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Beyond the Numbers

U.S. Stocks May Show A Lack Of Direction In Early Trading
9/22/2020 9:09 AM

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction in early trading.

Investors are looking ahead to the Federal Reserve Chairman Jerome Powell testifying with Treasury Secretary Steven Mnuchin before the House Financial Services Committee.

U.S. stocks plunged sharply on Monday but regained a substantial portion of lost ground in the final hour and the tech-laden Nasdaq nearly managed to move into positive territory towards the closing minutes of the session.

Rising worries about surging coronavirus cases in several countries across Europe and reports that British Prime Minister Boris Johnson is considering another national lockdown to act as a "circuit-breaker" to stop the spread of the virus sent stock prices crashing today.

In addition to coronavirus news, the death of Supreme Court Justice Ruth Bader Ginsburg also appeared to be weighing on the markets, as it is feared a fight over the nomination of her replacement could lead to further delays in the passage of another coronavirus relief bill.

A sell-off in European bank stocks amid allegations of illegal accounts and funds transfers by several leaders over nearly two decades and tensions between the U.S. and China also contributed to the bearish sentiment in the market.

The Dow, which was down nearly 950 points at 26,715.15 at one stage, recovered to close at 27,147.70, down 509.72 points or 1.84 percent. The S&P 500 ended down 38.41 points or 1.16 percent at 3,281.06, off the day's low of 3,229.10. The Nasdaq settled with a loss of 14.48 points or 0.13 percent at 10,778.80, a long way up from the session's low of 10,519.49.

Shares of oil companies declined sharply as crude oil prices plunged over 4 percent amid concerns about outlook for energy demand.

Travel-related stocks were under pressure due to spikes in coronavirus cases, and the overall weak sentiment took a toll of several stocks from other sectors as well.

General Electric (GE) plunged nearly 8 percent. DuPont (DWDP), Caterpillar (CAT), Honeywell International (HON), Merck (MRK), JP Morgan Chase (JPM) and Boeing (BA) lost 3 to 6 percent.

Among the stocks to buck the trend, Apple (APPL) gained more than 3 percent. Walmart (WMT) and Microsoft (MSFT) both ended higher by more than 1 percent.

Commodity, Currency Markets

Crude oil futures are rising $0.29 to $39.60 a barrel after plunging $1.80 to $39.31 a barrel on Monday. Meanwhile, after plummeting $51.50 to $1,910.60 an ounce in the previous session, gold futures are climbing $6.50 to $1,917.10 an ounce.

On the currency front, the U.S. dollar is trading at 104.56 yen compared to the 104.65 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1756 compared to yesterday’s $1.1761.

Asia

Asian stocks fell broadly on Tuesday as rising coronavirus cases and delays in fresh U.S. stimulus stoked worries that the quick economic recovery from the pandemic will be hampered.

Speculation about further lockdown measures in Europe and reports that several global banks were involved in money laundering to the tune of $2 trillion between 1999 and 2017 also weighed on markets.

The Japanese market was closed for a holiday. Chinese shares ended lower despite the country's cabinet unveiling steps to spur new forms of consumption, including online shopping and payments, in a bid to support economic recovery.

The benchmark Shanghai Composite fell 1.29 percent to 3,274.30. Hong Kong's Hang Seng index dropped nearly 1 percent to 23,716.85.

Australian markets hit three-month lows, with heavyweight banks and miners succumbing to heavy selling pressure.

The benchmark S&P/ASX 200 dropped 0.66 percent to 5,784.10, extending losses for the fourth straight session. The broader All Ordinaries index ended down 0.67 percent at 5,973.50.

Miners BHP and Rio Tinto gave up 1.8 percent and 2.4 percent, respectively as commodities dropped on concerns over global economic recovery.

Gold miners Evolution Mining, Regis Resources and Newcrest fell 2-3 percent after gold prices ended at near two-month lows overnight. Northern Star Resources slumped 4.6 percent.

Banks ANZ, NAB and Westpac fell over 2 percent as the Reserve Bank warned of a "gradual and uneven" recovery out of the coronavirus recession.

Oil Search, Woodside Petroleum and Santos declined 2-3 percent after crude oil prices fell over four percent on Monday amid worries about the outlook for energy demand due to rising coronavirus cases in Europe.

Tech stocks bucked the weak trend, with WiseTech Global, Afterpay and Appen climbing 2-3 percent.

Seoul stocks fell the most in the region on strong foreign and institutional sell-off amid fears of possible lockdown in Europe and renewed concerns over stalled stimulus talks in the U.S.

The benchmark Kospi slumped 2.38 percent to finish at 2,332.59. Market bellwether Samsung Electronics declined 1.7 percent, No. 2 chipmaker SK Hynix shed 3.8 percent and Hyundai Motor, the country's largest automaker, tumbled 3 percent.

Europe

European stocks rebounded on Tuesday after suffering their biggest drop since June the previous day on concerns over coronavirus restrictions and diminishing prospects for economic stimulus.

The pan European Stoxx 600 rose 0.6 percent to 359.06 after falling as much as 3.2 percent on Monday. The German DAX gained about 1 percent, France's CAC 40 index edged up 0.3 percent and the U.K.'s FTSE 100 was up 0.4 percent.

The British pound recovered some lost ground as Bank of England Governor Andrew Bailey downplayed the prospect of negative interest rates in the future.

As escalating Covid-19 cases threaten the economic outlook, the central bank was looking hard at how it could support the economy further, Bailey said in a British Chambers of Commerce webinar.

U.K. Prime Minister Boris Johnson will outline new lockdown restrictions later today to fight the second wave of coronavirus.

Also, Fed Chair Jerome Powell and U.S. Treasury Secretary Steven Mnuchin will speak later in the day at a Congressional panel.

Shares of GEA Group AG rallied 2.3 percent after the German technology company announced that it is selling the compressor manufacturer Bock, which is in GEA's Refrigeration Technologies division, to NORD Holding. The parties have agreed not to disclose the financial details of the deal.

LVMH shares edged down slightly as U.S. jewelry brand Tiffany & Co won approval by the Delaware Chancery Court to have its lawsuit against the French conglomerate fast-tracked. However, the court has not agreed to Tiffany's request for trial before November 24.

Plane maker Airbus SE tumbled 3.5 percent. CEO Guillaume Faury told French radio station RTL that the situation is so serious and no one can guarantee there won't be compulsory redundancies, if the situation evolves further.

Danish shipping firm AP Moeller Maersk jumper over 5 percent after JP Morgan upgraded the company's shares to "overweight".

UniCredit fell about 1 percent on reports that Italy's Treasury once again turned to the lender to buy its stake in Monte dei Paschi di Siena. Shares of the latter surged 4 percent.

Whitbread tumbled 3.3 percent in London as it announced thousands of job cut across its Premier Inns, Beefeater and Brewers Fayre sites.

Beazley slumped as much as 12 percent after saying it expects claims linked to the novel coronavirus pandemic to double to $340 million.

U.S. Economic Reports

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of August. Existing home sales are expected to increase by 2.4 percent.

Chicago Federal Reserve President Charles Evans is also due to speak at an Official Monetary and Financial Institutions Forum event at 10 am ET.

At 10:30 am ET, Federal Reserve Chair Jerome Powell is scheduled to testify with Treasury Secretary Steven Mnuchin before the House Financial Services Committee in a hearing entitled “Oversight of the Treasury Department's and Federal Reserve's Pandemic Response.”

Richmond Fed President Thomas Barkin is due to give remarks to the Greenville SC Chamber of Commerce at 12 pm ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $52 billion worth of two-year notes.

Atlanta Fed President Raphael Bostic is due to speak about "Cash-Based Consumers and the Digital Economy" at the Peach Pay Meeting event held by the Atlanta Fed at 3 pm ET.
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