Market Analysis

The major U.S. index futures are pointing to lower opening on Monday, with risk aversion stifling the markets.  The markets continue to be concerned about growth and any pointer towards a slowdown in global growth is triggering anxiety among traders. After Asian stocks ended mixed, even as most markets in the region remained closed for the Lunar New Year holiday, the European markets are seeing marked weakness, with weak investor confidence reading setting in motion a wave of selling. Domestically, earnings news is mixed and there is a dearth of Main Street catalysts. Growth fears have dragged crude oil lower and sent safe haven dollar and the yen higher.
 
U.S. stocks reversed course in the week ended February 5th, as oil’s slide, mixed economic data and mixed earnings news generated weakness in the markets. 
 
Last Monday, the major averages ended on a mixed note, weighed down by weak Chinese manufacturing data and mixed earnings news. A steep decline in oil prices and mixed earnings reports weighed on the averages on Tuesday, sending them notably lower.  
 
Amid a rebound by oil prices and the release of mixed earnings and economic data, the major averaged ended Wednesday’s session on a mixed note. The averages moved about in a volatile manner on Thursday due to mixed catalysts before ending mostly higher. Reacting to the mostly positive jobs data for January, stocks closed Friday’s session notably lower. 
 
For the week ended February 5th, the Dow Industrials fell 261.33 points or 1.59 percent to 16,205, the S&P 500 Index lost 60.19 points or 3.10 percent to 1,880 and the Nasdaq Composite ended down 250.81 points or 5.44 percent at 4,363, its lowest level since October 20th, 2014. 
 
 
 
Among the sectors, the NYSE Arca Oil Index and the NYSE Arca Biotechnology Index lost over 5 percent each and the Philadelphia Semiconductor Index, the NYSE Arca Securities Broker/Dealer Index, the Philadelphia Housing Sector Index and the Philadelphia Oil Service Index all declined over 4 percent. Additionally, the KBW Bank Index was down 3.88 percent for the week.  
 
On the other hand, the NYSE Arca Gold Bugs Index rallied 22.38 percent for the week. The Dow Jones U.S. Basic Materials Index and the Dow Jones Utility Average also gained 4.34 percent and 2.17 percent, respectively. 
 
Currency, Commodity Markets 
 
Crude oil futures are slipping $0.91 to $29.93 a barrel after declining $2.73 or 8.12 percent to $30.89 a barrel in the week ended February 5th. The dollar’s strength and demand-supply mismatch worries continued to wreak havoc on the commodity. 
 
Meanwhile, gold futures, which jumped $41.30 or 3.70 percent to $1,157.70 an ounce in the previous week, are currently climbing $21.50 to $1,179.20 an ounce. The precious metal’s safe haven appeal appreciably supported it for most of last week. 
 
Among currencies, the U.S. dollar firmed up in the week ended February 5th, as the specter of further monetary policy normalization propped up the currency. The buck made a 3.52 percent gain against the yen before ending the week at 116.87 yen and it tacked on 3.02 percent against the euro to $1.1158 a euro.  
 
The U.S. dollar is currently trading at 116.41 yen and is valued at $1.1097 versus the euro. 
 
Asia 
 
The major Asian markets that were open for trading closed on a mixed note, although most markets were closed for the Lunar New Year holiday. Trading volume was rendered light, given the lack of any regional directional clues. 
 
The Japanese market recovered in late trading, helped by the weakening of the yen, and ended notably higher. The Nikkei 225 Index opened lower and languished mostly below the unchanged line until late trading. Thereafter, the average recovered and advanced steadily, closing 184.71 points or 1.10 percent higher at 17,004.  
 
A majority of stocks advanced in the session, led by most export, utility, housing, food, retail, real estate, chemical, pharma and telecom stocks. However, financial, glass and resource stocks came under selling pressure. 
 
Tokyo Seikan Group, Sumco, Mitsubishi Motors, Asahi Kasei, DeNA, Toyobo, Unitika, Obayashi, Sky Perfect JSAT Holdings, Aeon and Advantest were among the biggest gainers of the session. On the other hand, Asahi Glass slumped 12.73 percent and Dowa Holding plunged 18.54 percent.  Nippon Electric Glass, Sumitomo Metal Mining, Hitachi and Olympus moved notably to the downside. 
 
Australia’s All Ordinaries Index languished below the unchanged line for much of the session before ending down 3.50 points or 0.07 percent at 5,022. Financial and IT stocks lost ground but utility and material stocks advanced. 
 
On the economic front, data published by the People’s Bank of China showed that forex reserves in China fell $99.5 billion to $3.23 trillion in January, marking the lowest level since 2012.  
 
The Japanese Ministry of Finance reported that the current account surplus of Japan fell to 960.7 billion yen in December from 1,143.5 billion yen in November, while economists expected a surplus of 1,051.7 billion yen. Exports fell 11.8 year-over-year and imports slumped 18.9 percent. However, on an adjusted basis, the current account surplus was 1,635.4 billion yen, ahead of forecasts for a surplus of 1,590 billion yen. 
 
A report released by the Bank of Japan showed that overall bank lending rose 2.3 percent year-over-year in January following a 2.2 percent increase in December. Excluding trusts, lending was up 2.4 percent. 
 
Total labor cash earnings in Japan increased at a slower than expected pace in December, a preliminary report from the Ministry of Health, Labor and Welfare showed. Gross earnings rose by 0.1 percent year-over-year in December, slower than the 0.7 percent increase expected by economists. In November, earnings showed no variation. 
 
Europe 
 
European stocks opened higher but saw volatility in early trading amid very little domestic and overseas news. The averages fell sharply in late afternoon trading following the release of weak investor confidence data.
 
In major corporate news, Air France-KLM reported a 2.9 percentage point year-over-year improvement in load factor to 85.2 percent, as traffic rose 3.1 percent and capacity edged down 0.4 percent.  
 
Randgold Resources (GOLD) reported higher sales and production for its fourth quarter but earnings fell. The company also announced a 10 percent increase in its cash dividend. 
 
On the economic front, an indicator measuring investor confidence in the eurozone declined in February. The Sentix indicator fell 3.6 points from January’s 9.6, while economists expected a more modest drop to 8.8. 
 
U.S. Economic Reports 
 
Much of the unfolding week is calm on the economic front, although there are a couple of reports that can make noise scheduled for Friday.  
 
After a jobs report that cemented hopes the U.S. economy is truly on a sustainable uptrend, traders may seek confirmation for the expectations from the Commerce Department’s retail sales report for January and the preliminary estimate of the University of Michigan’s consumer sentiment index for February, both due on Friday the 12th. 
 
Also on the radar will be a few speeches scattered all over the week, including Federal Reserve Chair Janet Yellen’s semi-annual testimony before Congress. 
 
The Commerce Department’s wholesale and business inventories reports, both for December, the Labor Department’s export and import prices data for January, the Treasury’s monthly budgetary statement for January and the auctions of 3-year and 10-year notes and 30-year bonds round up the economic events of the week. 
 
Stocks in Focus 

Hasbro (HAS) reported better than expected fourth quarter adjusted earnings per share and revenue.

Cognizant (CTSH) reported better than expected fourth quarter adjusted earnings per share and revenues were about in line. The company's first quarter guidance is weak.
 
ON Semiconductor (ONN) reported in line fourth quarter non-GAAP earnings per share but its revenues missed estimates. The company’s first quarter revenue guidance was soft.  
 
21st Century Fox (FOXA), Amkor (AMKR), Leap Frog (LF), Owens & Minor (OMI), Owens-Illinois (OI), PartnerRe (PRE), Waste Connections (WCN) and Yelp (YLP) are among the companies due to release their quarterly results after the close of trading.