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Futures Pointing To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground following the late-day advance seen in the previous session.

Uncertainty about the Federal Reserve's monetary policy decision on Wednesday may lead traders to cash in on the upward move seen in the final hour of trading on Monday.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

CME Group's FedWatch Tool is currently indicating an 84.0 percent chance of a 75 basis points rate hike and a 16.0 percent chance of a 100 basis point rate hike.

Several of other major central banks around the world are also scheduled to announce their latest monetary policy decisions this week, including the Bank of England and the Bank of Japan.

A notable drop by shares of Ford (F) may also weigh on Wall Street, with the auto giant slumping by 4.7 percent in pre-market trading.

The pullback by Ford comes after the company warned inflation-related supplier costs during the third quarter will run about $1.0 billion higher than originally expected.

On the U.S. economic front, the Commerce Department released a report showing an unexpected spike in new residential construction in the U.S. in the month of August, although the report also showed a steeper than expected slump in building permits.

Stocks recovered from an initial move to the downside and spent much of the trading session on Monday showing a lack of direction before advancing going into the close. The major averages all regained ground following the steep losses posted last week.

The major averages reached new highs late in the session, ending the day firmly positive. The Dow rose 197.26 points or 0.6 percent to 31,019.68, the Nasdaq advanced 86.62 points or 0.8 percent to 11,535.02 and the S&P 500 climbed 26.56 points or 0.7 percent to 3,899.89.

Lingering concerns about the outlook for the global economy contributed to the initial weakness on Wall Street after last week's warning from FedEx (FDX).

Selling pressure waned shortly after the start of trading, however, enabling traders to pick up stocks at reduced levels following recent weakness.

The subsequently rebound by the major averages came after they pulled back near the two-month intraday lows set last Friday.

Nonetheless, trading activity remained somewhat subdued as traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

Traders largely shrugged off a report from the National Association of Home Builders showing U.S. homebuilder confidence declined for the ninth consecutive month in September.

The report showed the NAHB/Wells Fargo Housing Market Index slid to 46 in September from 49 in August. Economists had expected the index to edge down to 48.

With the bigger than expected decrease, the housing market index dropped to its lowest level since hitting 45 in May 2014.

Airline stocks showed a substantial rebound after falling sharply in the previous session, with the NYSE Arca Airline Index soaring by 3.0 percent after ending last Friday's trading at its lowest closing level in well over a month.

Steel stocks also saw significant strength following recent weakness, driving the NYSE Arca Steel Index up by 2.9 percent. The index ended the previous session at a nearly two-month closing low.

Considerable strength was also visible among gold stocks, as reflected by the 2.6 percent surge by the NYSE Arca Gold Bugs Index. The rally by gold stocks came despite a modest decrease by the price of the previous metal.

Housing, chemical and financial stocks also saw notable strength on the day, while weakness remained visible among computer hardware stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.44 to $86.17 a barrel after climbing $0.62 to $85.73 a barrel on Monday. Meanwhile, after slipping $5.30 to $1,678.20 an ounce in the previous session, gold futures are edging down $4.50 to $1,673.70 an ounce.

On the currency front, the U.S. dollar is trading at 143.64 yen compared to the 143.21 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $0.9967 compared to yesterday's $1.0024.

Asia

Asian stocks recovered from recent losses on Tuesday, thanks to a rebound in the final hour of New York trading overnight. The upside, however, remain capped by lingering uncertainty over the size of the interest rate hike by the Federal Reserve.

The Fed begins a two-day meeting later today, with a rate hike of 75-100 basis points in the cards after hotter-than-expected U.S. inflation data last week.

China's Shanghai Composite Index edged up 0.2 percent to 3,122.41 after the People's Bank of China kept its benchmark lending rates unchanged at a monthly fixing, as expected.

The central bank is facing a balancing act of loosening monetary policy while also supporting the yuan. Hong Kong's technology-heavy Hang Seng Index jumped 1.2 percent to 18,781.42.

Japanese shares rose even as data showed consumer price inflation in the country jumped in August to 3.0 percent, its highest level since November 1991 due to increased pressures on the economy from high commodity prices and a softening yen.

The Bank of Japan is set to maintain ultra-low interest rates and its dovish policy guidance on Thursday as other central banks opt to hike interest rates to fight soaring inflation.

The Nikkei 225 Index rose 0.4 percent to 27,688.42, while the broader Topix ended 0.5 percent higher at 1,947.27.

Seoul stocks closed higher to snap a four-day losing streak, as investors scooped up oversold stocks ahead of the Fed meeting. The Kospi climbed 0.5 percent to 2,367.85.

National flag carrier Korean Air surged 3.2 percent and Asiana Air soared 3.6 percent after U.S. President Joe Biden declared the COVID-19 pandemic "over" in the United States.

Australian markets ended sharply higher, led by heavyweight banking and mining stocks. The benchmark S&P ASX 200 Index jumped 1.3 percent to 6,806.40, while the broader All Ordinaries Index gained 1.2 percent to close at 7,030.

New Hope Corp. soared 8.8 percent after the coal miner reported a massive jump in its annual profit on soaring thermal coal prices.

Minutes of the Reserve Bank of Australia's September monetary policy meeting showed earlier in the day that "all else equal, members saw the case for a slower pace of increase in interest rates as becoming stronger as the level of the cash rate rises."

Europe

European stocks have reversed course to edge lower on Tuesday after Sweden's central bank hiked interest rates by a full percentage point to 1.75 percent in a surprise move and data showed German producer prices rose in August at their strongest rate since records began both in annual and monthly terms.

The Executive Board of Riksbank raised the key interest rate by 1 percentage point to 1.75 percent, while markets had widely expected a 75 basis-point rate hike.

German producer prices registered an annual increase of 45.8 percent in August, faster than the 37.2 percent spike in July, Destatis reported. The rate was forecast to ease slightly to 37.1 percent.

Energy prices soared 139.0 percent in August from last year. Excluding energy, producer prices were up 14.0 percent.

On a monthly basis, producer prices gained 7.9 percent, the highest on record, following a 5.3 percent jump in July. Economists had expected inflation to ease sharply to 1.6 percent.

Investors also remained focused on a round of interest rate decisions by central banks such as the Fed and the Bank of England this week.

While the U.K.'s FTSE 100 Index has dipped by 0.4 percent, the German DAX Index is down by 0.9 percent and the French CAC 40 Index is down by 1.1 percent.

Ferrexpo, an iron ore pellet producer, has slumped in London after an adverse court ruling in relation to its purchase of a 40.19 percent stake in Ferrexpo Poltava Mining.

CRH, a global business in building materials solutions, has also fallen after it entered into arrangements with UBS A.G., London Branch to repurchase shares on its behalf for consideration up to $300 million.

Home improvement retailer Kingfisher has also shown a significant moves to the downside after its first-half profit declined 30 percent.

Henkel AG & Co. KGaA is also moving lower despite the German chemical and consumer goods firm raising its sales outlook for fiscal 2022.

Meanwhile, Bachem Holding shares have moved sharply higher after the Swiss biotech supplier received large orders for peptides.

U.S. Economic Reports

The Commerce Department released a report on Tuesday showing an unexpected spike in new residential construction in the U.S. in the month of August, although the report also showed a steeper than expected slump in building permits.

The report showed housing starts soared by 12.2 percent to an annual rate of 1.575 million in August after plunging by 10.9 percent to a revised rate of 1.404 million in July.

The sharp increase surprised economists, who had expected housing starts to edge down by 0.1 percent to an annual rate of 1.445 million from 1.446 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits plunged by 10.0 percent to an annual rate of 1.517 million in August after slipping by 0.7 percent to a revised rate of 1.685 million in July.

Economists had expected building permits, an indicator of future housing demand, to tumble by 4.5 percent to an annual rate of 1.610 million from the 1.674 million originally reported for the previous month.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month's auction of $12 billion worth of twenty-year bonds.

Stocks In Focus

Shares of Change Healthcare (CHNG) are moving sharply higher in pre-market trading after a federal judge denied the Justice Department's request to block UnitedHealth (UNH) planned $13 billion acquisition of the healthcare technology company.

Machine vision systems, software and sensors maker Cognex (CGNX) may also move to the upside after raising its third quarter revenue guidance, citing strong progress in replenishing component inventory destroyed in a previously disclosed fire at the company's primary contract manufacturer.

On the other hand, shares of Nike (NKE) may see initial weakness after Barclays downgraded its rating on the athletic footwear and apparel maker to Equal Weight from Overweight.

Disk drive maker Western Digital (WDC) is also moving lower in pre-market trading after Deutsche Bank downgraded its rating on the company's stock to Hold from Buy.

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