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US stocks recover from losses as analysts focus on surprise gasoline supply drop

Last updated: 16:07 08 Feb 2017 EST, First published: 03:24 08 Feb 2017 EST

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US stocks recovered from intraday losses to end higher on Wednesday after analysts focused on a fall in gasoline inventories rather than a spike in oil supplies.

The S&P 500 market bellwether closed up 0.07% at 2294 and led by Microchip Technology (NASDAQ:MCHP) up 6% at $73.81 after its third-quarter earnings beat forecasts and the company raised its guidance.

Meanwhile, the ticker’s biggest faller all session was Akamai Technologies (NASDAQ:AKAM) down 10.7% at $63.54.

The Nasdaq Composite also managed to dig itself out of losses and closed up 0.2% at 5682.

Only the Dow Jones Industrial Average was condemned to losses all session and closed down 0.2% at 20,054.

Oil prices turned positive on Wednesday as investors took their cue from an unexpected drop in gasoline stocks and ignored the headline number in the latest US crude stockpile report. The West Texas Intermediate was up 0.5% at $52.44.

According to EIA figures, gasoline fell by 869,000 last week. It had been forecast to rise by more than a million barrels.

That masked a jump in crude oil stocks by 13.8mln versus a forecast of 2.5mln and an actual 6.4mln a week earlier.

But even if traders put a brave face on it, this marked several successive weeks when American oil drillers were turning aggressively enthusiastic – and putting in jeopardy a brokered deal for oil cartel OPEC and Russia to curb supplies in order to lift global energy prices.

The S&P Midcap 400 closed up 0.06% at 1,695, and led by Deckers Outdoor Corp (NYSE:DECK) up 9.1% at $49.05 after the shoes and related apparel maker after a critical assessment by Zacks Equity Research.

“You may want to consider dropping Deckers Outdoor Corporation DECK, which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year,” Zacks said.

The S&P Smallcap 600 closed down 0.2% at 829 and led by Sps Commerce Inc (NASDAQ:SPSC) down 19% at $53.73 as the software company was still reeling from its fourth quarter earnings report the previous day.


Early trading

US stocks were dragged lower by energy and financial sectors on Wednesday in the wake of a surge in oil inventories, as safer haven assets like gold and US Treasuries advanced.

Copper was also on the ascent after disruptions at two of the world’s largest copper mines. Copper traded on the London Metal Exchange rose to a high of $5,925 a tonne on the news. The metal has rallied 22 per cent since Donald Trump’s election last November on hopes for a boost in infrastructure spending.

The price of copper rose 2% Wednesday after miner BHP Billiton (NYSE:BHP) said it would halt output at its Escondida mine in Chile after unions voted to start striking on Thursday. At the same time, reports said Freeport-McMoran would reduce output at its Grasberg mine in Indonesia as the miner awaits government approval for exports of its copper after the expiration of a permit last month.

BHP’s ADRs were down 0.9% at $38.82. But Freeport shares were up 1.6% at $15.76.

The S&P 500 slid 0.3% 2,285, led by a 1.5% drop in the energy sector and a 1% drop in shares of financials. Meanwhile, the Dow Jones Industrial Average declined 0.3% to 20,030 as its second-time 20,000 level looked under threat, while the Nasdaq Composite slid 0.4% to 5,651.

Prospects of fresh record highs, after the gains seen on Tuesday, were proving elusive so far in the session.

Stocks of US crude climbed the most since October, advancing for the fifth consecutive week - but mostly as oil imports surged.

Inventories of US crude rose by 13.8mln barrels in the week ended February 4, according to the latest data from the Energy Information Administration. That was well above a Reuters poll for a build of 2.53mln barrels and follows last week’s increase of 6.47mln barrels.

At 508.6mln barrels, US crude oil inventories are above the upper limit of the average range for this time of year, the EIA said. Although oil imports were partly to blame this time, as US oil producers ramp up supply the worry is that OPEC and Russia will renege on last year’s pledge to curb oil production. The effect would be further downward pressure on oil prices.

The West Texas Intermediate, for now, was up 0.7% at 52.55.

The top decliner on the S&P 500 was Akamai Technologies (NASDAQ:AKAM) down 12.2% at £62.44 following the company’s fourth-quarter 2016 results. The decline apparently reflects conservative management guidance, which now expects margins to remain under pressure in the near term, due to continuing investments on new growth avenues like Enterprise Solution portfolio.

The second biggest decliner was pharma Gilead Sciences Inc (NASDAQ:GILD) down 9.7% at $66.07 after it reported that fourth-quarter 2016 earnings (including the impact of stock-based compensation expenses) of $2.64 per share beat the Zacks Consensus Estimate of $2.31 but earnings were down from $3.27 in the year-ago quarter.

The S&P Midcap 400 was flat at 1694 while the S&P Smallcap 600 was down 0.1% at 829 and led by Tidewater Inc (NYSE:TDW) down 18.7% at $1.61 after the shipping and transportation company, still reeling from Tuesday’s report of poor earnings.

The company reported a third quarter net loss for the period ended December 31, 2016, of $297.7mln, or $6.32 per common share, on revenues of $129.2mln. For the same quarter last year, net loss was $19.5mln, or $0.42 per common share, on revenues of $218.2mln. The immediately preceding quarter ended September 30, 2016, had a net loss of $178.5mln, or $3.79 per common share, on revenues of $143.7mln.


Pre-Open

US stocks are expected to softer on Wednesday after they came back off fresh record highs the previous session although buoyant earnings reports may yet see stocks mark fresh record highs early in the day.

The S&P 500 is indicated down 0.1%, and the Nasdaq Composite and the Dow Jones Industrial Average both flat. The trio of tickers marked record highs intraday on Tuesday.

Shares in the boutique investment firm Moelis & Co (NYSE:MC) look set to jump at the open based on reports that it's been chosen to advise Saudi Aramco on its planned initial public offering.

The oil giant's IPO is expected to be the biggest in history. Moelis shares were up 4.9% at $36.70 pre-market.

Pharma giant Allergan (NYSE:AGN), the maker of wrinkle smoother Botox, at least reported fourth quarter earnings that beat Wall Street expectations before the opening bell, setting up the pharma sector for gains in the day ahead. Allergan shares were up 1.7% at $236.50 pre-market.

The company reported adjusted earnings of $3.90 per share during the final three months of last year on revenues of $3.86bn. Wall Street analysts had expected the company to post adjusted EPS of $3.75 on sales of $3.8bn.

Conversely, London shares in GlaxoSmithKline (LON:GSK, NYSE: GSK) dropped 0.9% to 1549p on Wednesday despite the company reporting earnings growth at the top end of forecasts, as it warned it could face increased competition for its biggest product in the US.

Full-year revenues of £27.9bn for 2016 were above consensus forecasts, 17% higher than the previous year, or six per cent at constant exchange rates.

Glaxo’s Wall Street ADRs were down 0.4% at $39.29 pre-market.

Elsewhere, the media sector was excited after Superheroes and the latest J.K. Rowling film helped Time Warner (NYSE:TWX) beat market expectations for its fourth quarter sales and profits.

The media giant, which is in the midst of being acquired by AT&T (NYSE:T), notched a 11% jump in revenue to $7.89bn for the three months to end of December as it reported gains at each of its three divisions – Turner, HBO and Warner Bros.

The sales increase came despite headwinds from the stronger dollar and was ahead of analysts forecast of $7.72bn. Time Warner shares were up 1% at $97.20 pre-market. AT&T didn’t do badly either, up 1.1% at $41.59.

But US President Donald Trump has voiced opposition to the merger with AT&T.

In an important gear shift in the debt capital markets, Japanese investors halted their rapacious buying of US government debt in December.

Japan’s army of domestic investors, long known for a tendency to move global markets by escaping the low-interest rate environment at home to chase income overseas, were in pullback mode on US government debt at the end of last year. And that’s despite talk of higher interest rates in the United States with or without Trump’s ambitious reflationary policies.

Net sales of US Treasuries totaled Y2.4tn in December, figures from Japan’s Ministry of Finance on Wednesday showed, the highest level of monthly net selling since May 2013.

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