Wall St. set for another record open; Home Depot to fall

Summary:

• Further gains seen in US benchmarks

• Dow set for record open despite Home Depot miss

• HD.US cuts 2019 forecast after sales disappoint

Technical breakouts higher in European bourses swept the US indices along with futures in all 3 major benchmarks making new all-time highs this morning. There was little by the way of a clear catalyst behind the moves although a bounce in Asian equities overnight no doubt played a part in boosting sentiment. There is still yet to be confirmation of a “phase 1” trade deal but for now investors don’t seem to be hanging around and until there’s a change in market structure the path of least resistance remains higher.

The Dow Jones Industrial Average is set to begin at its highest ever level this afternoon. The market has rallied over 2400 points from the early October low and while price is getting a little stretched with an RSI reading of 73.9, this isn’t too extreme and is lower than previous peaks. Source: xStation

Even though the market is still called to open higher there has been a bit of a pullback after one of its larger components announced a disappointing trading update. Home Depot, which has a weighting of just under 6% on the broader DJIA index, is trading firmly lower in the pre-market and the release of the firm’s latest results had a clear negative impact on the benchmark. To give a rough idea of the imapct the stock can have, when it was trading down by 4.8% in the pre-market this translated to a 78-point drop in the Dow. The results for the 3rd quarter were as follows:

• Earnings per share: $2.53 vs %2.52 exp

• Revenue: $27.22B vs $27.53B exp

• Global same-store sales growth: 3.6% s 4.7% exp

The miss in turnover and slower pace of same-store sales growth are two clear negatives here and another aspect weighing on the stock is that forecast for 2019 sales to now grow by 1.8% compared to 2.3% in the prior estimate. The stock at one point was on track to open down by around 5% which would put shares on course for their worst day since February 2018, but these declines have pared a little since. 

Shares in Home Depot ended at their highest ever level last night but are called to open somewhere around 230 this afternoon after the latest trading update. Below there the 222 level could be one to keep an eye on. The stock has enjoyed a strong push higher over much of the year, rising by 50%. Source: xStation