US pre-open: Stocks to bounce back amid optimism over China-US relations
By Michele Maatouk
Date: Tuesday 13 Nov 2018
(Sharecast News) - US stocks looked set for a positive open on Tuesday following heavy losses in the previous session, amid hopes that relations between China and the US are improving.
At 1220 GMT, Dow Jones Industrial Average and S&P 500 futures were up 0.7%, while Nasdaq futures were 1% firmer.
On Monday, the Dow lost more than 600 points and the Nasdaq closed down just over 200 points as Apple led tech shares lower after a number of chip suppliers warned on their future earnings outlook, citing weaker mobile phone demand.
"This really shouldn't have come as a shock given the break down in Apple's numbers earlier this month, the surprise is that investors took so long to put two and two together," said CMC Markets analyst Michael Hewson.
"The decision to stop reporting the unit sales numbers for iPhones, iPads and other individual products should have clued investors in to begin with, along with the slight miss on handset sales. The focus on an average selling price of $793 a unit helpfully disguises the fact that while margins are likely to be higher on individual products they don't need to sell anywhere near as many products to meet revenue targets, which means fewer chips."
Sentiment was likely to be underpinned by signs that Sino-US relations are thawing, following a report that China's top trade negotiator was preparing to visit the US ahead of the G20 summit later this month.
On the macro front, small business sentiment in the US deteriorated in October, according to the National Federation of Independent Business.
The small business optimism index ticked down to 107.4 from 107.9 in September, slightly below consensus expectations of 108.0.
Pantheon Macroeconomics noted that the index was dragged down a by three point fall in the "good time to expand" index , a two point decline in earnings expectations and one-point dips in hiring and inventory plans.
"Further declines in the headline are likely, because the economic expectations component, which is very sensitive to the stock market, was unchanged in October; we expect it to fall in November," said analyst Ian Shepherdson.
In corporate news, Home Depot was poised to rally at the open as its third-quarter earnings beat expectations and the home improvement company lifted its sales and earnings guidance.
Shares in Advance Auto Parts were also likely to be active after the release of its third-quarter earnings.
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