Corporate earnings reports shares investor headspace with geopolitical tensions as stocks tick upward after a holiday weekend.

April 17, 2017
By Vlad Karpel

Stock index futures are looking up today as investors digest a round of corporate earnings reports and look for guidance. Following President Donald Trump’s election, the stock markets saw a powerful rally that broke index records and released animal spirits. Now, investors are looking for validation for the rally in both earnings reports and economic data. Some analysts believe valuations are overstretched, and foresee a sharp selloff if fundamental economic data or commercial activity do not complement  optimistic investor sentiments.  

Still, geopolitical tensions remain high, although slightly relaxed from last week. Rhetoric from both the U.S administration and North Korea had reached a crescendo over the weekend as the DPRK held a military parade and attempted to launch a missile- which failed. China’s Foreign Ministry had made strong calls for both sides to de-escalate. A recent Turkish referendum- wrought with allegations of fraud- has concluded as a victory to President Recep Tayyip Erdogan. The controversial Turkish leader now has more concentrated power and additional abilities, largely seen as a radical change and met with protests. Global destabilization has a dampening effect on broader market sentiments.   

When geopolitical tension is high, investors will move to safety by investing in stable G-10 markets- in particular the U.S dollar. Gold serves as a perceived safe-haven as well, which has seen gains today. Treasury bonds have also seen similar activity.

The Dow is currently up 0.56%, or 79 points, at 20,557.29 The Nasdaq-100 is up 0.61% at 5,836.94 and the S&P 500 is currently trading at 2,340.20 which is up 0.52% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows initial downward movement followed by positive correction. Today’s negative vector figure of -0.23% eases to -0.01% before reversing into positive movement within four trading sessions. Today’s support and resistance is 2,322.02 (± 4.48) and 2,346.69 (± 4.53), respectively. The predicted close today is 2,328.62.   



Crude oil markets are looking down today, as U.S supplies are expected to rise again. Data released by U.S rig operator Baker Hughes is showing a 13th week of consistent upticks in rig count. The figure is now at 683 which is the highest in two years.  The Energy Information Administration will be releasing production data later today, which is viewed by investors to gauge potential offsets to global production cuts led by OPEC. An extension of the OPEC production cut deal is expected for the second half of this year, as indicated by Saudi Arabia. This is crucial in maintaining a degree of equilibrium and provides a counterweight to ramped up U.S domestic production.  West Texas Intermediate for May delivery is currently priced at $53.04 per barrel, down 0.23% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows downward movement building incrementally. The fund is currently trading at $11.08, which is down 0.45% from the open. Today’s prediction sees support at $11.06 (± 0.06) and resistance at $11.13 (± 0.06). The predicted close for today is $11.11. Vector figures show -0.39% for today, then progress past -1.10% within three sessions. All vector figures are based on today’s market conditions.  



The price for June gold is up 0.26% at $1,293.50 a troy ounce. Heightened geopolitical tension and lingering anxieties attached to the rise of far-right, euroskeptic populist politics in Europe are two main drivers for these gains. The U.S dollar has also pulled back today, which makes gold a more attractive investment to investors using foreign currencies.   

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows consistent positive movement. The gold proxy is currently trading at $122.66, up 0.05% from the open. Today’s predicted low is $122.16 (± 0.32) and the predicted high is $123.90 (± 0.32). The predicted close today is $123.69. Relative to today’s conditions, vector figures rise from +0.52% today to pass +1.00% and remain above that level throughout the 10-day window.  



Geopolitical tensions remain high, driving investors to perceived safe-haven assets which include treasury bonds. Bond prices and yields are inversely related to one another, and the boost in bonds has driven yields down to significant lows. Tense U.S.-Russia relations over Syria, a military stare-down between the Trump administration and North Korea, and growing questions around the future of the EU are all contributing factors. The yield on the 10-year Treasury note is down 0.16%, currently trading at  2.24%.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see positive movement building incrementally in our 10-day prediction window. Relative to current conditions, we see vector figures moving from +0.23% today to +1.12% in three trading sessions.  The ETF is currently priced at $123.25- down 0.08% from the open. The predicted close today is $123.93 with a low and high of $123.26 (± 0.20) and $124.03 (± 0.20), respectively.  



The CBOE Volatility Index (VIX) is currently down 4.95% from the open at 15.17. Relative to today’s conditions, the 10-day prediction window shows consistent negative signals. The predicted close today is 15.56 with a negative vector of -1.61%. Today’s predicted lows and highs are 14.54 (± 0.20) and 15.96 (± 0.22), respectively.


Other News

Netflix Inc. (NFLX) is due to report earnings after the market close today, as part of a heavy round of corporate earnings reports this week.

Following the FDA’s decision to not approve a rheumatoid arthritis drug, shares for Eli Lilly & Co. (LLY) and Incyte Corp. (INCY) have dropped. Shares of Eli Lilly are down 3.95% at $82.98, while Incitye is currently seeing a dip of 11.10% at $125.15.

Defense sector stocks are up today, following two displays of U.S military force within the past week. Shares of Raytheon Co. (RTN), which manufactures the Tomahawk cruise missiles used in a punitive strike against a Syrian airbase, are up 0.61% at $152.54. Boeing Co. (BA) is also seeing a share price boost- following the use of the Massive Ordnance Air Blast (MOAB) or ‘mother of all bombs’ in an attack on an underground ISIS-K base in Afghanistan. The aerospace defence contractor’s shares are currently up 1.38% at $178.04.

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