Futures Pointing To Initial Weakness On Wall Street Ahead Of Powell Testimony

The major U.S. index futures are currently pointing to a lower open on Tuesday, with technology stocks likely to lead the way to the downside.

Concerns about the outlook for inflation and the potential for higher interest rates may continue to weigh on the markets due to the recent increase in bond yields.

The yield on the benchmark ten-year note is currently hovering near the one-year closing high set in the previous session.

Traders are likely to keep a close eye on testimony by Federal Reserve Chair Jerome Powell, who is due to appear before a virtual Senate Banking Committee hearing.

Powell is likely to reiterate that the Fed plans to maintain easy monetary policy for the foreseeable future as the economy continues to recover from the coronavirus pandemic.

However, traders may pay closer attention to any comments Powell makes regarding the outlook for inflation due to recent signs of price growth.

The Fed has recently signaled that it is not concerned about inflation, suggesting that inflation should exceed its 2 percent target for some time before the central bank considers raising interest rates.

A notable decline by shares of Tesla (TSLA) may weigh on the tech-heavy Nasdaq, with the electric car maker tumbling by 5.4 percent in pre-market trading.

Tesla is extending the steep drop seen in the previous session after Wedbush analyst Daniel Ives told CNBC the company’s share price is now directly linked to the price of bitcoin after its $1.5 billion investment in the cryptocurrency.

Dow component Home Depot (HD) is also seeing pre-market weakness after the home improvement retailer reported better than expected fourth quarter results but declined to provide guidance due to uncertainty related to the COVID-19 pandemic.

Stocks moved mostly lower during trading on Monday, with the tech-heavy Nasdaq showing a particularly steep drop. The S&P 500 also ended the day firmly in negative territory, while the narrower Dow closed slightly higher.

After falling by more than 200 points in early trading, the Dow edged up 27.37 points or 0.1 percent to 31,521.69. Meanwhile, the Nasdaq plunged 341.42 points or 2.5 percent to 13,533.05 and the S&P 500 slid 30.21 points or 0.8 percent to 3,876.50.

The steep drop by the Nasdaq came as traders moved out of technology stocks amid concerns about the impact of the recent increase in treasury yields.

Electric car maker Tesla (TSLA) plummeted by 8. Percent, while big-name tech companies like Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) also posted steep losses.

The sell-off came as the yield on the benchmark ten-year note saw further upside on the day, reaching its highest closing level in a year.

Bond yields remain at historically low levels, but the recent increase may still spook investors already concerned that stocks are overbought.

Traders were also looking ahead to two days of Congressional testimony by Powell for additional guidance regarding the outlook for monetary policy.

In U.S. economic news, the Conference Board released a report showing a bigger than expected increase by its index of leading U.S. economic indicators in the month of January.

The Conference Board said its leading economic index climbed by 0.5 percent in January after rising by an upwardly revised 0.4 percent in December.

Economists had expected the leading economic index to rise by 0.3 percent, matching the increase originally reported for the previous month.

Semiconductor stocks moved sharply lower over the course of the session, dragging the Philadelphia Semiconductor Index down by 3.8 percent.

Substantial weakness was also visible among software stocks, as reflected by the 2.6 percent slump by the Dow Jones U.S. Software Index.

Utilities stocks also showed a significant move to the downside, with the Dow Jones Utility Average tumbling by 1.9 percent to its lowest closing level in well over four months.

Biotechnology, housing and networking stocks also moved notably lower on the day, while considerable strength emerged among gold and energy stocks.

The NYSE Arca Gold Bugs Index spiked by 4.6 percent after ending the previous session at its lowest closing level in eight months. The rebound came amid a sharp increase by the price of gold. Similarly, energy stocks moved higher along with the price of crude oil.

Airline stocks also moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.3 percent to its best closing level in a year.

Commodity, Currency Markets

Crude oil futures are rising $0.20 to $61.90 a barrel after spiking $2.44 to $61.70 a barrel on Monday. Meanwhile, after skyrocketing $31 to $1,808.40 an ounce in the previous session, gold futures are edging down $0.10 to $1,808.30 an ounce.

On the currency front, the U.S. dollar is trading at 105.39 yen compared to the 105.08 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2147 compared to yesterday’s $1.2157.

Asia

Asian stocks ended mixed on Tuesday as the prospect of more U.S. fiscal stimulus offset lingering concerns over an uptick in bond yields and worries over higher inflation affecting valuations.

Investors watched closely for any changes to the U.S. Federal Reserve’s dovish outlook from Chair Jerome Powell when he speaks before the Senate Banking Committee later in the day.

Japanese markets were closed on account of the Emperor’s Birthday. Chinese stocks ended a tad lower as policy tightening worries persisted.

China’s Shanghai Composite Index slipped 6.09 points, or 0.2 percent, to 3,636.36, while Hong Kong’s Hang Seng Index rose 312.81 points, or 1 percent, to 30,632.64 on optimism about an economic recovery.

China’s central bank said it would prioritize policy stability and avoid making sudden shifts while providing the support needed for a continued economic recovery in 2021.

Australian markets recovered from a weak start to end notably higher, led by mining and energy stocks. The benchmark S&P/ASX 200 Index climbed 58.30 points, or 0.9 percent, to 6,839.20 amid reports that the country will ramp up its Covid-19 immunization drive. The broader All Ordinaries Index ended up 49.20 points, or 0.7 percent, at 7,110.80.

Energy stocks such as Woodside Petroleum and Santos soared around 6 percent as oil surged toward $63 a barrel. Oil Search jumped 6.4 percent after reporting a surprise underlying profit.

Mining heavyweights BHP and Rio Tinto climbed 2-3 percent as copper prices breached the $9,000 mark for the first time since 2011 on indications of tight supply. Firmer bullion prices lifted gold miners, with Newcrest Mining rallying 4.4 percent.

Meanwhile, tech stocks followed their U.S. peers lower, with buy-now-pay-later giant Afterpay plunging 7.2 percent.

Seoul stocks ended modestly lower amid inflation concerns. The Kospi swung between gains and losses before ending the session down 9.66 points, or 0.3 percent, at 3,070.09. Tech and bio stocks paced the decliners.

In economic news, a central bank survey showed that consumer confidence in South Korea improved in January, with a sentiment index score of 97.4 – up from 95.4 in December.

Europe

European stocks have moved lower on Tuesday, as investors keep an eye on bond yields and await testimony from Federal Reserve Chair Jerome Powell, with most analysts expecting Powell to reiterate the Fed’s commitment to maintain dovish policy.

In economic news, the U.K. unemployment rate rose to 5.1 percent in the three months to December, a five-year high, official figures showed earlier today.

The pan-European Stoxx 600 Index has slid by 0.7 percent after declining 0.4 percent on Monday. The German DAX Index has also slumped by 1 percent and the U.K.’s FTSE 100 Index has edged down by 0.1 percent, but the French CAC 40 Index is just above the unchanged line.

Health technology company Philips has moved to the downside after providing an update on the composition of its supervisory board.

Cement-maker HeidelbergCement has also moved notably after its revenue fell in the fourth quarter of last year.

Lender HSBC Holdings has also declined after it abandoned its long-term profitability targets and unveiled a revised strategy focused mainly on wealth management in Asia.

Meanwhile, German healthcare group Fresenius has moved higher after confirming its 2021 guidance as well as targets until 2023.

Higher commodity prices have lifted miners, while energy giants BP Plc and Royal Dutch Shell have also advanced as oil prices jump.

Intercontinental Hotels Group, whose brands include the Crowne Plaza, Regent and Hualuxe hotel chains, has also moved to the upside.

After slumping into a loss in 2020, the company said it is pressing ahead with its expansion plans to take advantage when things do pick up again.

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of December at 9 am ET.

At 10 am ET, Federal Reserve Chair Jerome Powell is due to testify on monetary policy during a virtual Senate Banking Committee hearing.

The Conference Board is also scheduled to release its report on consumer confidence in the month of February at 10 am ET. The consumer confidence index is expected to inch up to 89.7 in February from 89.3 in January.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $60 billion worth of two-year notes.

Stocks In Focus

Shares of The RealReal (REAL) are moving sharply lower in pre-market trading after the retailer of secondhand luxury goods reported a wider than expected fourth quarter loss on revenues that missed analyst estimates.

Cybersecurity company Palo Alto Networks (PANW) may also come under pressure after reporting better than expected fiscal second quarter results but providing disappointing guidance.

On the other hand, shares of ZoomInfo (ZI) are seeing significant pre-market strength after the marketing database provided reported better than expected fourth quarter results and provided an upbeat forecast.

Department store chain Macy’s (M) may also move to the upside after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.