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U.S. Stocks Likely To Extend Last Week's Sell-Off In Early Trading

wallstreet higher 050119 26sep22 lt

Following the sell-off seen last week, stocks are likely to see further downside in early trading on Monday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 117 points.

A continued surge in the value of the U.S. dollar is likely to weigh on the markets, with the greenback hitting a record high versus the British pound.

Aggressive interest rate hikes by the Federal Reserve continue to contribute to the increase by the dollar along with Britain's new chancellor Kwasi Kwarteng announcement of a sweeping package of tax cuts.

"Such U.S. dollar strength has historically led to some kind of financial/economic crisis," said Morgan Stanley chief U.S. equity strategist Michael Wilson. "If there was ever a time to be on the lookout for something to break, this would be it."

Concerns about the outlook for the global economy may also continue to weigh on the markets amid worries the increases in interest rates around the world will lead to a recession.

The Fed and other central banks have indicated they plan to continue raising rates in an effort to combat stubbornly elevated inflation.

In the coming days, traders are likely to keep an eye on reports on durable goods orders, consumer confidence, new home sales and personal income and spending.

Stocks moved sharply lower during trading on Friday, extending the notable downward move seen over the past several sessions. With the steep drop on the day, the Dow dropped to its lowest closing level in over a year, while the Nasdaq and the S&P 500 hit three-month closing lows.

The major averages rebounded from their lows of the session going into the close but continued to post steep losses. The Dow tumbled 486.27 points or 1.6 percent to 29,590.41, the Nasdaq dove 198.88 points or 1.8 percent to 10,867.93 and the S&P 500 plunged 64.76 points or percent to 1.7 percent to 3,693.23.

Closing lower for the fourth consecutive session, the major averages also posted steep losses for the week. The Dow slumped by 4.0 percent, while the S&P 500 and the Nasdaq plummeted by 4.7 percent and 5.1 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan's Nikkei 225 Index plunged by 2.7 percent, while China's Shanghai Composite Index slumped by 1.2 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the French CAC 40 Index is up by 0.1 percent, the German DAX Index is down by 0.1 percent and the U.K.'s FTSE 100 Index is down by 0.8 percent.

In commodities trading, crude oil futures are sliding $0.86 to $77.88 a barrel after plummeting $4.75 to $78.74 a barrel last Friday. Meanwhile, after tumbling $25.50 to $1,655.60 an ounce in the previous session, gold futures are slipping $6.10 to $1,649.50 an ounce.

On the currency front, the U.S. dollar is trading at 143.98 yen versus the 143.31 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $0.9651 compared to last Friday's $0.9687.

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