US OPEN: Solid employment data supports risk-on rally

• Stock futures gain on stellar ADP and coronavirus treatment hopes

• Donald Trump expected to be acquitted by Senate today

• Ford (F.US) slumps in pre-market trading as earnings disappoint

US stock market futures rally along European equities as markets digest latest news on alleged coronavirus treatment breakthrough. Stellar ADP data boosted sentiment even further. Walt Disney, Merck & Co, General Motors and Ford Motor are earnings reporters  being on the watch today.

Final impeachment vote and partial Iowa Caucus results

Donald Trump’s impeachment saga is expected to end today with a vote in the US Senate. The vote is expected to be held around 4:00 pm ET (9:00 pm GMT). However, as Republicans control the Senate and no witnesses were allowed in the trial, it looks likely that the incumbent US president will be acquitted. The event is unlikely to have a major impact on the markets. Elsewhere, partial results of the Iowa Democratic Caucus were finally released and they can be seen as somewhat surprising. Pete Buttigieg turned out to be leader while Bernie Sanders came in slightly behind. Markets’ favourite, Joe Biden, lost to Elizabeth Warren and came in fourth. Buttigieg is seen as a centrist.

US100 fully recovered from last week’s drop and surged to new record highs yesterday. The index found support at 161.8% exterior retracement of last week’s correction and rushed higher afterwards. The potential near-term level to watch can be found at 161.8% exterior retracement of the downward correction started on January 24 - 9510 pts. Source: xStation5

Walt Disney (DIS.US) reported earnings for Q4 2019.  Adjusted EPS came in at $1.53, higher than expected $1.46 but weaker than a year ago. Revenue of $20.86 billion was 36% YoY higher and more or less in line with estimates.  Revenue in all segments was higher than expected and higher than a year ago. Walt Disney reported the number of Disney+ streaming platform subscribers for the first time and it turned out to be a positive surprise. Number of subscribers reached 26.5 million, much higher than 20.8 million signalled by Bloomberg consensus. Disney+ service was launched in November 2019. The company said that it expects earnings in calendar Q1 2020 to be negatively affected by coronavirus outbreak.

Ford Motor (F.US) reported disappointing Q4 earnings. Adjusted EPS in the quarter reached $0.12 and lagged median estimate of $0.17. Automotive revenue at $36.7 billion was slightly higher than expected. Adjusted free cash flow was down 67% YoY to $498 million while EBIT margin stood at just 1.2%. The company issued a downbeat earnings guidance for 2020 as it expects EBIT in the $5.6-6.6 billion range while analysts’ forecasts ranged between $6.34 and $8.18 billion.

Ford (F.US) is set to open over 8% lower today with pre-market trading pointing to a $8.40 area. A price zone marked by price reactions from 2018 and early-2019 can be found in the area. Traders may expect this zone to be a support to watch, at least at the start of the US cash session. Near-term resistance can be found at a zone ranging around $8.80 handle. Source: xStation5

Merck & Co (MRK.US) reported Q4 adjusted EPS of $1.16, 11.5% YoY higher and in-line with estimates. Revenue increased 7.9% YoY and reached $11.87 billion. The result was weaker than forecasted $11.98 billion. Drugs generating over $1 billion of quarterly revenue remained strong while smaller products saw their revenue decline year-over-year. The company announced that it will spin-off products from Biosimilars business into a new, independent, publicly traded company. The spin-off is expected to be completed in the first half of 2021. 

General Motors (GM.US) reported Q4 adjusted EPS of $0.05 against expectations of no earnings at all (EPS of $0.00). The release can be considered beat but still marked a 96.5% YoY decline. However, it should be noted that the employee strike that occured in the fourth quarter of 2019 had a negative impact of $1.39 on the company's EPS. Nevertheless, the company said that it expects a strong year in 2020 with full-year EPS coming in the $5.75-6.25 range.

Merck (MRK.US) launched a recovery at the beginning of this week. The stock reached a 50-session moving average (green line) yesterday and is set to open lower today as investors are assessing the impact of a planned spin-off. Should the drop be continued during trading hours, recent lows above $85 handle could be targeted. Source: xStation5