Market Analysis

Beyond the Number

Futures Pointing To Initial Rebound On Wall Street
2/28/2018 8:51 AM

The major U.S. index futures are pointing to a modestly higher opening on Wednesday, with stocks poised to regain some ground following the sell-off seen in the previous session.

Traders may pick up stocks at somewhat reduced levels following the pullback seen on Tuesday, which came on the heels of two-day rally.

Stocks came under pressure over the course of the trading day on Tuesday after initially showing a lack of direction. The pullback on the day came after the major averages moved sharply higher over the two previous sessions.

The major averages ended the session at their worst levels of the day. The Dow tumbled 299.24 points or 1.2 percent to 25,410.03, the Nasdaq slumped 91.11 points or 1.2 percent to 7,330.35 and the S&P 500 plunged 35.32 points or 1.3 percent to 2,744.28.

Renewed interest rate concerns contributed to the pullback by stocks, as traders kept a close eye on new Federal Reserve Chairman Jerome Powell's testimony before the House Financial Services Committee.

Powell's remarks before the committee were interpreted by some as indicating that the Fed may raise rates more than the three times currently anticipated.

In response to a question, Powell noted that incoming data has suggested a strengthening in the economy since the median forecast called for three rate hikes at the December meeting.

"We've seen some data that in my case will add some confidence to my view that inflation is moving up to target," Powell said. "We've also seen continued strength around the globe. And we've seen fiscal policy become more stimulative."

He added, "So, I think each of us is going to be taking the developments since the December meeting into account and writing down our new rate paths as we go into the March meeting."

The new Fed Chief stressed that he did not want to prejudge the new set of projections, but his comments still raised concerns about four rate increases this year.

In his prepared remarks, Powell reiterated the Fed's view that further gradual increases in interest rates will best promote attainment of both of the central bank's dual objectives.

Powell also said financial conditions remain accommodative despite recent volatility and highlighted strong consumer spending and job growth.

With the focus on Powell's congressional testimony, traders largely shrugged off a mixed batch of economic data.

While the Commerce Department released a report showing a bigger than expected drop in durable goods orders in January, the Conference Board's consumer confidence index jumped more than expected in February.

Gold stocks moved sharply lower on the day, dragging the NYSE Arca Gold Bugs Index down by 2.8 percent. With the drop, the index ended the session at its lowest closing level in over a year. The weakness in the gold sector came amid a steep drop by the price of the precious metal.

Significant weakness was also visible among interest rate-sensitive real estate stocks, as reflected by the 2.2 percent loss posted by the Dow Jones U.S. Real Estate Index.

Transportation, natural gas, and housing stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are inching up $0.04 to $63.05 a barrel after tumbling $0.90 to $63.01 a barrel on Tuesday. Meanwhile, after slumping $14.20 to $1,318.60 an ounce in the previous session, gold futures are edging up $0.90 to $1,319.50 an ounce.

On the currency front, the U.S. dollar is trading at 107.13 yen compared to the 107.33 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2212 compared to yesterday’s $1.2233.


Asian stocks followed Wall Street lower on Wednesday after hawkish comments from Federal Reserve Chairman Jerome Powell triggered speculation that the Fed might hike rates four times this year instead of the expected three. Weak economic data from China and Japan also weighed on markets across the region.

China's Shanghai Composite Index tumbled 32.57 points or 1 percent to 3,259.50, as official data showed the manufacturing PMI for February hit a 19-month low. Hong Kong's Hang Seng Index plunged 423.94 points or 1.4 percent to 30,844.72.

The manufacturing PMI came in at 50.3, missing forecasts for 51.1 and down from 51.3 in January. The non-manufacturing PMI slowed to 54.4 versus forecasts for 55.0 and down from 55.3 in the previous month.

Japanese shares fell as the Bank of Japan's decision to trim purchases of super-long government bonds helped to lift the yen and a slew of data releases disappointed investors.

Industrial production in Japan fell at a faster than forecast rate in January and retail sales dropped 1.8 percent month-on-month, while housing starts logged a double-digit decline at the start of the year, separate reports showed.

The Nikkei 225 Index plummeted 321.62 points or 1.4 percent to 22,068.24, while the broader Topix Index closed 1.2 percent lower at 1,768.24. Index heavyweights Fast Retailing, Fanuc and SoftBank all ended down over 2 percent. Oil majors Inpex and Japan Petroleum declined 4-5 percent.

Australian shares fell in reaction to disappointing earnings, falling commodity prices and the overnight sell-off on Wall Street.

The benchmark S&P/ASX 200 Index dropped 40.90 points or 0.7 percent to 6,016, while the broader All Ordinaries Index closed 0.7 percent lower at 6,117.30.

Miners BHP Billiton, South32 and Fortescue Metals Group fell 2-3 percent, and banks Commonwealth, NAB and Westpac ended down between half a percent and 1.2 percent.

Electronics retailer Harvey Norman Holdings slumped 12.5 percent and hospital operator Ramsay Health Care lost 5.8 percent after reporting decreases in their half-year profits.

Cement and masonry supplier Adelaide Brighton plummeted 5.9 percent after its full-year profit was hit by impairments. Bega Cheese retreated 6.4 percent despite the dairy processing firm reporting a 31 percent increase in first-half net profit.

Shares of Retail Food Group, the parent of Donut King, entered a trading halt after delaying its half-year earnings announcement.


European stocks have moved mostly lower in cautious trading on Wednesday as hawkish comments from Federal Reserve Chairman Jerome Powell coupled with weak economic data from China and Japan dented investors' risk appetite.

Disappointing regional data releases, declining oil prices and mixed corporate earnings also weighed on the markets.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the German DAX Index is down by 0.2 percent and the French CAC 40 Index is down by 0.3 percent.

Germany's forward-looking consumer sentiment index dropped 0.2 points to 10.8 in March, as the political turbulence surrounding the formation of a stable, viable government in Berlin unsettled consumers, survey data from the market research group GfK showed.

A gauge of German unemployment also fell notably in February, while French consumer spending declined for the second straight month in January, defying economists' expectations for an increase.

Eurostat figures showed that inflation across the 19-country euro zone fell in February for the third straight month.

Bayer shares have tumbled after the German drug company warned of delays for its merger deal with Monsanto after reporting a drop in fourth-quarter net profit due to a U.S. tax overhaul.

Media firm ITV has also slumped in London after reporting a decrease in annual pre-tax profits due to ongoing political uncertainty in the U.K.

Taylor Wimpey has moved to the downside after the homebuilder reported a 6.9 percent decline in 2017 pre-tax profits amid increased political and economic risks.

Meanwhile, Dialog Semiconductor has soared, as the chipmaker's net income for the fourth quarter jumped 57 percent as a result of lower income tax expenses and a one-time gain resulting from the fair valuation of the Energous warrants.

Dutch supermarkets and eCommerce company Ahold Delhaize N.V. has also rallied after reporting strong fourth quarter net income growth.

U.S. Economic Reports

Revised data released by the Commerce Department showed slightly slower than previously estimated U.S. economic growth in the fourth quarter of 2017.

The Commerce Department said gross domestic product climbed by 2.5 percent in the fourth quarter compared to the previously estimated 2.6 percent increase. The downward revision to GDP growth matched economist estimates.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of February.

The Chicago business barometer is expected to dip to 64.2 in February from 65.7 in January, although a reading above 50 would still indicate growth.

The National Association of Realtors is due to release its report on pending home sales in the month of January at 10 am ET. Pending home sales are expected to rise by 0.3 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 23rd.

Crude oil inventories are expected to increase by 2.7 million barrels after falling by 1.6 million barrels in the previous week.

Stocks In Focus

Shares of Weight Watchers (WTW) are moving sharply higher in pre-market trading after the weight loss company reported better than expected fourth quarter results and provided upbeat guidance.

DVR and set-top box maker TiVo (TIVO) is also likely to see early strength after the company said it is evaluating a wide range of strategic alternatives to realize long-term shareholder value, including going private.

Shares of Etsy (ETSY) may also seen an initial jump after the online crafts marketplace reported fourth quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Lowe’s (LOW) are likely to come under pressure after the home improvement retailer reported weaker than expected fourth quarter earnings.

Car rental company Hertz Global (HTZ) may also move to the downside after reporting a wider than expected fourth quarter loss.

Shares of Papa John’s (PZZA) are also seeing pre-market weakness after the pizza chain reported fourth quarter earnings that missed analyst estimates.
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