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Profit Taking, Coronavirus Concerns May Weigh On Wall Street

The major U.S. index futures are pointing to a lower open on Wednesday, with stocks likely to give back ground following the upward move seen over the two previous sessions.

Profit taking may contribute to initial weakness on Wall Street, as some traders worry the recovery from the March lows has been overdone.

The advance seen during trading on Tuesday lifted the Nasdaq to another new record closing high, with the tech-heavy index extending its winning streak to eight sessions.

Concerns about the rising number of coronavirus cases in a number of U.S. states may also weigh on the markets amid worries a "second wave" could delay the economic recovery.

A CNBC analysis of data compiled by Johns Hopkins University found the nation's seven-day average of daily new Covid-19 cases spiked more than 30 percent compared with a week ago.

Texas, Arizona and California are among several states that have seen significant increases in coronavirus cases, with California reporting 6,219 new cases on Monday.

During congressional testimony on Tuesday, White House health advisor Dr. Anthony Fauci warned of a "disturbing surge" in coronavirus infections.

President Donald Trump has repeatedly blamed the jump in coronavirus cases on increased testing and doubled-down on his suggestion that testing should be slowed.

With the exception of the sharp pullback seen earlier this month, traders have largely shrugged off the concerns about the increase in coronavirus cases amid continued optimism about a quick economic recovery.

Stocks moved mostly higher on Tuesday, extending the upward move seen over the course of the trading day on Monday. With the continued advance, the tech-heavy Nasdaq reached another new record closing high.

The major averages pulled back off their best levels in late-day trading but remained firmly positive. The Nasdaq advanced 74.89 points or 0.7 percent to 10,131.37, while the Dow climbed 131.14 points or 0.5 percent to 26,156.10 and the S&P 500 rose 13.43 points or 0.4 percent to 3,131.29.

Apple (AAPL) helped to lead the Nasdaq higher, jumping by 2.1 percent to a new record high as traders reacted positively to news out of the tech giant's Worldwide Developers Conference.

The continued strength on Wall Street was also widely attributed to White House trade adviser Peter Navarro clarifying his remarks about the U.S.-China trade deal.

"It's over," Navarro said in response to a question about the trade deal in an interview on Fox News on Monday, adding that the "turning point" was China's failure to warn the United States about the coronavirus outbreak.

However, Navarro subsequently released a statement attempting to clarify his remarks, claiming his initial comments were "taken wildly out of context."

"They had nothing at all to do with the Phase I trade deal, which continues in place," Navarro said. "I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world."

Trump also sought to reassure investors with a post on Twitter declaring the trade deal is "fully intact" and saying he hopes China will "continue to live up to the terms of the Agreement!"

Navarro's initial comments contributed to an overnight nosedive by stock futures but were clarified before impacting regular trading.

Stocks also benefited from upbeat economic data out of Europe, with a reading on private sector activity jumping to 47.5 in June from 31.9 in May.

A reading below 50 still indicates contraction, but Simon MacAdam, Senior Global Economist at Capital Economics, noted the readings on activity in developed markets have "come back a long way from their April lows."

"While activity is still considerably below normal levels, the surprising speed of the recovery poses an upside risk to some of our Q2 forecasts," MacAdam said.

In U.S. economic news, the Commerce Department released a report showing a substantial increase in new home sales in the month of May.

The report said new home sales spiked by 16.6 percent to an annual rate of 676,000 in May from a significantly downwardly revised rate of 580,000 in April.

Economists had expected new home sales to jump 2.7 percent to an annual rate of 640,000 from the 623,000 originally reported for the previous month.

Gold stocks extended the rally seen over the two previous sessions, driving the NYSE Arca Gold Bugs Index up by 1.8 percent to its best closing level in a month.

The continued strength among gold stocks came as the price of the precious metal saw further upside, jumping to the highest closing level since October 2012.

Significant strength was also visible among transportation stocks, as reflected by the 1.3 percent gain posted by the Dow Jones Transportation Average.

Steel and retail stocks also saw notable strength on the day, while some weakness emerged among networking and utilities stocks.

Commodity, Currency Markets

Crude oil futures are slumping $0.85 to $39.52 a barrel after falling $0.36 to $40.37 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,783.60, up $1.60 compared to the previous session's close of $1,782. On Tuesday, gold jumped $15.60.

On the currency front, the U.S. dollar is trading at 106.78 yen compared to the 106.52 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1273 compared to yesterday's $1.1308.

Asia

Asian stocks ended broadly higher on Wednesday as improved data from key economies and hopes of more stimulus measures helped offset reports of a surge in the number of coronavirus cases in the U.S. and elsewhere across the world.

Chinese shares rose to close the shortened three-session week on a positive note as new virus cases declined in China and investors paid more attention to Beijing's reforms in its capital markets. Chinese stock markets will be closed on Thursday and Friday for the Dragon Boat Festival.

The benchmark Shanghai Composite Index gained 8.93 points, or 0.3 percent, to close at 2,979.55, while Hong Kong's Hang Seng Index slid 125.76 points, or 0.5 percent, to 24,781.58.

Japanese stocks closed modestly lower and the yen strengthened after Tokyo reported a jump in coronavirus infections to mark its highest daily tally since May 5. The city had 55 new infections, public broadcaster NHK reported. That's the highest since the country lifted a nationwide state of emergency.

The Nikkei 225 Index edged down 14.73 points, or 0.7 percent, to 22,534.32, and the broader Topix index declined 0.4 percent to close at 1,580.50. Market heavyweight SoftBank Group lost 1.8 percent, while Fast Retailing rose half a percent.

Australian markets eked out modest gains after the country's major financial regulators urged banks to continue to support households and businesses during the recovery from the coronavirus.

The benchmark S&P/ASX 200 Index crept up 11.30 points, or 0.2 percent, to 5,965.70, extending gains for the third straight session. The broader All Ordinaries Index ended up 0.2 percent at 6,081.60.

Technology stocks followed their U.S. peers higher, with Appen rising 2.3 percent. Afterpay rose 0.4 percent after releasing a Clearpay update in the U.K.

Ioneer soared 8.7 percent after the company said it was in talks with a "range of strategic players" to fund the development of its Rhyolite Ridge Lithium-Boron Project.

Gold miners surged as gold prices rose to their highest level since October 2012 on hopes of more monetary stimulus by central banks. Evolution Mining jumped 6.7 percent, Northern Star Resources climbed 4.9 percent, Newcrest Mining added 2.5 percent and Regis Resources gained 2.3 percent.

Woodside Petroleum, Santos and Oil Search rose 2-3 percent as oil prices extended losses from the previous session.

Seoul stocks posted strong gains, with upbeat economic data from the United States and Europe as well as eased tensions with North Korea helping underpin investor sentiment.

The benchmark Kospi jumped 30.27 points, or 1.4 percent, to 2,161.51. Heavyweight Samsung Electronics advanced 2.9 percent and No. 2 chipmaker SK Hynix added 2.3 percent.

Earlier in the day, North Korea decided to suspend "military action plans" against South Korea during a Central Military Commission meeting presided over by leader Kim Jong-un.

Europe

European stocks have moved sharply lower on Wednesday as Tokyo reported a jump in infections to its highest daily tally since May 5 and Germany reported 712 new cases, fuelling concerns about a second wave of coronavirus infections.

Dr. Anthony Fauci, the top virus expert in the U.S., told Congress on Tuesday that the next two weeks would be critical in trying to keep the virus under control.

Meanwhile, there are reports that the European Union is mulling a ban on American travelers when it reopens its borders on July 1.

On the positive side, the Ifo business climate index for Germany rose to a reading of 86.2 in June from 79.5 in May, beating forecasts.

While the U.K.'s FTSE 100 Index has plunged by 2 percent, the German DAX Index and the French CAC 40 Index are both down by 1.7 percent.

Volkswagen has declined on reports that the automaker is in talks to buy French car-rental company Europcar Mobility Group.

Nokia has also fallen on news that Pekka Lundmark will start his new role as President and Chief Executive Officer on August 1.

Petrofac has also come under pressure. In its pre-close trading update, the oilfield services provider said that trading and awards for the first-half year-to-date period were materially impacted by Covid-19 and the sharp drop in oil and gas prices.

British house building company Persimmon has also tumbled as it announced the appointment of Dean Finch as Group Chief Executive.

JD Wetherspoon has also moved to the downside. The company said it does not currently intend to start any new pub development projects in the next 12 months.

On the other hand, Premier Foods has soared. The food manufacturer reported profit before tax of 53.6 million pounds for the 52 weeks ended March 28 compared to a loss of 42.7 million pounds in the previous year.

U.S. Economic Reports

The Energy Information Administration is due to release its report on oil inventories in the week ended June 19th at 10:30 am ET.

At 12:30 pm ET, Chicago Federal Reserve President Charles Evans is scheduled to give a virtual presentation to the Corridor Business Journal Mid-Year Economic Review.

The Treasury Department is due to announce the results of its auction of $47 billion worth of five-year notes at 1 pm ET.

At 2 pm ET, St. Louis Fed President James Bullard is scheduled to speak at the Greater Louisville Metro Chamber of Commerce on Covid-19 and the economy.

Stocks In Focus

Shares of Carnival (CCL) are moving significantly lower in pre-market trading after Standard & Poor's downgraded the cruise operator's debt rating to Junk status amid expectations of continued weak demand due to the ongoing COVID-19 pandemic.

Recreational vehicle maker Winnebago (WGO) is also seeing notable pre-market weakness even though the company reported a narrower than expected fiscal third quarter loss on revenues that exceeded estimates.

On the other hand, shares of Dell Technologies (DELL) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said the PC maker is examining options including a spinoff for its roughly $50 billion stake in VMware (VMW).

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