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Bargain Hunting May Contribute To Rebound On Wall Street

The major U.S. index futures are pointing to a higher opening on Friday, as some traders may look to pick up stocks at reduced levels following the pullback seen over the past few sessions.

Buying interest may be somewhat subdued, however, as the ever-escalating war of words between President Donald Trump and North Korea continues to raise geopolitical concerns.

Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the U.S. is prepared to take military action against North Korea.

"Military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!" Trump tweeted.

North Korea responded with a statement by its official KCNA news agency claiming Trump is "driving the situation on the Korean peninsula to the brink of a nuclear war."

Adding to the modest losses posted in the two previous sessions, stocks moved sharply lower over the course of the trading day on Thursday. With the sell-off on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in a month.

The major averages ended the session just off their worst levels of the day. The Dow slumped 204.69 points or 0.9 percent to 21,844.01, the Nasdaq plummeted 135.46 points or 2.1 percent to 6,216.87 and the S&P 500 tumbled 35.81 points or 1.5 percent to 2,438.21.

Geopolitical concerns continued to weigh on Wall Street amid an ongoing escalation in tensions between the U.S. and North Korea.

A statement from the North Korean military called President Donald Trump's warning that the communist nation would face "fire and fury" if it continued its provocations a "load of nonsense."

North Korea claimed "only absolute force" can work on someone as "bereft of reason" as Trump and detailed plans to fire a salvo of missiles into waters around the U.S. Pacific territory of Guam.

Trump further ratcheted up the rhetoric in remarks this afternoon, suggesting that his "fire and fury" comments may not have been tough enough.

"They've been doing this to our country for a long time, for many years, and it's about time that somebody stuck up for the people of this country and for the people of other countries," Trump said.

He added, "I will tell you this, North Korea better get their act together or they're going to be in trouble like few nations ever have been in trouble in this world."

The focus on North Korea largely overshadowed a Labor Department report showing an unexpected drop in U.S. producer prices in the month of July.

The Labor Department said its producer price index for final demand edged down by 0.1 percent in July after inching up by 0.1 percent in June. Economists had expected another 0.1 percent uptick.

Excluding food and energy prices, core producer prices still dipped by 0.1 percent in July after creeping up by 0.1 percent in June. Core prices had been expected to rise by 0.2 percent.

A separate report from the Labor Department showed an unexpected uptick in initial jobless claims in the week ended August 5th.

The report said initial jobless claims crept up to 244,000, an increase of 3,000 from the previous week's revised level of 241,000.

Economists had expected jobless claims to come in unchanged compared to the 240,000 originally reported for the previous week.

Amid broad based weakness on Wall Street, biotechnology stocks turned in some of the market's worst performances on the day. The NYSE Arca Biotechnology Index plunged by 3.4 percent to its lowest closing level in well over a month.

Cempra (CEMP) helped to lead the biotech sector lower, extending the pullback seen over the course of the previous session.

Substantial weakness was also visible among internet stocks, as reflected by the 2.8 percent slump by the Dow Jones Internet Index. The index dropped to a one-month closing low.

Within the internet sector, Synacor (SYNC) fell sharply after the internet content provider reported better than expected second quarter results but provided disappointing guidance.

Semiconductor, computer hardware, oil service, and retail stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Meanwhile, gold stocks bucked the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.3 percent. The strength in the sector came amid a jump in the price of gold.

Commodity, Currency Markets

Crude oil futures are slipping $0.10 to $48.49 a barrel after tumbling $0.97 to $48.59 a barrel on Thursday. Meanwhile, after jumping $10.80 to $1,290.10 an ounce in the previous session, gold futures are climbing $6.50 to $1,296.60 an ounce.

On the currency front, the U.S. dollar is trading at 108.82 yen compared to the 109.20 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.826 compared to yesterday's $1.1772.

Asia

Asian stocks fell across the board on Friday as the escalation in tensions surrounding North Korea continued to push investors towards safe-haven assets such as the Japanese yen, the Swiss franc and gold. The Japanese market was closed in observance of the Mountain Day holiday.

The U.S. dollar set an eight-week low against the yen after U.S. President Donald Trump further ratcheted up the rhetoric, suggesting that his "fire and fury" comments may not have been tough enough.

The president said "things will happen to them they never thought possible" should Pyongyang attack the U.S. or its allies.

The yen strengthened above ¥109 for the first time since mid-June and oil extended overnight losses on persistent worries about oversupply, while gold prices hit their highest level in over two months.

China's Shanghai Composite Index plunged 51.94 points or 1.6 percent to 3,209.80, as investors continued to book profits in cyclical sectors. Hong Kong's Hang Seng Index plummeted 560.49 points or 2 percent to 26,883.51.

Australian shares fell to near three-week lows in a broad-based selloff. The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index fell around 1.2 percent each to finish at 5,693.10 and 5,743.50, respectively.

NAB lost 1 percent despite the bank reporting a 5 percent rise in its third-quarter cash profit. ANZ fell 1.9 percent, Commonwealth shed 0.7 percent and Westpac declined 1.3 percent after RBA Governor Philip Lowe said the central bank is prepared to be patient on rates for quite some time.

Mining heavyweights BHP Billiton and Rio Tinto retreated 2-3 percent, while gold miners Evolution and Newcrest rose about 2 percent each. News Corp tumbled 5.4 percent and REA Group slumped 6 percent after disappointing full-year results.

Seoul shares hit 11-week low amid selling by foreign investors following Trump's fresh warning to North Korea. The benchmark Kospi tumbled 39.76 points or 1.7 percent to 2,319.71, its lowest level since May 24th. For the week, the index lost over 3 percent to register its biggest weekly loss since February of 2016.

Europe

European stocks have fallen for a third day on Friday and look headed for their worst week since early November last year, as U.S. President Donald Trump's rhetoric on North Korea over the past few days made investors risk averse.

While the German DAX Index has edged down by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both down by 1 percent.

Commodity-related stocks are among the worst performers against the backdrop of heightened political uncertainty after Trump further ratcheted up the rhetoric.

Innogy shares have moved to the downside after German utility maintained the outlook on the current year's business performance after reporting a drop in first-half net income to 817 million euros from 1.08 billion euros last year.

Danish biotech company Novozymes has tumbled after cutting its growth outlook. Old Mutual has also fallen on news the British financial services firm, which is in the middle of breaking up into four parts, plans to list two divisions in 2018.

In economic news, German consumer inflation grew an annual 1.7 percent in July, slightly faster than the 1.6 percent increase registered in June, final data from Destatis showed. Wholesale price inflation eased to an eight-month low of 2.2 percent in July from 2.5 percent in June.

French consumer prices climbed 0.7 percent year-on-year in July, the same rate as seen in June and in line with the preliminary estimate.

U.S. Economic Reports

A report released by the Labor Department showed a modest uptick in consumer prices in the U.S. in the month of July.

The Labor Department said its consumer price index inched up by 0.1 percent in July after coming in unchanged in June. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core consumer prices still crept up by 0.1 percent in July, matching the increases seen in the three previous months. Core prices had also been expected to climb by 0.2 percent.

At 9:40 am ET, Dallas Federal Reserve President Robert Kaplan is due to speak at the University of Texas at Arlington Accounting Department Sixth Annual CPE Day in Arlington, Texas.

Minneapolis Fed President Neel Kashkari is scheduled to take part in a moderated audience Q&A session at the Independent Community Bankers of Minnesota Annual Convention in Bloomington, Minnesota, at 11:30 am ET.

Stocks In Focus

Shares of J.C. Penney (JCP) are moving sharply lower in pre-market trading after the department store operator reported a wider than expected second quarter loss despite better than expected revenues.

Graphics chip maker Nvidia (NVDA) is also likely to come under pressure after reporting better than expected second quarter earnings but revenue from its data center and automotive businesses that missed estimates.

Shares of Snap (SNAP) are also seeing pre-market weakness after the parent of Snapchat reported a wider than expected second quarter loss on revenues that came in below expectations.

On the other hand, shares of Nordstrom (JWN) may see early strength after the department store operator reported second quarter results that beat estimates on both the top and bottom lines.

Publishing company News Corp (NWSA) reported fiscal fourth quarter earnings that beat estimates, although its revenues fell short.

Shares of Kura Oncology (KURA) are moving higher in pre-market trading after the biopharmaceutical company priced a public offering of 7.7 million shares of its common stock at $6.50 per share.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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