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Bargain Hunting May Contribute To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a sharply higher opening on Friday, with stocks likely to regain ground following the sell-off seen in the previous session.

Bargain hunting may contribute to initial strength on Wall Street, as traders look to pick up stocks at relatively reduced levels.

The steep drop on Thursday marked the worst day for the markets since the sell-off seen as worries about the coronavirus began to escalate in March.

Worries about a second wave of coronavirus infections contributed to the sharp losses in the previous session even as Treasury Secretary Steve Mnuchin told CNBC the U.S. "can't shut down the economy again."

The sell-off on Thursday largely offset the gains seen earlier this month, although the major averages remain well off their March lows.

Stocks moved sharply lower over the course of the trading session on Thursday, experiencing the biggest one-day drop since March. The Nasdaq pulled back well off Wednesday's record closing high, while the Dow and the S&P 500 closed lower for the third straight session.

The major averages ended the day just off their lows of the session. The Dow plunged 1,861.82 points or 6.9 percent to 25,128.17, the Nasdaq plummeted 527.62 points or 5.3 percent to 9,492.73 and the S&P 500 tumbled 188.04 points or 5.9 percent to 3,002.10.

The sell-off on Wall Street came amid concerns about a second wave of coronavirus cases, as recent data has led to worries about economic reopening leading to a spike in infections.

According to data CNN aggregated from the Covid Tracking Project, the number of coronavirus hospitalizations since Memorial Day has risen in at least a dozen states.

Texas reported 2,504 new coronavirus cases on Wednesday, reflecting the highest one-day total in the state since the pandemic emerged.

The number of confirmed coronavirus cases in the U.S. has also passed the two-million mark, according to data from Johns Hopkins University.

Meanwhile, as businesses reopen, the Labor Department released a report showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

The report said initial jobless claims tumbled to 1.542 million, a decrease of 355,000 from the previous week's revised level of 1.897 million.

Economists had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week.

Jobless claims declined for the tenth straight week after reaching a record high of 6.867 million in the week ended March 28th.

A separate report from Labor Department showed a much bigger than expected increase in U.S. producer prices in the month of May.

Energy stocks turned in some of the market's worst performances on the day, moving sharply lower along with the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index cratered by 14.2 percent, the NYSE Arca Oil Index plummeted by 9.7 percent and the NYSE Arca Natural Gas Index tumbled by 8.8 percent.

Substantial weakness was also visible among steel stocks, as reflected by the 9.6 percent nosedive by the NYSE Arca Steel Index. The index continued to give back ground after ending Monday's trading at a three-month closing high.

Banking stocks also showed a substantial move to the downside on the day, dragging the KBW Bank Index down by 9 percent.

Housing, chemical, computer hardware and transportation stocks also moved sharply lower on the day, reflecting broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are rising $0.22 to $36.56 a barrel after plunging $3.26 to $36.34 a barrel on Thursday. Meanwhile, after spiking $19.10 to $1,739.80 an ounce in the previous session, gold futures are climbing $6.90 to $1,746.70 an ounce.

On the currency front, the U.S. dollar is trading at 107.38 yen versus the 106.87 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1301 compared to yesterday's $1.1299.

Asia

Asian stocks fell on Friday as cautious commentary from the Federal Reserve coupled with rising coronavirus infection rates prompted investors to dump equities.

Chinese shares recovered from initial losses to little changed, with the Shanghai Composite Index edging down 1.16 points or less than a tenth of a percent to 2,919.74. Hong Kong's Hang Seng Index slid 178.77 points, or 0.7 percent, to 24,301.38.

Japanese shares finished lower on growing fears about a resurgence of coronavirus infections. The Nikkei 225 Index dropped 167.43 points, or 0.8 percent, to 22,305.48, its lowest close since June 1.

The broader Topix closed 1.2 percent lower at 1,570.68, with mining, nonferrous metal and metal product companies pacing the decliners.

Japan's parliament approved a record $300 billion second extra budget - including the reserve fund - in an effort to shore up the economy.

Australian stocks followed their U.S. peers lower on worries about economic reopening leading to a spike in coronavirus infections.

The benchmark S&P/ASX 200 Index tumbled 112.80 points, or 1.9 percent, to 5,847.80, while the broader All Ordinaries Index ended down 119.60 points, or 2 percent, at 5,959.90.

Energy stocks plunged to their lowest level in three weeks after oil prices crashed. Origin Energy, Beach Energy, Woodside Petroleum, Oil Search and Worley gave up 4-6 percent.

The so-called big four banks dropped 2-3 percent, while mining heavyweights BHP and Rio Tinto ended down 2.1 percent and 1.1 percent, respectively.

Seoul stocks fell sharply as concerns about a potential second wave of infections spooked investors. The benchmark Kospi fell 44.48 points, or 2 percent, to 2,132.30, marking the lowest close in eight sessions.

Market leader Samsung Electronics plunged 3.7 percent amid uncertainties surrounding Samsung Group's de facto leader Lee Jae-yong's legal battle in a succession probe.

No. 2 chipmaker SK Hynix shed 3.7 percent and top automaker Hyundai Motor declined 3.7 percent.

Europe

European stocks have rebounded on Friday after falling sharply in the previous session on concerns over a second wave of coronavirus infections and a gloomy economic outlook.

While the French CAC 40 Index has surged up by 1.5 percent, the U.K.'s FTSE 100 Index is up by 1 percent and the German DAX Index is up by 0.6 percent.

Banks have led the surge, with Commerzbank, Deutsche Bank and Societe Generale posting strong gains. Automakers BMW, Daimler, Volkswagen and Peugeot have also moved notably higher.

Interparfums has soared after it signed an exclusive and worldwide license agreement for fragrances with Italy's Moncler.

Travel-related companies have risen in London after airlines launched legal action against the government's quarantine rules for inbound travelers.

Shares of Games Workshop Group have jumped after the manufacturer of miniature war games lifted its forecast for fiscal 2020 pre-tax profit.

Pearson has also moved sharply higher after a regulatory filing revealed activist investment firm Cevian Capital has built a stake in the education company.

Informa has also shown a strong move to the upside. The events and academic-publishing group said it has identified cost savings of at least GBP400 million.

In economic news, Eurozone industrial output decreased 17.1 percent on a monthly basis in April following an 11.9 percent drop in March, data from Eurostat showed. Production was expected to decline 20 percent.

This was the largest monthly fall recorded since the start of the series and bigger than the reductions seen during the global financial crisis.

On a yearly basis, industrial production fell by a record 28 percent in April after easing 13.5 percent in March. Economists had expected a 29.5 percent slump.

U.K. GDP contracted by 20.4 percent in April from March, when it was down 5.8 percent, official data showed. GDP was forecast to fall 18.4 percent. In the three months to April, GDP decreased 10.4 percent, slightly faster than the expected fall of 10 percent.

Industrial output declined by a record 20.3 percent in April from the previous month, with manufacturing providing the biggest downward contribution, falling by a record 24.3 percent.

U.S. Economic Reports

Reflecting a substantial rebound in fuel prices, the Labor Department released a report on Friday showing a bigger than expected jump in U.S. import prices in the month of May.

The Labor Department said import prices surged up by 1.0 percent in May after plunging by 2.6 percent in April. Economists had expected import prices to increase by 0.6 percent.

The rebound in import prices came as fuel prices spiked by 20.5 percent in May following the 31.0 percent nosedive in the previous month.

The report also showed a rebound in export prices, which climbed by 0.5 percent in May after tumbling by 3.3 percent in April. Export prices were expected to rise by 0.6 percent.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of June. The consumer sentiment index is expected to rise to 75.0 in June after inching up to 72.3 in May.

Stocks In Focus

Shares of Party City (PRTY) are moving sharply higher in pre-market trading after the party supplies retailer reported weaker than expected fiscal first quarter results but announced a deal that could cut its debt by 25 percent and raise $100 million in capital.

Software company Adobe (ADBE) is also likely to move to the upside after reporting fiscal second quarter earnings that exceeded analyst estimates.

Shares of Southwest Airlines (LUV) may also move back to the upside after Credit Suisse upgraded its rating on the airline's stock to Outperform from Neutral.

On the other hand, shares of Lululemon (LULU) are likely to see initial weakness after the athletic apparel company reported fiscal first quarter results that missed analyst estimates on both the top and bottom lines.

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