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Beyond the Numbers

Futures Pointing To Mixed Open On Wall Street
3/11/2019 9:02 AM

The major U.S. index futures are pointing to a mixed opening on Monday following the pullback seen by the major averages last week.

A steep drop by shares of Boeing (BA) is likely to weigh on the Dow, as the aerospace giant is plunging by more than 10 percent in pre-market trading.

Boeing is under pressure following the crash of Ethiopian Airlines Flight 302, which is the second crash in five months involving the company’s 737 Max 8 model.

Meanwhile, the broader Nasdaq and S&P 500 may move to the upside following the release of a report from the Commerce Department showing an unexpected uptick in U.S. retail sales in January.

After an initial move to the downside, stocks staged a few recovery attempts over the course of the trading session on Friday. The major averages rallied going into the close of trading but still ended the day modestly lower.

The Dow edged down 22.99 points or 0.1 percent to 25,450.24, the Nasdaq dipped 13.32 points or 0.2 percent to 7,408.14 and the S&P 500 slipped 5.86 points or 0.2 percent to 2,743.07. With the drop, the major averages extended the pullback seen over the past few sessions.

For the week, the Dow and the S&P 500 both slumped by 2.2 percent, while the tech-heavy Nasdaq tumbled by 2.5 percent.

The initial weakness on Wall Street came after a report from the Labor Department revealed job growth nearly ground to a halt in February after soaring in January.

The Labor Department said non-farm payroll employment edged up by 20,000 jobs in February after jumping by an upwardly revised 311,000 jobs in January.

Economists had expected employment to increase by about 180,000 jobs compared to the spike of 304,000 jobs originally reported for the previous month.

The much weaker than expected job growth in February represented the worst month since the loss of 18,000 jobs in September of 2017, when employment was impacted by Hurricanes Harvey and Irma.

However, FTN Financial Chief Economist Chris Low said the stark contrast between the January and February data suggests a "seasonal adjustment breakdown rather than a change in economic performance."

"The three month average, 186k, is respectable, and far more realistic than either the 311k rise in January or the 20k rise in February," Low said.

The report also showed the unemployment rate dropped to 3.8 percent in February from 4.0 percent in January, while the annual rate of wage growth accelerated to 3.4 percent from 3.1 percent.

The jobs data largely overshadowed a separate report from the Commerce Department showing a substantial rebound in housing starts in January.

The report said housing starts soared by 18.6 percent to an annual rate of 1.230 million in January after plunging by 14.0 percent to a revised rate of 1.037 million in December.

Economists had expected housing starts to jump by 11 percent to a rate of 1.197 million from the 1.078 million originally reported for the previous month.

The Commerce Department said building permits also rose by 1.4 percent to an annual rate of 1.345 million in January after inching up by 0.3 percent to 1.326 million in December.

Building permits, an indicator of future housing demand, had been expected to drop by 2.8 percent to a rate of 1.289 million.

Concerns about the global economy also weighed on the markets after the European Central Bank downgraded its GDP forecasts and China reported weaker than expected trade data for February.

Energy stocks saw substantial weakness on the day amid a drop by the price of crude oil amid concerns about global demand.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 3 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index tumbled by 2.6 percent and 2.2 percent, respectively.

Concerns about global demand also weighed on the steel sector, as reflected by the 1.7 percent slump by the NYSE Arca Steel Index.

Meanwhile, gold stocks moved sharply higher over the course of the session amid a jump by the price of the precious metal, with the NYSE Arca Gold Bugs Index spiking by 3.5 percent.

Commodity, Currency Markets

Crude oil futures are rising $0.36 to $56.43 a barrel after sliding $0.59 to $56.07 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,295.50, down $3.80 from the previous session’s close of $1,299.30. On Friday, gold jumped $13.20.

On the currency front, the U.S. dollar is trading at 111.12 yen compared to the 111.17 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1240 compared to last Friday’s $1.1235.

Asia

Asian stocks turned in a mixed performance on Monday as global growth worries offset hopes for policy support from China.

U.S. job growth almost halted in February and new bank loans in China fell sharply last month, adding to concerns over cooling global growth.

Investors also awaited a crucial vote on U.K. Prime Minister Theresa May's revised Brexit deal on Tuesday for directional cues.

Chinese stocks rebounded from heavy losses in the previous session after central bank governor Yi Gang said Beijing would not use the yuan exchange rate as a tool to boost exports or ease trade frictions.

The benchmark Shanghai Composite Index rallied 57.13 points or 1.92 percent to 3,026.99, while Hong Kong's Hang Seng Index jumped 274.88 points or 1 percent to finish at 28,503.30.

Japanese shares bounced back from four days of losses as investors looked ahead to the Bank of Japan policy meeting later this week.

The Nikkei 225 Index rose 99.53 points or 0.5 percent to 21,125.09, while the broader Topix ended up by 0.6 percent at 1,581.44.

Automakers Honda Motor, Toyota, Mitsubishi Motors and Nissan Motor gained between 0.7 percent 1.1 percent as the dollar remained strong above the 111.00 yen threshold.

Nissan Motor, Renault and Mitsubishi Motors will create a new decision-making body to discuss business collaboration across the three-way alliance, replacing a setup that concentrated power in former chief Carlos Ghosn, Nikkei Asian Review reported.

Hitachi Chemical soared 20 percent after Kyodo news reported that parent company Hitachi was considering a sale of its stake at a hefty premium of more than 40 per cent.

Meanwhile, Australian markets fell, dragged down by energy stocks after crude oil prices fell 1 percent on Friday on weak data from China and the U.S. The European Central Bank's surprising dovish stance also fueled growth concerns.

The benchmark S&P/ASX 200 Index dropped 23.60 points or 0.4 percent to 6,180.20, while the broader All Ordinaries Index ended down 23.80 points or 0.4 percent at 6,263.30.

Energy stocks such as Woodside Petroleum, Oil Search and Santos lost around 2 percent. The big four banks ended largely unchanged after CEOs from several major banks faced questioning in parliament.

Weak copper prices weighed on the mining sector, with heavyweights BHP and Rio Tinto losing 1 percent and 0.7 percent, respectively.

Gold miner Newcrest Mining rallied 3.8 percent after it agreed to buy a copper and gold mine in Canada for $806.5 million. Rivals Northern Star and Evolution Mining jumped over 4 percent after a surge in gold prices.

Appen entered a trading halt. The artificial intelligence firm is launching a A$300 million capital raising to fund the acquisition of U.S.-based machine learning software firm Figure Eight.

Seoul stocks fluctuated before ending largely unchanged amid growth worries. The benchmark Kospi edged up by 0.66 point to 2,138.10, snapping a six-session losing streak. Cosmetics maker AmorePacific slumped 4.6 percent and oil refiner S-Oil gave up 4 percent.

Europe

European stocks have moved mostly higher on Monday, as media reports suggesting Deutsche Bank has begun tentative merger talks with rival Commerzbank helped investors shrug off global growth worries.

Traders also reacted positively to comments from Federal Reserve Chairman Jerome Powell that interest rates are currently "appropriate" and "roughly neutral.”

While the French CAC 40 Index has edged up by 0.2 percent, the German DAX Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.

After failing to secure significant concessions from the European Union in the latest round of talks and with just two cabinet ministers backing her, U.K. Prime Minister Theresa May is facing increasing pressure to resign, the Telegraph reported.

It is believed that Tuesday's vote on her Brexit deal could result in an even worse humiliation.

Deutsche Bank has jumped amid reports that its top executives have agreed to hold discussions with rival Commerzbank AG about a potential merger. Commerzbank shares have also rallied.

Charter Court Financial and OneSavings Bank have also moved sharply higher after the two U.K. challenger banks said they are in advanced discussions regarding a possible all-share combination of the two companies.

Provident Financial has also moved to the upside. The company reiterated that Non-Standard Finance's nil-premium offer is strategically and financially flawed and presents significant risk in terms of both execution and shareholder value.

Meanwhile, aerospace group Safran has fallen in Paris after a Boeing 737 MAX plane operated by Ethiopian Airlines crashed.

Clarkson has also slumped in London after its fiscal 2018 pre-tax profit declined to 42.9 million pounds from 45.4 million pounds in the previous year.

In economic news, German industrial production unexpectedly decreased in January, while exports were unchanged, underpinned mainly by demand from outside the European Union, preliminary data showed.

Industrial production decreased 0.8 percent month-on-month in January, while economists had predicted a 0.5 percent gain.

A 9.2 percent slump in the automobile industry influenced the January outcome, the Economy Ministry said.

U.S. Economic Reports

A report released by the Commerce Department on Monday showed a modest increase in U.S. retail sales in the month of January.

The Commerce Department said retail sales rose by 0.2 percent in January after tumbling by a revised 1.6 percent in December.

Economists had expected retail sales to come in unchanged compared to the 1.2 percent slump originally reported for the previous month.

Excluding a steep drop in auto sales, retail sales climbed by 0.9 percent in January after plummeting by a revised 2.1 percent in December.

Ex-auto sales had been expected to increase by 0.3 percent compared to the 1.8 percent plunge originally reported for the previous month.

At 10 am ET, the Commerce Department is scheduled to release a separate report on business inventories in the month of December. Inventories are expected to climb by 0.6 percent.

The Treasury Department is due to announce the results of its auction of $38 billion worth of three-year notes at 1 pm ET.

Federal Reserve Chairman Jerome Powell is scheduled to give videotaped welcoming remarks at the National Community Reinvestment Coalition's Just Economy Conference in Washington, D.C. at 7 pm ET.
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