic of Ireland still the main obstacle, Chancellor Merkel argued that it is possible to arrive at a “creative” solution to keep this border largely free of controls even after the UK leaves the EU’s customs union. 

Asia Pacific Markets

Several Asian markets were closed Monday for lunar new year holidays, including China, Korea, and Taiwan, while Hong Kong’s stock market closed early, with the Hang Seng index up 0.2 percent. Singapore’s STI fell 0.1 percent on the day.
Japanese markets opened the week with solid gains after Friday’s strong US employment report, with the Nikkei up 0.5 percent and the Topix advancing 1.1 percent. Tech company Sony, however, fell sharply Monday after it reported weaker-than-expected sales of cameras and smartphones and provided more subdued guidance about the revenue outlook for 2019. Auto-maker Honda also closed lower after reporting weak fourth-quarter results.

Australia’s All Ordinaries index closed flat on the day ahead of the publication after the close of trading of a government report into misconduct relating to banks’ consumer lending practices and Tuesday’s meeting of the Reserve Bank of Australia. As expected, the report recommends tighter credit procedures and stricter rules on the range of financial products banks offer to consumers. The RBA is expected to keep policy rates on hold again but further weakness in residential property prices may have an impact on officials’ assessment of economic conditions and the policy outlook. Officials have consistently said in recent months that they expect the next move in policy rates to be higher, but markets have started to price in a greater chance of a rate cut. 

Looking forward

Australian trade and retail sales data are scheduled for release shortly, followed by the Reserve Bank of Australia’s policy rate decision. Service sector PMI surveys will be the main focus of the European and US data calendars.

Global Stock Markets

 

Index

Feb 4 2019

Daily Change

% Change Daily

North America

United States

Dow

25239.37

175.48

0.7

 

NASDAQ

7347.54

83.67

1.2

 

S&P 500

2724.87

18.34

0.7

Canada

S&P/TSX Comp

15602.32

96.01

0.6

Europe

UK

FTSE 100

7034.13

13.91

0.2

France

CAC

5000.19

-19.07

-0.4

Germany

XETRA DAX

11176.58

-4.08

0.0

Italy

MIB

19605.60

28.83

0.1

Spain

Ibex 35

8975.20

-44.20

-0.5

Sweden

OMX Stockholm 30

1527.19

1.50

0.1

Switzerland

SMI

9011.48

15.12

0.2

Asia/Pacific

Australia

All Ordinaries

5962.98

27.68

0.5

Japan

Nikkei 225

20883.77

95.38

0.5

 

Topix

1581.33

16.70

1.1

Hong Kong

Hang Seng

27990.21

59.47

0.2

S. Korea

Kospi

*

*

*

Singapore

STI

3184.56

-4.12

-0.1

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

*

*

*

India

Sensex 30

36582.74

113.31

0.3

* Market closed
Source: Haver Analytics

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.