Dow eyes 26,000 as earnings pick up pace

NEW YORK: Futures on the Dow Jones Industrial Average surged more than 200 points yesterday, indicating that the blue-chip index could open above 26,000 for the first time as the fourth-quarter reporting season kicks into high gear. Dow component UnitedHealth rose 1.47 percent after the largest US health insurer reported results that beat analysts’ estimates and raised its full-year profit forecast. Citigroup Inc jumped 2.7 percent after the lender reported profit that topped Wall Street expectations as strength in consumer businesses made up for lower revenue from bond and currency trading. Hopes of strong quarterly earnings, supported by steep cut in corporate taxes, and solid global economic growth have bolstered Wall Street’s optimism in the start to 2018.

“Not only is the US coming off a strong quarter, but the new tax reform measures are continuing to provide a boost, with investors keen to hear more about what impact this will have on future earnings,” said Craig Erlam, senior market analyst at online foreign exchange broker Oanda.

If the Dow hits 26,000, it would mark its fastest 1000point rise. It ended above 25,000 on Jan 4. S&P 500 e-minis were up 12.5 points, or 0.45 percent, with 312,460 contracts traded. Nasdaq 100 e-minis were up 38.75 points, or 0.57 percent, on volume of 72,029 contracts. General Motors rose 3.36 percent after the company said it expects earnings in 2018 to be largely flat, compared with 2017, but that profits should pick up pace in 2019.

General Electric shares fell 3.52 percent in heavy premarket trading, after the industrial conglomerate said it would record a $6.2 billion charge in the fourth quarter as part of an ongoing review of its finance arm’s insurance portfolio. Oil prices pulled back from recent highs yesterday, with Brent crude dipping 1.07 percent to $69.51 per barrel. Hershey fell 1.05 percent after Goldman Sachs downgraded the stock to “sell”. Bitcoin tumbled 18 percent to a four-week trough close to $11,000, after reports that a ban on trading of cryptocurrencies in South Korea was still an option.

Shares of cryptocurrency-related companies were all down. Marathon Patent, Riot BlockChain, Xunlei and Overstock.com fell between 4 percent and 13 percent.

Meanwhile, eurozone stock markets pushed higher yesterday on the coattails of Asia, while London gains were capped by share price falls across the heavyweight energy and mining sectors. London’s FTSE 100 was still close to hitting a new all-time high however, as sterling dropped on official data showing that UK annual inflation pulled back in December from a near six-year peak. The euro meanwhile came off a three-year high versus the dollar struck on Monday, while oil futures retreated also from their highest levels since 2015 that were reached at the start of the week.

The euro is “finally seeing some weakness after its remarkable bounce of late”, said Chris Beauchamp, chief market analyst at IG trading group. He noted also that “sterling’s impressive rally over the past nine months has helped cool imported inflation” into the UK, in turn lessening the prospect of further rate tightening from the Bank of England.

“Perhaps they won’t have to raise rates this year after all, although one reading does not constitute a trend,” added Beauchamp after UK annual inflation dipped to 3.0 percent from 3.1 percent.

The European single currency on Monday almost broke $1.23 for the first time since December 2014 on strong economic data and after a key member of the European Central Bank hinted that it could start cutting back its bond-buying stimulus by September. In company share price movement yesterday, BP shed 2.0 percent to 521.9 pence after the British energy giant said it will take an additional charge of $1.7 billion (1.4 billion euros) for last year linked to the Gulf of Mexico oil spill disaster in 2010.