On Thursday, crude oil prices gained in early Asian trading. This came as investors kept a close eye on events in Yemen while investors also digested U.S. supply and production figures. On the New York Mercantile Exchange, WTI crude for delivery in June traded at $56.33 a barrel, up 0.29 percent. Overnight on Wednesday, crude oil futures were mixed. This came as a result of continued fighting in Yemen as well as increased stockpiles in the U.S. which caused the spread between international and U.S. domestic benchmarks of crude to widen. According to the weekly report by the U.S. Energy Information Administration (EIA), its inventory at the Cushing Oil Hub in Oklahoma grew by roughly 789,000 barrels last week to approximately 80% of capacity. The declining supply capacity has now exacerbated concerns of a slowdown in production. Meanwhile, EIA also reported that crude production dipped by 18,000 last week marking the second consecutive week of worse than expected output. According to forecasts by the EIA, production in the Bakken formation in North Dakota will decline by 23,000 barrels to 1.3 million barrels per day, while production at Eagle Ford in South Texas will fall by 33,000 to 1.69 million bpd. This will drop the overall production from 5.02 million barrels in April to 4.98 million bpd in May. Meanwhile on Wednesday, Brent crude oil for delivery in June traded at $62.77 a barrel, up 0.69, or 1.11%, on the Intercontinental Exchange (ICE).
USD Pares Losses After U.S. Home Sales Report
In currency trading on Wednesday, the U.S. dollar (USD) pared losses against other major currencies. This came after the release of upbeat U.S. home sales data while uncertainty regarding the timing of interest rate hikes by the Federal Reserve continued to weigh. According to the U.S. National Association of Realtors, existing home sales rose in March 6.1% to 5.19 million units beating analyst expectations for existing home sales to rise 3.0% in March. Gains in the USD were capped however as investors pushed back expectations for higher U.S. interest rates after a recent streak of soft economic data which has now dampened optimism on the country’s economic recovery. The EUR/USD traded steady at 1.0742. The single currency remains under pressure as the Greek government is still no closer to reaching an agreement with its euro zone partners and the International Monetary Fund (IMF) over economic reforms required to access remaining bailout funds. Meanwhile, on Tuesday, Bloomberg reported that the European Central Bank (ECB) is considering tighter rules on Greek banks in return for emergency liquidity, adding to pressure on Athens. In other currency trading, the British pound traded higher with GBP/USD up 0.75% and trading at 1.5041. Against the currencies in Japan and Switzerland, the USD traded mixed with USD/JPY steady at 119.74 and with USD/CHF up 0.86% and trading at 0.9633. Against the currencies in Australia, New Zealand and Canada, the greenback traded mixed with AUD/USD up 0.74% at 0.7767, the NZD/USD steady at 0.7678 and USD/CAD down 0.40% and trading at 1.2233. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.10% to 98.11.
Nasdaq Hits 15-Year High
In stocks trading on Wednesday, U.S. stocks closed higher. This came in response to a positive report on existing home sales and better-than-expected earnings which boosted investor confidence. This positive sentiment was evident in the tech-heavy Nasdaq Composite index (COMP) which rose for the 3rd-straight session. Added to this, this index now only stands 13 points below its record close which it reached on March 10, 2000. At the close of trading, the tech-heavy index added 21 points, or 0.4%, to 5,035.17. Also on the upside was the Dow Jones Industrial Average (DJIA) which gained 88.35 points, or 0.5%, to 18,038.07. Most of these gains came from the top four gainers on the blue chip index which included Apple Inc. (AAPL, +1.35%), American Express Company (AXP, +1.50%), Visa Inc. (V, +4.07% and McDonald’s (MCD, +3.13%). Also, Coca Cola (KO, +1.30%), McDonald’s and Boeing all posted better-than-expected earnings. Despite this positive data, the shares of Boeing declined 2 percent after the aerospace company also reported an increase in expenses. Following the upward trend was the S&P 500 index (SPX) which closed up 10.66 points, or 0.5%, at 2,107.95. Broad based gains on the index were led by technology stocks. Also, the CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 4.15% to 12.70.
In the Spotlight – What Can We Expect From Starbucks Earnings?
After trading on Thursday, Starbucks Corp. (SBUX, -0.07%) is set to report its second-quarter earnings. As one of the most popular companies in the U.S., Seattle-based Starbucks recently shook things up with a new PR campaign which was aimed to prompt customers to engage in conversations about race by requiring baristas to write “Race Together” on cups. Despite this, the company is still a hot favorite among analysts for the long term.
In April this year, Starbucks carried out its first 2-for-1 stock split since 2005. In their second quarter earnings report, analysts expect the company to report earnings per share (EPS) of 33 cents after the company executed a 2-for-1 stock split on the 9th of April. Starbucks has set guidance at 32 cents to 33 cents. Meanwhile, adjusted for the split, the company’s first-quarter earnings per share were 40 cents.
In terms of sales, the coffee chain is expected to report $4.53 billion in sales which will be up from the $3.8 billion reported a year ago. This will however be approximately $272 million less than the previous quarter’s sales of $4.80 billion. In seven of the last 10 quarters, Starbucks has missed the consensus revenue estimate. Meanwhile, analysts are looking for a 5.1% increase in same-store sales as gains in same-store sales have been flat at 5% over the past two quarters.
According to analysts on FactSet, Starbucks has an average stock price target of $51.22. This is up compared with the company’s current stock price of $47.90. Over the past 3 months, the stock has risen 17% and has also gained 18% so far this calendar year. Meanwhile, the S&P 500 index has only gained about 2 percent.