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Overseas Weakness May Weigh On Wall Street

The major U.S. index futures are pointing to a lower opening on Monday, with stocks likely to extend the downward move seen over the two previous sessions.

The downward momentum on Wall Street comes on the heels of substantial weakness in the overseas markets, with Chinese stocks showing a particularly steep drop following a week-long holiday.

Lingering concerns about the outlook for interest rates may also weigh on stocks following the recent advance by treasury yields.

The yield on the ten-year note climbed to its highest closing level in over seven years last Friday on the heels of the release of the monthly jobs report.

Trading activity is likely to be somewhat subdued, however, as some traders are likely to be away from their desks due to the Columbus Day holiday.

While the stock markets will remain open, banks, federal offices, and the bond markets are all closed on the day.

The holiday will lead to a lack of U.S. economic data, although reports on producer and consumer prices are likely to attract attention in the coming days along with speeches by several Federal Reserve officials.

After falling sharply in morning trading on Friday, stocks regained some ground in the afternoon but still ended the day mostly lower. With the drop on the day, the major averages added to the notable losses posted in the previous session.

The major averages ended the day firmly in negative territory but well off their lows of the session. The Dow slid 180.43 points or 0.7 percent to 26,447.05, the Nasdaq tumbled 91.06 points or 1.2 percent to 7,788.45 and the S&P 500 fell 16.04 points or 0.6 percent to 2,885.57.

For the week, the Dow edged down by less than a tenth of a percent, while the S&P 500 slumped by 1 percent and the Nasdaq plunged by 3.2 percent to its lowest closing level in well over a month.

The weakness on Wall Street came as treasury yields extended a recent upward move following the release of the monthly jobs report, adding to recent concerns about the outlook for interest rates.

While the Labor Department report showed weaker than expected job growth in September, the jump in employment in August was upwardly revised and the unemployment rate fell to its lowest level since 1969.

The Labor Department said non-farm payroll employment climbed by 134,000 jobs in September, while economists had expected an increase of about 185,000 jobs.

However, the report also showed a significant upward revision to the pace of job growth in August, with employment spiking by 270,000 jobs compared to the originally reported jump of 201,000 jobs.

The Labor Department also said the unemployment rate fell to 3.7 percent in September from 3.9 percent in August. The unemployment rate had been expected to edge down to 3.8 percent.

With the bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.08 or 0.3 percent to $27.24 in September, reflecting a year-over-year increase of 2.8 percent.

"Overall, a strong report that will keep the Fed firmly on track to continue raising rates once a quarter, with the next hike likely to come in December," said Michael Pearce, Senior U.S. Economist at Capital Economics.

A separate report from the Commerce Department showed the U.S. trade deficit widened in August, reflecting an increase in imports and a decrease in exports.

The Commerce Department said the trade deficit widened to $53.2 billion in August from a revised $50.0 billion in July. Economists had expected the trade deficit to widen to $53.5 billion.

Pearce said the data suggests "net trade is on track to be a substantial drag on GDP growth in the third quarter, which we expect will come in at 3.0% annualized."

Semiconductor stocks showed a substantial move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 2.3 percent. With the drop, the index ended the session at its lowest closing level in three months.

Xilinx (XLNX), Qorvo (QRVO) and Maxim Integrated Products (MXIM) turned in some of the semiconductor sector's worst performances.

Computer hardware and networking stocks also saw considerable weakness, contributing to the steep drop by the tech-heavy Nasdaq.

While steel and retail stocks also saw notable weakness on the day, tobacco and utilities stocks bucked the downtrend shown by the broader markets.

Commodity, Currency Markets

Crude oil futures are tumbling $1.07 to $73.27 a barrel after inching up $0.01 to $74.34 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,188.90 down $16.70 from the previous session's close of $1,205.60. On Friday, gold climbed $4.00.

On the currency front, the U.S. dollar is trading at 113.41 yen compared to the 113.72 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1471 compared to last Friday's $1.1524.


Asian stocks retreated on Monday as strong U.S. jobs data for September added to worries about rising interest rates and investors brushed aside central bank policy loosening in China. The Japanese markets were closed for the Health-Sports day holiday.

China's Shanghai Composite Index plunged 104.84 points 3.7 percent to finish at 2,716.51 as traders returned to their desks after a week-long holiday. Hong Kong's Hang Seng Index tumbled 370.00 points or 1.4 percent to 26,202.57.

Investors brushed aside a move by the People's Bank of China to cut the reserve requirements for banks in order to lower financing costs and spur growth amid a trade war with the U.S.

Meanwhile, China's private sector logged moderate growth in September as improved services activity was offset by softer manufacturing growth, survey data from IHS Markit showed.

The Caixin composite output index rose marginally to 52.1 from 52.0 in August. The services PMI signaled the strongest increase in activity in three months, while manufacturing production showed a marginal pace of expansion that was the weakest since October 2017.

Australian markets fell the most in more than four weeks, dragged down by financials and material stocks after a steep sell-off in U.S. Treasuries.

The benchmark S&P/ASX 200 Index slumped 85.20 points or 1.4 percent to 6,100.30, while the broader All Ordinaries Index ended down 82.50 points or 1.3 percent at 6,218.60.

Lender ANZ lost 2.6 percent after it drastically increased the amount of money it expects to pay for various costs related to customer compensation. The other three banks fell around 1 percent. Mining heavyweights BHP Billiton and Rio Tinto gave up 2.8 percent and 1.6 percent, respectively amid declining copper and aluminum prices.

Alumina plummeted 6.9 percent as London aluminum prices fell more than 3 percent after a Brazilian court approved emergency waste measures that could allow the world's biggest alumina refinery to resume production.

Meanwhile, MYOB Group shares jumped over 19 percent after U.S. private equity firm KKR & Co lunched a $1.2 billion buyout offer for the accounting software provider.


European stocks have fallen on Monday after Chinese markets brushed aside central bank policy loosening and recorded their biggest single-day drop since February on concerns over an escalating trade war with the United States. Concerns surrounding Italy, rising bond yields and Brexit uncertainty have also kept investors nervous.

While the French CAC 40 Index has slumped by 1 percent, the German DAX Index is down by 0.9 percent and the U.K.'s FTSE 100 Index is down by 0.7 percent.

Hearing aid maker William Demant has slumped on worries about competition after the FDA approved a hearing aid from Bose.

Total SA has also fallen in Paris after signing a new concession contract with Sonatrach and Alnaft to jointly develop the Erg Issouane gas field located on the TFT Sud permit.

On the other hand, Norsk Hydro has jumped after the Norwegian aluminum and renewable energy company said it was preparing to resume production at its alumina refinery in Brazil.

In economic news, German industrial output slid 0.3 percent in August from the previous month, confounding expectations for an increase of 0.5 percent, figures from Destatis showed. Production had decreased 1.3 percent in July.

On a yearly basis, industrial production logged a decrease of 0.1 percent, in contrast to the expected growth of 0.1 percent and the 1.5 percent increase seen in July.

Eurozone investor confidence weakened in October largely due to uncertainty about the fiscal policy stance in Italy and the automobile industry in Germany, survey data from think tank Sentix showed.

The investor sentiment index fell more than expected to 11.4 in October from 12.0 in September. The expected reading was 11.8.

Separately, surveys released by Deloitte and the British Chambers of Commerce highlighted concerns among British businesses over Brexit.

U.S. Economic Reports

The economic calendar for the week starts off relatively quiet due to the Columbus Day holiday, although reports on producer and consumer prices are likely to attract attention in the coming days along with remarks by several Federal Reserve officials.

Stocks In Focus

Shares of Petrobras (PBR) are moving sharply higher in pre-market trading after J.P. Morgan upgraded its rating on the Brazilian oil giant's stock to Overweight from Neutral.

Industrial conglomerate General Electric (GE) is also likely to see early strength after Barclays raised its rating on the company's stock to Overweight from Equal Weight.

On the other hand, shares of Ensco (ESV) may move to the downside after offshore drilling contractor announced an agreement to acquire Rowan (RDC) in an all-stock transaction valued at $2.38 billion.

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