Market Analysis

Beyond the Numbers

Looming Fed Minutes May Lead To Choppy Trading On Wall Street
4/10/2019 9:03 AM

The major U.S. index futures are pointing to a roughly flat opening on Wednesday, with stocks likely to show a lack of direction following the notable move to the downside seen in the previous session.

Traders may be reluctant to make any significant moves ahead of this afternoon’s release of the minutes of the Federal Reserve’s latest monetary policy meeting.

The minutes of the Fed’s March meeting may shed additional light on the central bank’s decision to no longer forecast any more interest rates hikes this year.

Some analysts described the Federal Reserve’s decision to downwardly revise its forecast for interest rates as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

The looming earnings season may also keep traders on the sidelines, with financial giants JPMorgan Chase (JPM) and Wells Fargo (WFC) due to report their quarterly results before the start of trading on Friday.

Stocks moved mostly lower over the course of the trading session on Tuesday following the mixed performance seen on Monday. The Nasdaq and the S&P 500 pulled back after ending Monday's trading at six-month closing highs.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow slid 190.44 points or 0.7 percent to 26,150.58, the Nasdaq fell 44.61 points or 0.6 percent to 7,909.28 and the S&P 500 dropped 17.57 points or 0.6 percent to 2,878.20.

Concerns about the global economic outlook weighed on the markets, particularly after President Donald Trump threatened to impose tariffs on European goods in response to European Union subsidies to Airbus.

U.S. Trade Representative Robert Lighthizer estimates the harm from the EU subsidies as $11 billion in trade each year, with the amount subject to arbitration at the World Trade Organization.

"This case has been in litigation for 14 years, and the time has come for action," Lighthizer said. "The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures."

"Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft," he added. "When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted."

Meanwhile, a European Commission spokesman called the estimated adverse effects of the subsidies "greatly exaggerated" and pledged to retaliate against any new U.S. tariffs.

The trade dispute between Trump and the EU comes amid lingering uncertainty about the U.S. and China reaching a final trade agreement.

Steel stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Steel Index down by 2.3 percent. The index pulled back after ending the previous session at its best closing level in five months.

U.S. Steel (X) led the sector lower after Credit Suisse downgraded its rating on the company's stock to Underperform from Neutral.

Significant weakness also emerged among biotechnology stocks, as reflected by the 1.6 percent drop by the NYSE Arca Biotechnology Index.

Energy stocks also saw considerable weakness amid a pullback by the price of crude oil, moving notably lower along with housing, banking, and semiconductor stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $64.32 a barrel after falling $0.42 to $63.98 a barrel on Tuesday. Meanwhile, after climbing $6.40 to $1,308.30 an ounce in the previous session, gold futures are slipping $1.40 to $1,306.90 an ounce.

On the currency front, the U.S. dollar is trading at 111.16 yen compared to the 111.14 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1262 compared to yesterday’s $1.1263.


Asian stocks turned in a mixed performance on Wednesday, as growth worries coupled with geopolitical issues like U.S.-China trade tensions and Brexit dented investors' appetite for risk.

China’s benchmark Shanghai Composite Index inched up 2.27 points or 0.1 percent to 3,241.93, while Hong Kong's Hang Seng Index edged down 37.93 points or 0.1 percent to 30,119.56.

A Global Times' editorial urged patience after U.S. President Donald Trump said a trade deal could be reached in about four weeks.

It is still uncertain when, or even whether, Beijing and Washington can reach a trade deal, the Chinese newspaper cautioned.

Japanese shares fell as investors kept an eye on escalating trade tensions between the United States and Europe and an upcoming press conference by European Central Bank President Mario Draghi.

The benchmark Nikkei 225 Index down 115.02 points or 0.5 percent at 21,687.57, while the broader Topix closed 0.7 percent lower at 1,607.66.

Exporters ended broadly lower as the yen strengthened amid an uptick in risk aversion. Japan Post tumbled 2.9 percent on news of a new share sale by the government.

Sony fell 2.5 percent on profit taking after soaring more than 9 percent in the previous session.

On the data front, the total value of core machine orders in Japan jumped 1.8 percent in February, the Cabinet Office said, coming in at 836.7 billion yen. That was shy of expectations for a spike of 2.8 percent following the 5.4 percent contraction in January.

Producer prices in Japan rose 0.3 percent sequentially in March, exceeding expectations for 0.2 percent and unchanged from the February reading.

Overall bank lending in Japan climbed an annual 2.4 percent in the month, following the 2.3 percent annual increase in February.

Australian markets finished little changed amid worries about growth and a flare-up in trade tensions between the U.S. and Europe. The benchmark S&P/ASX 200 Index inched up 1.70 points or less than a tenth of a percent to 6,223.50.

Miners BHP and Fortescue Metals Group dropped 0.4 percent and 0.2 percent, respectively, while Rio Tinto edged up 0.3 percent. Energy stocks ended broadly lower as oil prices slipped from five-month highs after Russia suggested it would hike output.

Crown Resorts slumped 9.1 percent after Wynn Resorts said it had terminated takeover discussions with the casino and resorts operator.

Webjet rallied 2.4 percent as the online travel agent released an update ahead of its appearance at the UBS Emerging Companies Conference.

Gold miners Evolution and Newcrest rose over 1 percent as gold held near two-week highs amid an uptick in risk aversion.

Commonwealth Bank of Australia advanced 0.7 percent after cutting home loan rates. The other three big banks closed up between 0.1 percent and 0.2 percent.

South Korean stocks closed higher, with financials, telecom and tech shares pacing the gainers. The benchmark Kospi rose 10.83 points or 0.5 percent to 2,224.39 amid buying by institutional investors in late afternoon trade.


European stocks have turned mixed on Wednesday, as investors await the EU's crucial Brexit summit and digest the European Central Bank’s widely expected decision to leave interest rates unchanged.

European Council president Donald Tusk is asking the EU to consider offering the U.K. a "flexible" delay to Brexit of up to a year, with the option of leaving earlier if a deal is ratified.

While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.5 percent.

Unibail-Rodamco-Westfield has advanced after entering into an agreement with a consortium of institutional buyers for the sale of Tour Majunga in La Défense.

Royal Dutch Shell has also moved to the upside a day after it agreed with Sinopec to examine the Dongying trough of Shengli in Shandong.

Tesco, the U.K.'s largest retailer, has also moved higher after reporting a better than expected 34 percent spike in full-year operating profit.

On the other hand, Indivior shares have nosedived after the U.S. Department of Justice accused the British drugmaker of fraud to boost prescriptions of the film version of its opioid addiction treatment Suboxone.

In economic news, a report showed U.K. GDP grew 0.2 percent in February, beating forecasts as manufacturing surged.

U.S. Economic Reports

Reflecting a spike in energy prices, the Labor Department released a report showing consumer prices in the U.S. increased by slightly more than anticipated in the month of March.

The Labor Department said its consumer price index climbed by 0.4 percent in March after edging up by 0.2 percent in February. Economists had expected the index to rise by 0.3 percent.

Excluding the jump in energy prices and a modest increase in food prices, core consumer prices inched up by 0.1 percent in February, matching the uptick seen in the previous month. Core prices had been expected to tick up by 0.2 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 5th.

Crude oil inventories are expected to rise by 2.5 million barrels after surging up by 7.2 million barrels in the previous week.

Federal Reserve Vice Chairman for Supervision Randal Quarles is due to participate in a Financial Stability Board Roundtable on reforming major interest rate benchmarks in Washington, D.C., at 11:50 am ET.

At 1 pm ET, the Treasury Department is scheduled to release the results of its auction of $24 billion worth of ten-year notes.

The Fed is due to release the minutes of its latest monetary policy meeting at 2 pm ET, with the minutes potentially shedding light on the central bank’s decision to no longer forecast any more interest rate hikes this year.

At 7 pm ET, Dallas Fed President Robert Kaplan is scheduled to discuss national and global economic issues with former Fed Chair Janet Yellen in Houston, Texas.

Stocks In Focus

Shares of Delta Air Lines (DAL) are seeing pre-market strength after the airline reported first quarter results that exceeded analyst estimate on both the top and bottom lines.

Clothing company Levi Strauss (LEVI) may also move to the upside after reporting 7 percent revenue growth in its first quarterly report since its initial public offering.

On the other hand, shares of WD-40 (WDFC) may come under pressure after the lubricants maker reported second quarter earnings that beat estimates but weaker than expected revenues.
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