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Beyond the Numbers

Choppy Trading May Persist On Wall Street Ahead Of Fed Minutes
10/13/2021 8:54 AM

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to extend the lackluster performance seen in the previous session.

Traders may be reluctant to make 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 September meeting may shed additional light on the central bank’s plans to scale back its asset purchases.

The markets are also digesting a report from the Labor Department showing consumer prices in the U.S. increased by slightly more than anticipated in the month of September.

On the earnings front, shares of JPMorgan Chase (JPM) are moving modestly higher in pre-market trading after the financial giant reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Asset management firm Blackrock (BLK) is also likely to see initial strength after reporting better than expected third quarter earnings and revenues.

Meanwhile, shares of Delta Air Lines (DAL) may move to the downside after the airline beat third quarter estimates but warned of a fourth quarter loss due to higher fuel costs.

Following the downturn seen over the course of Monday’s session, stocks showed a lack of direction throughout the trading day on Tuesday. The major averages spent most of the session lingering near the unchanged line.

The major averages eventually ended the day modestly lower. The Dow dipped 117.72 points or 0.3 percent to 34,378.34, the Nasdaq edged down 20.28 points or 0.1 percent to 14,465.93 and the S&P 500 slipped 10.54 points or 0.2 percent to 4,350.65.

The choppy trading on Wall Street came as traders expressed some uncertainty about the outlook for the markets following the volatility seen throughout early October.

Concerns about inflation and the Federal Reserve scaling back stimulus as early as next month continued to weigh on the markets.

Earnings news was also on traders' minds, with financial giants Bank of America (BAC), Citigroup (C), Morgan Stanley (MS), Wells Fargo (WFC), and Goldman Sachs (GS) due to report their quarterly results in the coming days.

On the U.S. economic front, the Labor Department released a report showing job openings dropped to 10.4 million in August from an upwardly revised 11.1 million in July.

Among individual stocks, shares of MGM Resorts (MGM) showed a strong move to the upside after Credit Suisse upgraded its rating on the resort operator's stock to Outperform from Neutral.

Airbnb (ABNB) also moved notably higher after Cowen upgraded its rating on the vacation rental company to Outperform from Market Perform.

Meanwhile, shares of CureVac (CVAC) fell sharply after the biopharmaceutical company said it would halt development of its first-generation COVID-19 vaccine candidate.

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

Gold stocks turned in a strong performance, however, with the NYSE Arca Gold Bugs Index surging up by 2.5 percent. The rally by gold stocks came amid a modest increase by the price of the precious metal.

Notable strength was also visible among commercial real estate stocks, as reflected by the 1.4 percent gain posted by the Dow Jones U.S. Real Estate Index.

On the other hand, computer hardware and semiconductor stocks came under pressure, dragging the NYSE Arca Computer Hardware Index and the Philadelphia Semiconductor Index down by 1.4 percent and 1.3 percent, respectively.

Commodity, Currency Markets

Crude oil futures are falling $0.55 to $80.09 a barrel after inching up $0.12 to $80.64 barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,763.60, up $4.30 compared to the previous session’s close of $1,759.30. On Tuesday, gold rose $3.60.

On the currency front, the U.S. dollar is trading at 113.65 yen compared to the 113.61 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1543 compared to yesterday’s $1.1530.

Asia

Asian stocks ended mixed on Wednesday after data showed Chinese exports hitting a record high in September despite power shortages.

A cautious undertone prevailed as traders awaited U.S. consumer price data due later in the day for clues on the outlook for the Federal Reserve’s monetary policy. A strong reading could raise bets of earlier than expected interest rate hikes by the U.S. central bank.

Chinese shares fluctuated before closing higher as positive exports data offset worries of spreading debt contagion. The benchmark Shanghai Composite Index rose 14.83 points, or 0.4 percent, to 3,561.76. Trading in Hong Kong was suspended as a typhoon passed south of the city.

Japanese shares ended a tad lower after data showed core machinery orders in the country unexpectedly fell in August, underlining persistent pressure on businesses and the broader economy.

The Nikkei 225 Index dipped 90.33 points, or 0.3 percent, to 28,140.28, while the broader Topix closed 0.5 percent lower at 1,973.83.

J. Front Retailing shares soared 8.6 percent as the department store operator returned to a net profit in the quarter to August after two quarters of losses. Similarly, film maker Toho rallied 3.9 percent after reporting a jump in profits.

Shipping firms, steelmakers and semi-conductor companies all ended sharply lower after the IMF warned that threats to the global economic recovery are growing. Nippon Paint plunged 7.1 percent after cutting its earnings guidance.

Australian markets fell for a third consecutive session as a plunge in Dalian prices pulled down miners. The benchmark S&P/ASX 200 Index slipped 8.20 points, or 0.1 percent, to 7,272.50, while the broader All Ordinaries Index ended marginally lower at 7,571.90.

BHP dropped 1 percent, Fortescue Metals Group slumped 5.3 percent and Rio Tinto lost 3.2 percent. Second-tier lender Bank of Queensland gave up 4.3 percent after warning of a decline in margins in the coming year.

Gambling giant Star Entertainment jumped 6.5 percent on bargain hunting after suffering heavy losses in the previous two sessions.

Seoul stocks rose sharply as investors sought to buy oversold tech and auto stocks after a sharp plunge the previous session. The benchmark Kospi surged up 28.03 points, or 1 percent, to close at 2,944.41. Internet portal operator Naver climbed 2.7 percent and top automaker Hyundai Motor added 3.2 percent.

Europe

European stocks have moved mostly higher over the course of the trading day on Wednesday after China released positive trade figures.

While the German DAX Index has advanced by 0.8 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Chinese export growth unexpectedly accelerated in September, providing some relief to those worried about a slowdown in the world's second-largest economy.

Closer to home, Eurostat data released earlier in the day showing Eurozone industrial production fell in August due to supply-chain bottlenecks and slowing global trade.

U.K. gross domestic product grew 0.4 percent month-on-month in August, slightly slower than economists' forecast of 0.5 percent.

GDP growth for July was revised from 0.1 percent growth to a 0.1 percent fall, mainly because of downwardly revised data for the manufacture of motor vehicles, oil and gas, and improvements to how health output is measured.

In stock-specific news, online food ordering company Just Eat Takeaway.com N.V. has tumbled after delivering weaker than expected third-quarter orders.

Hannover Re has also declined. The re-insurance company said it is committing to achieve net zero emissions in business operations by 2030 and in its reinsurance portfolio and investments by 2050.

Meanwhile, SAP has jumped after the German software group said it is seeing strong growth in current cloud backlog across its cloud portfolio.

Apple suppliers STMicroelectronics, Infineon Technologies and AMS are moving higher despite a Bloomberg report that Apple is likely to slash production of its iPhone 13 by as many as 10 million units due to the global chip shortage.

Luxury goods maker LVMH has also risen after announcing improved earnings for the third quarter, with 40 percent organic revenue growth across its brands compared to 2020.

Man Group shares have spiked percent in London. The active management business reported a further increase in funds under management in the third quarter, driven by very strong net inflows and solid investment performance.

Barratt Developments has also moved notably higher. While issuing a trading update for the period from July 1 to October 10, 2021, the housebuilder said the positive start to the new fiscal year has continued in recent weeks with private reservations remaining strong. The Group remains on track to deliver both its fiscal 2022 and medium-term targets.

U.S. Economic Reports

Consumer prices in the U.S. increased by slightly more than anticipated in the month of September, according to a report released by the Labor Department on Wednesday.

The Labor Department said its consumer price index climbed by 0.4 percent in September after rising by 0.3 percent in August. Economists had been expecting another 0.3 percent increase.

The stronger than expected price growth partly reflect higher prices for food and energy, which jumped by 0.9 percent and 1.3 percent, respectively.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in September after inching up by 0.1 percent in August. The uptick in core prices matched economist estimates.

A 0.4 percent increase in prices for shelter contributed to the core price growth along with higher prices for new vehicles, household furnishings and operations, and motor vehicle insurance.

Meanwhile, the Labor Department said prices for airline fares, apparel, and used cars and trucks all declined over the month.

The report also showed the annual rate of growth in consumer prices accelerated to 5.4 percent in September from 5.3 percent in August, while the annual rate of growth in core prices was unchanged at 4.0 percent.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $24 billion worth of thirty-year bonds.

The Federal Reserve is scheduled to release the minutes of its latest monetary policy meeting held September 21st and 22nd at 2 pm ET.

At 3:30 pm ET, Federal Reserve Governor Lael Brainard is due to speak on Engaging Tribal Leaders on Financial Inclusion and the Economic Challenges of the Pandemic before a hybrid virtual Fed Listens: Roundtable with Oklahoma Tribal Leaders.

Federal Reserve Governor Michelle Bowman is scheduled to speak on Monetary Policy Making and the Economic Outlook before the Dykhouse Scholar Program Speakers Series in Money, Banking, and Regulation at 8 pm ET.

Stocks In Focus

Shares of Plug Power (PLUG) are moving sharply higher in pre-market trading after the hydrogen fuel cell maker announced a strategic partnership with Airbus to study the feasibility of bringing green hydrogen to future aircraft and airports worldwide.

Video software company Vimeo (VMEO) is also likely to see initial strength after reporting a 33 percent year-over-year spike in revenues in the month of September.

On the other hand, shares of Sarepta Therapeutics (SRPT) may come under pressure after forecasting third quarter revenues below analyst estimates and announcing a $500 million stock offering.

Sun Country Airlines (SNCY) is also seeing pre-market weakness after the announcing a public offering of 8 million shares of its common stock by certain of its existing shareholders.
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