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Beyond the Number

Futures Pointing To Higher Open As Fed Announcement Looms
9/22/2021 8:44 AM

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move to the upside after ending the previous session narrowly mixed.

Stocks may stage another rebound attempt after buying interest waned over the course of the trading day on Tuesday, leading to a lackluster close.

The Dow ended the previous session at its lowest closing level in three months, with the major averages all showing notable decreases for September.

Trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement this afternoon.

The Fed is widely expected to leave monetary policy unchanged but could provide guidance for its plans to begin scaling back its asset purchases.

The central bank previously signaled it could start tapering by the end of the year, although some disappointing economic data could lead the Fed to push back its plans.

Stocks showed a lack of direction over the course of the trading session on Tuesday following the sell-off seen during trading on Monday. The major averages spent the day bouncing back and forth across the unchanged line before closing narrowly mixed.

While the Nasdaq rose 32.50 points or 0.2 percent to 14,746.40, the Dow dipped 50.63 points or 0.2 percent to 33,919.84 and the S&P 500 edged down 3.54 points or 0.1 percent to 4,354.19. The Dow ended the session at its lowest closing level in three months.

The choppy trading on Wall Street came as traders looked ahead to the Federal Reserve's monetary policy announcement on Wednesday.

The Fed is widely expected to leave monetary policy unchanged but could address the outlook for its asset purchase program.

The minutes of the Fed's last meeting signaled the central bank was prepared to begin scaling back asset purchases by the end of the year.

With some recent disappointing economic data suggesting the Fed could push back its plans, traders are likely to pay close attention to the wording of the post-meeting statement.

On the U.S. economic front, new residential construction in the U.S. increased by more than expected in the month of August, according to a report released by the Commerce Department on Tuesday.

The report said housing starts jumped by 3.9 percent to an annual rate of 1.615 million in August from a revised rate of 1.554 million in July.

Economists had expected housing starts to increase to a rate of 1.580 million from the 1.534 million originally reported for the previous month.

The Commerce Department also said building permits spiked by 6.0 percent to an annual rate of 1.728 million in August from a revised rate of 1.630 million in July.

Building permits, an indicator of future housing demand, had been expected to drop to a rate of 1.610 million from the 1.635 million originally reported for the previous month.

Most of the major sectors showed only modest moves on the day, contributing to the lackluster close by the broader markets.

Computer hardware and airline stocks saw notable weakness on the day, while strength was visible among biotechnology and oil stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.82 to $71.31 a barrel after rising $0.35 to $70.49 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,774.50, down $3.70 compared to the previous session’s close of $1,778.20. On Tuesday, gold climbed $14.40.

On the currency front, the U.S. dollar is trading at 109.51 yen compared to the 109.23 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1730 compared to yesterday’s $1.1726.

Asia

Asian stock markets traded mixed on Wednesday, as the looming Fed announcement and Evergrande continued to reverberate, albeit on a lesser note. Chinese stock markets resumed trading after local holidays but were not overwhelmed by the Evergrande fiasco.

While major benchmarks in Australia and New Zealand ended positive, Japanese stocks continued to be beleaguered. Markets in Hong Kong and Korea were closed due to local holidays.

China's Shanghai Composite Index overcame an initial setback and finally closed the day's trading at 3,628.49, up 14.52 points or 0.4 percent. A liquidity infusion by the PBoC as well as assurances by China Evergrande helped soothe markets.

Though tensions eased on the solvency crisis at China Evergrande, Japan's Nikkei 225 Index slid 200.31 points or 0.7 percent to 29,639.40, partly due to fretting over the Fed's future course and partly due to concerns about the domestic economic situation.

Meanwhile, Bank of Japan maintained the status quo on short-term interest rates and issued a bleak commentary on factory output and exports. Weak inflation and weak consumption amidst supply chain disruptions dampened sentiment but also reinforced expectations that the central bank may not follow its global peers in an immediate rollback of pandemic-era stimulus.

Tokyo Electric Power company rallied 3.6 percent, while Kawasaki Kisen Kaisha, engaged in marine transportation business, gained 3.3 percent.

Tokai Carbon Co, a producer and exporter of graphite material for use mainly in nuclear energy lost the most with a decline of 5.5 percent. Marubeni Corp. followed suit with a decline of 4.3 percent.

Australia's S&P/ASX200 Index closed trading at 7,296.90 after gaining 23.10 points or 0.3 percent. The index is currently 4.4 percent below its 52-week high of 7632.80.

Metal recycling company Sims Metal Management was the best performing stock with a rally of 6.1 percent. Energy business related technical service provider Worley, iron ore exploration company Champion Iron, and oil and gas exploration company Beach Energy all gained more than 5 percent.

Specialty fashion retailer Premier Investments declined 4.5 percent after a brokerage cut its price target. Insurance Australia Group slumped around 3 percent amidst pay-out concerns on the earthquake in Victoria on Wednesday morning. Energy infrastructure company Ausnet Services dropped 2.7 percent amidst a takeover battle between Brookfield and APA.

Europe

European stocks are mostly higher on Wednesday, with traders building up positions, shrugging off concerns about Chinese real estate major Evergrande's financial woes and looking ahead to the Federal Reserve's policy announcement.

While the German DAX Index has advanced by 0.7 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are up by 1.2 percent and 1.3 percent, respectively.

In the U.K., Entain Plc shares are surging, benefiting from an announcement from the company that it has received a $22.4 billion takeover proposal from U.S.-based DraftKings.

Antofagasta, HSBC Holdings, Standard Chartered, Glencore, Flutter Entertainment, Anglo Americal Plc, Prudential, Barclays Group, Lloyds Banking Group and BHP are also posting notable gains.

Kingfisher has moved to the downside, extending losses from the previous session. Severn Trent, AstraZeneca and Auto Trader Group are also notably lower.

In the French market, ArcelorMittal, Renault, BNP Paribas, Credit Agricole, Societe Generale, Technip and Valeo are posting strong gains. Kering, Vivendi, Accor, Publicis Groupe, Schneider Electric and Air France-KLM are also up sharply.

In Germany, Deutsche Bank, Daimler, Volkswagen, BMW, Allianz, HeidelbergCement, Munich RE, Bayer, Sartorius and Siemens are notably higher.

Data from Swiss National Bank showed Switzerland's current account surplus widened to CHF 10.51 billion in the June quarter of 2021, from CHF 3.21 billion in the same period last year.

The Swiss National Bank is scheduled to announce its rate decision on Thursday. The Bank of England's monetary policy announcement is also due tomorrow.

U.S. Economic Reports

The National Association Of Realtors is scheduled to release its report on existing home sales in the month of August at 10 am ET. Existing home sales are expected to drop to an annual rate of 5.89 million in August from 5.99 million in July.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended September 17th.

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

Stocks In Focus

Shares of Stitch Fix (SFIX) are moving sharply higher in pre-market trading after the online shopping and styling service reported an unexpected fourth quarter profit on revenues that exceeded analyst estimates.

Online personal finance company SoFi (SOFI) is also likely to see initial strength after Jefferies initiated coverage of the company’s stock with a Buy rating.

On the other hand, shares of FedEx (FDX) may come under pressure after the delivery giant reported weaker than expected fiscal first quarter earnings.

Software company Adobe (ADBE) is also seeing pre-market weakness despite reporting fiscal third quarter results that beat analyst estimates on both the top and bottom lines.
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