Looming Fed Announcement May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction after moving mostly higher over the course of the previous session.

The lackluster performance by the futures comes as traders continue to look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

Traders will be paying close attention to any changes to the Fed’s statement as well as any revisions to the central bank’s forecasts for the economy, inflation and interest rates.

Some traders are hoping the Fed will address the recent spike in bond yields, which has led to considerable volatility in Wall Street in recent sessions.

The futures did not show much reaction to a report from the Commerce Department showing U.S. retail sales pulled back by much more than anticipated in the month of February.

Stocks turned in a lackluster performance for much of the trading session on Monday but managed to end the day mostly higher. With the upward move on the day, the Dow and the S&P 500 reached new record closing highs.

The major averages showed a strong move to the upside going into the close, ending the session near their best levels of the day. The Dow rose 174.82 points or 0.5 percent to 32,953.46, the Nasdaq jumped 139.84 points or 1.1 percent to 13,459.71 and the S&P 500 climbed 25.60 points or 0.7 percent to 3,968.94.

The strength that emerged on Wall Street reflected optimism about the economic outlook amid stepped up coronavirus vaccination efforts and the recent passage of a new $1.9 trillion stimulus bill.

A pullback by treasury yields may also have generated some buying interest, with the ten-year yield moving lower after ending last Friday’s trading at its highest closing level in over a year.

Trading activity was somewhat subdued, however, as traders looked ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

On the U.S. economic front, a report released by the Federal Reserve Bank of New York showed an acceleration in the pace of growth in New York manufacturing activity in the month of March.

The New York Fed said its general business conditions index climbed to 17.4 in March from 12.1 in February, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 14.5

Looking ahead, the New York Fed said firms remained optimistic that conditions would improve over the next six months, anticipating significant increases in employment.

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 3.8 percent to its best closing level in nearly three years.

Significant strength was also visible among gold stocks, as reflected by the 2.1 percent jump by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid an increase by the price of the precious metal.

Semiconductor stocks also turned in a strong performance, resulting in a 2.3 percent advance by the Philadelphia Semiconductor Index.

Biotechnology, housing and networking stocks also saw considerable strength on the day, while steel and banking stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slumping $0.91 to $64.48 a barrel after slipping $0.22 to $65.39 a barrel on Monday. Meanwhile, after climbing $9.40 to $1,729.20 an ounce in the previous session, gold futures are inching up $1.30 to $1,730.50 an ounce.

On the currency front, the U.S. dollar is trading at 109.00 yen compared to the 109.13 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1920 compared to yesterday’s $1.1929.

Asia

Asian stocks rose on Tuesday as investors continued to buy cyclical shares on optimism about the economic reopening from the coronavirus pandemic.

Against a backdrop of rising inflation, investors awaited policy cues from the Federal Reserve meeting this week.

Chinese stocks recovered some ground, with the upside capped by lingering concerns over policy tightening.

The benchmark Shanghai Composite climbed 26.79 points, or 0.8 percent, to 3,446.73. Consumer staple stocks led the surge after steep losses in the previous session. Hong Kong’s Hang Seng Index ended up 0.7 percent at 29,027.69.

Japanese shares rose as prospects of a stimulus-driven global economic recovery got brighter. The Nikkei 225 Index rose 154.12 points, or 0.5 percent, to 29,921.09, while the broader Topix closed 0.7 percent higher at 1,981.50, its highest close since May 14, 1991.

Heavyweight SoftBank Group advanced 2.4 percent, while Tokyo Electron rose 1.5 percent and Advantest gained 3.4 percent in the tech space. Travel-related stocks surged, with Japan Airlines and ANA Holdings jumping 3.9 percent and 2.4 percent, respectively.

E-commerce firm Rakuten Inc. fell 2.4 percent on profit taking after rallying up to 24 percent on reports of a capital tie-up with Japan Post Holdings.

Australian markets advanced, led by gold miners and technology companies. The benchmark S&P/ASX 200 Index advanced 54.10 points, or 0.8 percent, to 6,827.10 as the RBA’s March policy meeting minutes reinforced the view that there will be no rate increases for a considerable time. The broader All Ordinaries Index ended up 59.90 points, or 0.9 percent, at 7,079.

Tech stocks such as Afterpay, Appen and Xero surged 3-4 percent. A rise in bullion prices lifted gold miners, with Evolution Mining rising 2.5 percent. Energy stocks ended on a mixed note as oil extended declines for a third day.

Real estate developer Dexus climbed 2.9 percent after it launched a merger proposal with a wholesale property fund managed by AMP Capital.

Seoul stocks advanced amid falling Treasury yields. The benchmark Kospi rose 21.46 points, or 0.7 percent, to 3,067.17. Chipmaker SK Hynix rallied 2.9 percent, while chemical firm LG Chem plunged 7.8 percent.

Europe

European stocks have moved mostly higher on Tuesday as investors digest a slew of earnings updates and look ahead to a Federal Reserve monetary policy announcement to see what the updated language and economic forecasts look like.

The upside remained capped after White House Chief Medical Advisor Dr. Anthony Fauci pointed to Europe as a warning to Americans that letting up mitigation measures early could put the U.S. on a similar course.

Germany’s Paul-Ehrlich Institute said it has noted a “conspicuous accumulation” of cases of a very rare cerebral vein thrombosis together with a lack of blood platelets known as thrombocytopenia and bleeding in temporal proximity to vaccinations with the Covid-19 vaccine AstraZeneca.

The European Medicines Agency is currently evaluating data on the AstraZeneca vaccine and any link to blood clotting. A decision is expected on Thursday.

While the French CAC 40 Index has risen by 0.3 percent, the German DAX Index is up by 0.6 percent and the U.K.’s FTSE 100 Index is up by 0.8 percent.

Zalando shares have moved sharply higher. The online fashion retailer upgraded its growth objectives after solid 2020 results.

Automaker Volkswagen AG has also jumped. The company expressed confidence that cost cuts will help it improve profit margins in the coming years.

AstraZeneca has also rallied. The chief scientist of the World Health Organization recommended that countries continue to use the AstraZeneca vaccine for now despite concerns about blood clots.

Nokia has edged higher. The Finnish telecommunications company has unveiled plans to cut around 5000 to 10,000 jobs within a period of two years.

Bakery chain Greggs has also surged after raising its U.K. stores target to 3,000 from 2,500 previously. Plumbing group Ferguson has also advanced after raising its dividend and announcing a share buyback.

On the other hand, utility RWE has moved to the downside. The company reported that its fiscal 2021 adjusted net income was 1.2 billion euros, above the outlook of 0.85 billion euros to 1.15 billion euros.

Wacker Chemie has also slumped. The chemicals company forecast mid-single-digit percentage sales growth in 2021.

Natwest Group shares have also dropped as the Financial Conduct Authority launched criminal proceedings against the company for allegedly failing to comply with anti-money laundering laws.

In economic news, French consumer prices grew 0.6 percent annually in February, the same rate as seen in January, final data from the statistical office Insee showed. This was bigger than the 0.4 percent estimated on February 26.

Month-on-month, consumer prices remained stable after a 0.2 percent rise in January. The monthly rate was revised from -0.1 percent.

U.S. Economic Reports

After reporting a substantial increase in U.S. retail sales in the previous month, the Commerce Department released a report on Tuesday showing retail sales pulled back by much more than anticipated in the month of February.

The Commerce Department said retail sales plunged by 3.0 percent in February after soaring by an upwardly revised 7.6 percent in January.

Economists had expected retail sales to dip by 0.5 percent compared to the 5.3 percent spike originally reported for the previous month.

The sharp pullback in retail sales reflected weakness in most categories, including sales by motor vehicle and parts dealers, which plummeted by 4.2 percent in February after surging up by 5.0 percent in January.

Excluding the drop in auto sales, retail sales still tumbled by 2.7 percent in February after skyrocketing by 8.3 percent in January. Ex-auto sales were expected to edge down by 0.1 percent.

Meanwhile, the Labor Department released a report showing another jump in U.S. import prices in the month of February.

The report showed import prices increased by 1.3 percent in February after surging up by 1.4 percent in January. Economists had expected import prices to climb by 1.2 percent.

The Labor Department said export prices also shot up by 1.6 percent in February following a 2.5 percent spike in January. Export prices were expected to increase by 0.9 percent.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of February. Industrial production is expected to increase by 0.6 percent.

The Commerce Department is due to release its report on business inventories in the month of January at 10 am ET. Economists expect business inventories to rise by 0.3 percent.

Also at 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of March.

The NAHB/Wells Fargo Housing Market Index is expected to edge down to 83 in March after inching up to 84 in February.

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

Stocks In Focus

Shares of FinTech Acquisition Corp. (FTCV) are moving sharply higher in pre-market trading on news the special purpose acquisition company will combine with investment platform eToro. The combined company is expected to be listed on Nasdaq.

Coffee giant Starbucks (SBUX) may also move to the upside after BTIG upgraded its rating on the company’s stock to Buy from Neutral.

On the other hand, shares of Ulta Beauty (ULTA) may see initial weakness after Guggenheim downgraded its rating on the cosmetics retailer’s stock to Neutral from Buy.