Wednesday, June 10, 2020

Tiffany Unable to Offset Boeing’s Impact on S&P 500

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News shaping
the markets today

     

What’s happening: The S&P 500 index declined yesterday, after erasing all its losses for the year on Monday.

What happened: After a strong rally on Monday, S&P 500 gave back some of its gains yesterday.

Shares of Tiffany & Co rose around 2% to close at $124.56, even after the company reported downbeat results for the fiscal first quarter. This, however, was not enough to offset the massive 6% pullback in Boeing’s stock on news of order cancellations.

Details: The S&P 500 index had closed Monday’s session just 4.5% shy of its record high closing on February 19. Stock index futures pulled back yesterday, and S&P 500 slipped 0.78% to settle at 3,207.18.

Luxury jeweller Tiffany reported a 44.6% declined in sales to $555.5 million. The company also posted a net loss of $64.6 million, or 53 cents per share, versus a profit of $125.2 million, or $1.03 per share, in the same quarter last year. Both figures disappointed the market, as consensus estimates were at sales of $692.0 million and a loss of 4 cents per share.

Despite the downbeat results, the company indicated that its sales growth had improved to 90% in May after declining 85% in February due to store closures amid the coronavirus outbreak.

Investor sentiment was also helped by news of the luxury jeweller receiving antitrust clearances to move forward with its $16.5 billion deal with the French giant LVMH.

Meanwhile, aircraft manufacturer Boeing said it had received new orders for six 767 Freighters in May. However, the company’s order backlog declined by 90 jets last month, mainly due to order cancellations and other negative adjustments.

The cancellations included 14 737 Max and the company had to remove 77 other aircraft orders from its May backlog to meet accounting standards. While these remain under sales contracts, Boeing said it is not confident of closing the sales. The company delivered only four aircraft in May.

What to watch: Investors await the US Federal Reserve’s policy decision later today. While the central bank is unlikely to change interest rates, investors look forward to the release of economic and interest rate projections, which the Fed had declined from issuing in March due to the virus crisis. US indices trading will also be impacted by inflation data scheduled for release today.

The Markets Today

     

Crude oil will be in focus today, ahead of the EIA’s (Energy Information Administration) report on petroleum supplies.

Context: After posting a decline earlier in the session, crude oil closed higher on Tuesday with traders projecting a rebound in energy demand. Prices trended lower for most of the session as Gulf producers indicated ending their voluntary production cuts by the end of June.

Details: The OPEC+ group succeeded in arriving at a deal to extend their global output cut by another month till the end of July. However, Gulf countries, including Saudi Arabia, the UAE and Kuwait, are not planning to extend their additional production cuts of 1.18 million bpd (barrels per day) next month. 

Investor sentiment for commodity index assets improved after the EIA lifted its 2020 projections for WTI crude to $35.14 per barrel, up 17% versus its May guidance. Brent crude oil prices are expected to average $38.02 per barrel in 2020, up 11.4% from the earlier forecast.

The API (American Petroleum Institute) late Tuesday reported that US crude supplies increased 8.4 million barrels in the week ending June 5, following a 0.5 million decline in the prior week. WTI (West Texas Intermediate) crude for July delivery gained 2% to end at $38.94 per barrel, after falling as low as $37.07 per barrel earlier in the session. Crude prices had declined 3.4% on Monday.

Global benchmark Brent for August rose 0.9% to $41.18 a barrel yesterday, after dropping 3.6% on Monday.

What to watch: Investors await the EIA’s weekly report on US petroleum supplies. Analysts project a decline of 3.2 million barrels in crude supplies for the latest week ending June 5.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.4%, 0.3% and 0.7%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Brazil’s inflation rate and US MBA mortgage applications.