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Beyond the Numbers

Futures Pointing To Higher Open Ahead Of Powell Testimony
1/11/2022 8:50 AM

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to extend the recovery from the sell-off seen early in the previous session.

The markets may continue to benefit from bargain hunting, which helped stocks rebound from a rocky start to the New Year.

The tech-heavy Nasdaq showed a notable turnaround during trading on Monday after hitting its lowest intraday level in almost three months.

A decrease in Treasury yields may also contribute to initial strength on Wall Street, with the ten-year yield continuing to give back ground after reaching its highest intraday level since January of 2020.

Early trading activity may be somewhat subdued, however, as traders keep an eye on the Senate Banking Committee’s hearing on Federal Reserve Chair Jerome Powell’s nomination for another term.

In prepared remarks, Powell highlighted elevated inflation as a result of supply chain issues and said the Fed would use all of its tools to prevent higher inflation from becoming entrenched.

“We can begin to see that the post-pandemic economy is likely to be different in some respects,” Powell said. “The pursuit of our goals will need to take these differences into account.”

He added, “To that end, monetary policy must take a broad and forward-looking view, keeping pace with an ever-evolving economy.”

The question-and-answer portion of the hearing is likely to attract attention, although Powell is unlikely to make definitive statements about the outlook for monetary policy.

Following an early sell-off, stocks showed a notable rebound over the course of the trading session on Monday. The major averages climbed well off their worst levels of the day, with the Nasdaq reaching positive territory.

The Nasdaq tumbled by as much as 2.7 percent in early trading but ended the day up 6.93 points or 0.1 percent at 14,942.83. Meanwhile, the S&P 500 edged down 6.74 points or 0.1 percent at 4,670.29 and the Dow fell 162.79 points or 0.5 percent at 36,068.87.

The early weakness on Wall Street reflected lingering concerns about the economic impact of the Omicron variant of the coronavirus and the likelihood the Federal Reserve will raise interest rates in the near future.

Treasury yields have moved sharply higher in recent sessions, with the yield on the benchmark ten-year note reaching its highest levels since January of 2020.

The jump in yields comes amid a more hawkish tone from the Fed, as the minutes of the central bank's latest meeting indicated it plans to accelerate monetary policy normalization.

Worries about higher rates led to particular weakness among high-growth tech stocks, dragging the tech-heavy Nasdaq down to its lowest intraday level in almost three months.

The subsequent recovery by the markets may have reflected bargain hunting, with Treasury yields pulling back off their highs also contributing to the rebound.

The volatility seen over the course of the day also came as traders look ahead to key inflation data as well as a Senate hearing on Fed Chair Jerome Powell's renomination.

Despite the rebound by the broader markets, airline stocks continued to see significant weakness on the day, resulting in a 1.7 percent drop by the NYSE Arca Airline Index.

Considerable weakness also remains visible among steel stocks, as reflected by the 1.2 percent decline by the NYSE Arca Steel Index.

Retail and telecom stocks also ended the day notably lower, while gold stocks showed a strong move to the upside amid a modest increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are jumping $0.91 to $79.14 a barrel after sliding $0.67 to $78.23 a barrel on Monday. Meanwhile, after inching up $1.40 to $1,798.80 an ounce in the previous session, gold futures are inching rising $7.70 to $1,806.50 an ounce.

On the currency front, the U.S. dollar is trading at 115.60 yen compared to the 115.20 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1330 compared to yesterday’s $1.1326.

Asia

Asian stocks ended broadly lower on Tuesday amid continuing worries about the Omicron coronavirus and an earlier-than-expected U.S. interest rate hike.

Investors looked for clues to the timing of expected policy tightening when Fed Chair Powell makes his appearance before the Senate Banking Committee later in the day. Upcoming U.S. December consumer inflation data was also on investors' radar.

Chinese shares retreated as investors grappled with an uptick in Covidd-19 cases in the country. The benchmark Shanghai Composite Index dropped 26.08 points, or 0.7 percent, to 3,567.44, while Hong Kong's Hang Seng Index finished marginally lower at 23,739.06.

Japanese shares fell sharply on worries that the normalization of U.S. monetary policy might be brought forward to fight inflation. The Nikkei 225 Index slid 256.08 points, or 0.9 percent, to 28,222.48, while the broader Topix closed 0.4 percent lower at 1,986.82.

Nippon Paint Holdings shares plummeted 12.3 percent after the company said it will offer up to 203 billion yen ($1.8 billion) of its shares in an overseas sale.

Australian markets ended notably lower, with retailers underperforming as the country's Covid-19 infections hovered near record levels.

The benchmark S&P/ASX 200 Index dropped 57 points, or 0.8 percent, to 7390.10, extending losses for the second consecutive session. The broader All Ordinaries Index ended down 55.40 points, or 0.7 percent, at 7,710.70.

Supermarket chains Woolworths and Coles fell more than 2 percent each, while Wesfarmers declined 1.4 percent despite retail sales surging past forecasts for a second month in November.

Banks also fell broadly, with ANZ and Commonwealth losing 1.3 percent and 1.5 percent, respectively. Higher bullion prices helped lift gold miners, with Evolution climbing 2.7 percent and Northern Star Resources adding 1.9 percent.

Seoul stocks fluctuated before finishing marginally higher ahead of the Fed chief's renomination hearing and U.S. inflation data. Investors also awaited the Bank of Korea's monetary policy decision this week for directional cues.

Chip giants Samsung Electronics and SK Hynix rose 1.2 percent and 2.8 percent, respectively, while LG Chem climbed 3.4 percent.

South Korean exports jumped an annual 24.4 percent in the January 1-10 period, helped by strong demand for semiconductors, petrochemical goods and cars, data showed earlier in the day.

Europe

European stocks have rebounded after three days of losses on Tuesday, as Treasury yields pulled back from two-year highs ahead of Federal Reserve Chair Powell's testimony and U.S. inflation data.

While the U.K.’s FTSE 100 Index has risen by 0.6 percent, the French CAC 40 Index is up by 1 percent and the German DAX Index is up by 1.1 percent.

Tech stocks have shown a notable rebound, with Infineon Technologies and ASM International posting strong gains.

Delivery Hero SE shares have also soared. The German online food ordering company said it expects its food delivery business to break even during the second half of 2022.

HelloFresh has also rallied after the meal-kit delivery firm announced a share buyback program of up to 250 million euros.

Evotec AG, a drug discovery and development company, has also surged after saying it has expanded its neurodegeneration collaboration with Bristol Myers Squibb (BMY) to include a new targeted protein degradation approach.

Swiss building materials maker Holcim Group has also jumped. The company has inked a deal to acquire French manufacturer of specialty building solutions PRB Group.

Construction chemicals maker Sika AG has also moved sharply higher after reporting a 17.3 percent increase in 2021 sales.

French rolling stock maker Alstom SA has also risen after it signed a 1.8 billion euros framework contract with Norske Tog AS, a provider of transit services, to supply up to 200 Coradia Nordic regional trains in Norway.

Technip Energies has also soared. The company has agreed to acquire 1.8 million of its own ordinary shares from TechnipFMC plc.

Vitec has also moved higher on London. The provider of hardware products and software services said that it expects 2021 adjusted pretax profit, revenue and net debt to be in line with market consensus.

Meanwhile, Deutsche Bank has fallen after U.S. financial investor Cerberus reduced its stakes in both Deutsche Bank and Commerzbank. Shares of the latter have also dropped.

Building materials supplier SIG has also declined. The company swung to an underlying operating profit in 2021 and said it has strong momentum going into 2022.

In economic news, U.K. retail sales grew 2.1 percent on a yearly basis in December despite the recent Omicron outbreak, data released by the British Retail Consortium revealed. For the whole year of 2021, retail sales were up 9.9 percent.

U.S. Economic Reports

Kansas City Federal Reserve Bank President Esther George is scheduled to speak on the economic and monetary policy outlook before a Central Exchange in-person event at 9:30 am ET.

At 10 am ET, the Senate Banking Committee is due to hold a hearing on Jerome Powell’s nomination for another term as Federal Reserve Chair

The Treasury Department is scheduled to announce the results of this month’s auction of $52 billion worth of three-year notes at 1pm ET.

Stocks In Focus

Shares of Accolade (ACCD) are moving sharply higher in pre-market trading after the workplace benefits technology company reported better than expected fiscal third quarter results and raised its full-year revenue guidance.

Biotechnology company Illumina (ILMN) is also likely to see initial strength after forecasting 2022 revenue above analyst estimates due to strong demand for its genetic sequencing products.

Shares of Juniper Networks (JNPR) may also move to the upside after BofA Securities upgraded its rating on the networking company’s stock to Buy from Underperform.

On the other hand, shares of Rivian (RIVN) are seeing pre-market weakness after the electric vehicle maker revealed Chief Operating Officer Rod Copes has left the company.

Tech giant IBM Corp. (IBM) may also move to the downside after UBA downgraded its rating on the company’s stock to Sell from Neutral.
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