Market Analysis

Beyond the Numbers

Looming Fed Announcement May Lead To Choppy Trading On Wall Street
12/11/2019 8:56 AM

The major U.S. index futures are pointing to a mixed opening on Wednesday, with stocks likely to extend the choppy trading seen in the previous session.

Traders may be reluctant to make significant moves in early trading ahead of the Federal Reserve’s monetary policy announcement this afternoon.

The Fed is scheduled to announce its latest monetary policy decision at 2 pm ET, followed by Fed Chairman Jerome Powell’s post-meeting press conference at 2:30 pm ET.

The central bank is widely expected to leave interest rates unchanged, although traders are still likely to pay close attention to the accompanying statement for clues about the outlook for rates.

Uncertainty about U.S.-China trade talks may also contribute to choppy trading on Wall Street, as new tariffs on Chinese imports are currently still set to take effect on Sunday.

Recent reports have suggested the U.S. will delay imposing the tariffs amid ongoing negotiations, but traders remain wary ahead of an official announcement.

Following the modest pullback seen over the course of the trading day on Monday, stocks showed a lack of direction during trading on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line.

Eventually, the major averages ended the day slightly lower. The Dow slipped 27.88 points or 0.1 percent to 27,881.72, the Nasdaq edged down 5.64 points or 0.1 percent to 8,616.18 and the S&P 500 dipped 3.44 points or 0.1 percent to 3,132.52.

The choppy trading on Wall Street came as traders digested the latest news on the trade front, with House Democrats announcing an agreement on President Donald Trump's trade deal with Canada and Mexico.

The deal will allow the United States-Mexico-Canada Agreement, or the USMCA, Trump's replacement for the North American Free Trade Agreement, or NAFTA, to move forward in the House.

House Speaker Nancy Pelosi, D-Calif., called the new agreement "much better than NAFTA" and argued changes negotiated by Democrats make the deal "infinitely better than what was initially proposed by the administration."

The news of the USMCA deal came on the heels of conflicting reports regarding trade talks between the U.S. and China.

Shortly before the start of trading, a report from the Wall Street Journal said the U.S. plans to delay imposing additional tariffs on Chinese goods.

Citing officials on both sides, the Journal said negotiators are laying the groundwork for delaying the tariffs set to kick in on December 15th as they continue to haggle over getting China to commit to massive purchases of U.S. farm products.

An earlier report from the South China Morning Post said a trade deal between the U.S. and China is unlikely to be completed this week.

However, the SCMP said sources close to the talks do not expect the tariffs planned for December 15th to take effect, adding to a growing chorus on both sides who expect de-escalation this week.

Traders also seemed reluctant to make significant moves ahead of the Fed's monetary policy announcement on Wednesday.

Contributing to the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.

Biotechnology and gold stocks saw some strength on the day, while telecom and housing stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slipping $0.26 to $58.98 a barrel after rising $0.22 to $59.24 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,472.40, up $4.30 compared to the previous session’s close of $1,468.10. On Tuesday, gold climbed $3.20.

On the currency front, the U.S. dollar is trading at 108.69 yen compared to the 108.72 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1084 compared to yesterday’s $1.1092.


Asian stocks ended mostly higher on Wednesday after the Wall Street Journal reported that U.S. and Chinese trade negotiators are laying the groundwork for a delay of a fresh round of tariffs set to kick in on December 15. Investors also awaited cues from key central bank meetings and the U.K. general election.

Chinese shares ticked higher as investors hoped for a delay in U.S. tariffs and new loan growth data for November topped forecasts. The benchmark Shanghai Composite Index gained 0.2 percent to end at 2,924.42, while Hong Kong's Hang Seng index advanced 0.8 percent to 26,645.43.

China's bank lending increased more than expected in November, data from the People's Bank of China showed. Banks extended CNY 1.39 trillion new loans in November versus CNY 661 billion in October. Lending was forecast to rise to CNY 1.2 trillion.

Meanwhile, Tokyo shares drifted lower as investors kept an eye on key events this week, including the Federal Reserve meeting, the U.K. election and the weekend's U.S.-China trade tariff deadline.

The Nikkei 225 Index gave up 18.33 points, or 0.1 percent, to finish at 23,391.86, while the broader Topix index closed 0.3 percent lower at 1,714.95.

Mitsui OSK Lines and Taiheiyo Cement ended down over 2 percent. Tech shares ended mostly higher, with semiconductor company Sumco spiking 4.2 percent. Advantest and Tokyo Electron rose around 0.8 percent each.

Australian markets rose notably, led by consumer and resource stocks. The benchmark S&P/ASX 200 Index climbed 45.70 points, or 0.7 percent, to 6,752.60, while the broader All Ordinaries Index ended up 41.10 points, or 0.6 percent, at 6,853.20.

Defensive stocks inched up, with heavyweights Woolworths Group and Coles Group rising half a percent and 0.7 percent, respectively. Online travel agency Webjet soared 9.6 percent on the buzz that it is a takeover target.

Gold miner Evolution rose 1.6 percent, while energy stocks Oil Search, Woodside Petroleum and Santos climbed 1-2 percent. Lender Westpac Banking Corp added 0.7 percent ahead of its annual general meeting Thursday.

GrainCorp shed 0.8 percent after the bulk grain handler appointed Fonterra's Robert Spurway as its new CEO and Managing Director.

Australia's consumer sentiment weakened in December, consistent with the sharp decline in consumer spending in the third quarter, survey data from Westpac showed.

The Westpac-Melbourne Institute Index of Consumer Sentiment declined 1.9 percent to 95.1 in December. All components of the index recorded declines during the month.

Seoul stocks gained ground after the release of labor market data. The benchmark Kospi rose 7.62 points, or 0.4 percent, to 2,105.62.

South Korea's jobless rate rose to a seasonally adjusted 3.6 percent in November from 3.5 percent in October, a government report showed. The rate was forecast to remain unchanged at 3.5 percent. In the same period last year, the rate was 3.8 percent.


European stocks are subdued on Wednesday as investors await cues from key central bank meetings and the U.K. general election.

A poll showed British Prime Minister Boris Johnson is now likely to win only a modest majority in Thursday's vote, raising fresh uncertainty around the outcome of Brexit.

According to a YouGov forecast on Tuesday, the Tories are expected to win 339 of the 650 seats in the House of Commons, Labour 231, the Scottish National Party 41, and the Liberal Democrats 15.

Meanwhile, investors are also reacting to conflicting narratives on the trade front. The Wall Street Journal reported that Washington is laying the groundwork for a delay in the latest tariffs on China, due to take effect on Sunday.

However, White House economic adviser Larry Kudlow said the "tariffs are still on the table." Analysts say that a trade deal might have to wait until after the U.S. presidential election in November 2020.

While the U.K.’s FTSE 100 Index is down by 0.1 percent, the French CAC 40 Index is just above the unchanged line and the German DAX Index is up by 0.4 percent.

Swiss banking major Credit Suisse Group has moved lower despite announcing it continued momentum in 2019 with strong growth across key metrics.

Telefonica Deutschland shares have also fallen after the mobile operator cut its dividend, saying it wants to upgrade its network over the next three years.

Meanwhile, Spanish fashion retailer Industria de Diseño Textil has risen after its nine-month net profit increased 12 percent to 2.72 billion euros from last year's 2.44 billion euros.

Aurubis has soared after reporting its earnings for fiscal 2018/19, while Petra Diamonds has also jumped on news it has restarted its mining operations in South Africa.

Stagecoach Group shares have also soared. The transport operator reported profit before tax of 65.9 million pounds for the half-year ended October 26, 2019 compared to 48.9 million pounds in the previous year.

U.S. Economic Reports

A report released by the Labor Department on Wednesday showed consumer prices in the U.S. increased by slightly more than anticipated in the month of November.

The Labor Department said its consumer price index rose by 0.3 percent in November after climbing by 0.4 percent in October. Economists had expected prices to edge up by 0.2 percent.

Excluding food and energy prices, core consumer prices crept up by 0.2 percent in November, matching the uptick seen in the previous month as well as economist estimates.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended December 6th.

Crude oil inventories are expected to decrease by 3.1 million barrels after tumbling by 4.9 million barrels in the previous week.

The Federal Reserve is scheduled to announce its latest monetary policy decision at 2 pm ET, followed by Fed Chairman Jerome Powell’s post-meeting press conference at 2:30 pm ET.

Stocks In Focus

Shares of GameStop (GME) are moving sharply lower in pre-market trading after the video game retailer reported weaker than expected third quarter results and cut its full-year profit forecast.

Apparel retailer American Eagle Outfitters (AEO) may also come under pressure after reporting fiscal third quarter earnings in line with estimates but providing disappointing guidance.

On the other hand, shares of Dave & Buster's (PLAY) may see initial strength after the restaurant chain reported fiscal third quarter results that exceeded analyst estimates.
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