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Beyond the Numbers

Uncertainty May Lead To Choppy Trading On Wall Street
6/29/2022 8:52 AM

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the sell-off seen over the course of the previous session.

Uncertainty about the near-term outlook for the markets may keep some traders on the sidelines following recent volatility on Wall Street.

The sharp pullback during trading on Tuesday came on the heels of the strong upward move seen last week, which in turn reflected a rebound from the sell-off seen earlier this month.

Traders may also be reluctant to make significant moves ahead of remarks by Federal Reserve Chair Jerome Powell.

Powell is due to participate in an economic policy panel discussion at the European Central Bank Forum on Central Banking alongside ECB President Christine Lagarde and Bank of England Governor Andrew Baile.

Stocks showed a substantial move to the downside during trading on Tuesday, coming under pressure after failing to sustain an early upward move. The major averages all moved notably lower, with the tech-heavy Nasdaq posting a particularly steep loss.

The major averages finished the session just off their worst levels of the day. The Dow tumbled 491.27 points or 1.6 percent to 30,936.99, the Nasdaq plummeted 343.01 points or 3 percent to 11,181.54 and the S&P 500 plunged 78.56 points or 2 percent to 3,821.55.

The initial strength on Wall Street partly reflected a positive reaction to news that China has cut quarantine times for international travelers in a big step toward easing Covid-19 controls.

The news contributed to strength among travel and casino stocks, with Wynn Resorts (WYNN) and Las Vegas Sands (LVS) showing significant moves to the upside.

Banking stocks also saw early strength after several financial giants, including Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC) and Wells Fargo (WFC), raised their dividends after passing the Federal Reserve's annual stress tests.

Buying interest waned shortly after the start of trading, however, with lingering concerns about a potential recession continuing to weigh on the markets.

Negative sentiment may also have been generated in reaction to a report from the Conference Board showing U.S. consumer confidence deteriorated to its lowest level in over a year in June.

The Conference Board said its consumer confidence index slid to 98.7 in June from a downwardly revised 103.2 in May. Economists had expected the index to drop to 101.0 from the 106.4 originally reported for the previous month.

With the continued decrease, the consumer confidence index fell to its lowest level since hitting 95.2 in February of 2021.

Retail stocks moved sharply lower following the disappointing consumer confidence reading, dragging the Dow Jones U.S. Retail Index down by 4 percent.

Substantial weakness also emerged among computer hardware stocks, as reflected by the 2.9 percent nosedive by the NYSE Arca Computer Hardware Index.

Gold stocks also saw considerable weakness amid a modest decrease by the price of the precious metal, with the NYSE Arca Gold Bugs Index plunging by 2.7 percent.

Semiconductor, biotechnology, networking and telecom stocks also showed notable moves to the downside, while energy stocks bucked the downtrend amid a surge by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are jumping $1.73 to $113.49 a barrel after surging $2.19 to $111.76 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,832.30, up $11.10 compared to the previous session’s close of $1,821.20. On Tuesday, gold dipped $3.60.

On the currency front, the U.S. dollar is trading at 136.38 yen compared to the 136.14 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0517 compared to yesterday’s $1.0519.

Asia

Asian stocks fell on Wednesday as investors fretted over high inflation and the possibility of a recession. Risk-off sentiment boosted the safe-haven dollar, while crude prices declined after a three-day rally.

Chinese shares fell sharply, with the benchmark Shanghai Composite Index ending 1.40 percent lower at 3,361.52.

Hong Kong's Hang Seng index tumbled 1.9 percent to 21,996.89 amid much uncertainty about whether a recession can be averted.

Japanese shares closed lower on fears that high inflation could cause the U.S. economy to slow significantly in the second half of the year.

The Nikkei 225 Index dropped 0.9 percent to 26,804.60, snapping a four-day rally despite upbeat retail sales data released earlier in the day. The broader Topix ended 0.7 percent lower at 1,893.57.

Tech stocks followed their U.S. peers lower, with SoftBank, Advantest and Tokyo Electron losing 1-3 percent. Tokyo Electric Power Holdings surged 5.3 percent after Prime Minister Fumio Kishida called for maximum possible use of nuclear power to supply electricity.

Seoul stocks tumbled after a survey showed consumer confidence in South Korea took a hit in June. The Kospi slid 1.8 percent to 2,377.99 to snap a three-day winning streak.

Hyundai Motor plunged 5.7 percent and its affiliate Kia Corp. slumped 6.1 percent following reports of raids at their business premises in Germany and Luxembourg over the use of suspected illegal defeat devices.

Tech heavyweights SK Hynix and Samsung Electronics fell 1.4 percent and 2.4 percent, respectively.

Battery giant LG Energy Solution plummeted 4.6 percent after a report that the company is reconsidering its 1.7 trillion-won (US$1.31 billion) plan to build a new battery plant in the U.S. state of Arizona.

Australian markets ended off their day's lows after retail sales figures for May beat expectations. The benchmark S&P ASX 200 Index fell 0.9 percent to 6.700.20, declining for the first time in four sessions.

The broader All Ordinaries Index closed 1.1 percent lower at 6,877.90. Real estate and tech stocks underperformed, while banks ANZ, NAB and Westpac all ended up around 1 percent.

Europe

European stocks have fallen on Wednesday following a three-day rally. A cautious undertone has prevailed ahead of remarks by European Central Bank President Christine Lagarde at the Sintra forum, alongside Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Baile.

In economic news, Eurozone's final consumer confidence index arrived at -23.6 in June, unchanged from the -23.6 recorded previously and matching estimates.

U.K. shop prices grew at the fastest pace since 2008, reflecting the cost of living crisis, separate data published by the British Retail Consortium showed.

The BRC-NielsenIQ shop price index increased 3.1 percent on a yearly basis in June following May's 2.8 percent jump. This was the fastest annual growth since September 2008.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the French CAC 40 Index and the German DAX Index are down by 1.1 percent and 1.3 percent, respectively.

Capita has shown a notable move to the downside. The outsourcing business said that revenue for the first half of the year was in line with expectations.

EssilorLuxottica shares have also declined. Leonardo Del Vecchio, the chairman of the eyeglass retailer and one of Italy's wealthiest business figures, passed away at the age of 87.

Hornbach Baumarkt, a DIY-store chain, has also tumbled after reporting a decline in earnings for the first quarter.

On the other hand, budget footwear retailer Shoe Zone has surged after providing a positive trading update.

Discount retailer B&M European Value Retail has also advanced despite reporting a drop in sales in the first quarter.

U.S. Economic Reports

Revised data released by the Commerce Department on Wednesday showed U.S. economic activity shrank by slightly more than previously estimated in the first quarter of 2022.

The report showed the decrease in real gross domestic product in the first quarter was revised to 1.6 percent from the previously reported 1.5 percent. Economists had expected the drop in GDP to be unrevised.

The slightly bigger than previously estimated decline in GDP in the first quarter came on the heels of the 6.9 percent spike in GDP in the fourth quarter of 2021.

At 9 am ET, Federal Reserve Chair Jerome Powell is due to participate in an economic policy panel discussion before the European Central Bank Forum on Central Banking.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended June 24th at 10:30 am ET. The release will include data for the week ended June 17, which was delayed due to technical issues.

Stocks In Focus

Shares of Bed Bath & Beyond (BBBY) are moving sharply lower in pre-market trading after the housewares retailer reported a wider than expected fiscal first quarter loss and announced the departure of CEO Mark Tritton.

Spice maker McCormick (MCK) may also come under pressure after reporting weaker than expected fiscal second quarter results and lowering its full-year earnings guidance.

On the other hand, shares of General Mills (GIS) are likely to move to the upside after the food producer reported fiscal fourth quarter results that beat analyst estimates on both the top and bottom lines and raised its quarterly dividend.
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