Futures Pointing To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move back to the downside after ending the previous session mostly higher.

Concerns about extended coronavirus lockdowns in Europe may generate some negative sentiment amid worries a new wave of infections.

German leaders agreed to extend the country’s lockdown until April 18, raising concerns about demand from Europe’s largest economy.

The news has contributed to a steep drop by the price of crude oil, which may lead to a sell-off by energy stocks on Wall Street.

Nonetheless, a continued drop by treasury yields may limit any early downside on Wall Street, with the yield on the benchmark ten-year note continuing to give back ground after reaching its highest levels in over a year last week.

High-growth technology stocks may benefit from the continued pullback in yields, leading to an extended advance by the tech-heavy Nasdaq.

Traders are also likely to keep an eye on Congressional testimony from Federal Reserve Chair Jerome Powell, who is due to appear virtually before the House Financial Services Committee this afternoon.

In prepared remarks, Powell reiterated the Fed’s recent assessment that indicators of economic activity and employment have turned up recently.

Powell noted that the economic recovery is “far from complete,” however, and stressed the Fed will continue to provide the support that the economy needs for “as long as it takes.”

Following the mixed performance seen last Friday, stocks moved mostly higher during trading on Monday. The major averages all moved to the upside, with the tech-heavy Nasdaq showing a particularly strong advance.

The major averages gave back some ground going into the close but remained in positive territory. The Dow rose 103.23 points or 0.3 percent to 32,731.20, the Nasdaq jumped 162.30 points or 1.2 percent to 13,377.54 and the S&P 500 climbed 27.49 points or 0.7 percent to 3,940.59.

The strength on Wall Street came as traders kept a close eye on activity in the bond market, with a decrease by treasury yields generating buying interest in high-growth companies.

After hovering near its highest levels in over a year in the previous session, the yield on the benchmark ten-year note pulled back below 1.7 percent.

The drop in yields, which move opposite of prices, came as treasuries benefited from their appeal as a safe haven amid turmoil in the Turkish lira and concerns over rising Covid-19 cases in Europe.

The Turkish lira slumped toward a record low versus the U.S. dollar after President Recep Tayyip Erdogan ousted central bank chief Naci Agbal for hiking interest rates to contain double-digit inflation.

In U.S. economic news, the National Association of Realtors released a report showing existing home sales in the U.S. tumbled by much more than expected in the month of February.

NAR said existing home sales plunged by 6.6 percent to an annual rate of 6.22 million in February after inching up by 0.2 percent to a downwardly revised rate of 6.66 million in January.

Economists had expected existing home sales to slump by 3.0 percent to a rate of 6.49 million from the 6.69 million originally reported for the previous month.

Semiconductor stocks showed a significant move to the upside on the day, with the Philadelphia Semiconductor Index jumping by 2.2 percent.

Software, computer hardware and biotechnology stocks also saw considerable strength, contributing to the advance by the tech-heavy Nasdaq.

On the other hand, airline stocks moved sharply lower, resulting in a 4.1 percent nosedive by the NYSE Arca Airline Index.

Banking stocks also showed a notable move to the downside on the day, dragging the KBW Bank Index down by 2.3 percent.

Commodity, Currency Markets

Crude oil futures are plummeting $2.28 to $59.28 a barrel after inching up $0.13 to $61.55 a barrel on Monday. Meanwhile, after falling $3.60 to $1,738.10 an ounce in the previous session, gold futures are edging up $0.90 to $1,739 an ounce.

On the currency front, the U.S. dollar is trading at 108.58 yen compared to the 108.85 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1892 compared to yesterday’s $1.1933.

Asia

Asian stocks fell broadly on Tuesday after a coalition of western nations announced sanctions on Chinese officials for alleged human rights abuses against Uyghur Muslims. China immediately announced retaliatory sanctions against the EU that appeared broader.

China’s Shanghai Composite Index dropped 31.93 points, or 0.9 percent, to 3,411.51 as China imposed tit-for-tat sanctions over rights abuses. Hong Kong’s Hang Seng Index ended down 387.96 points, or 1.3 percent, at 28,497.38.

Japanese shares gave up early gains to end notably lower as investors fretted over the volatility of U.S. bond yields and steep declines in Chinese stocks on policy tightening and valuation worries.

The Nikkei 225 Index fell 178.23 points, or 0.6 percent, to 28,995.92, while the broader Topix closed 0.9 percent lower at 1,971.48.

Companies that rely on China led the losses, with robot maker Fanuc losing 1.6 percent and construction machinery maker Komatsu giving up 1.2 percent.

Transport firm Kawasaki Kisen Kaisha plunged 7.2 percent and Mitsui OSK Lines tumbled 5.8 percent. Japan Exchange Group, the operator of the Tokyo Stock Exchange, climbed 2.8 percent after raising its full-year net profit forecast.

Australian markets gave up early gains to end slightly lower amid growing tensions between China and the west. The benchmark S&P/ASX 200 Index slipped 7.10 points, or 0.1 percent, to 6,745.40, while the broader All Ordinaries Index ended down 8.40 points, or 0.1 percent, at 6,986.60.

Lender ANZ lost 1.3 percent, while the other three big banks ended down between 0.4 percent and 0.9 percent. Afterpay and WiseTech Global fell over 2 percent in the tech space.

Miners rose, with BHP and Fortescue Metals Group rising around 1 percent. Healthcare stocks also bucked the weak trend, with ResMed climbing 3.3 percent and Sonic Healthcare adding 3.5 percent.

Pharmaceutical supplier Sigma Healthcare surged 4.5 percent after beating its full-year earnings guidance. Telstra added 2.5 percent a day after the telecommunications giant announced plans to revise its corporate structure to unlock value.

Seoul stocks fell for the third straight day on concerns over rising bond yields and worsening U.S.-China relations. The benchmark Kospi ended down 30.72 points, or 1 percent, at 3,004.74. SK Hynix, Samsung SDI and LG Chem lost 2-3 percent.

Europe

European stocks are modestly lower on Tuesday as tensions between China and the west escalated and German leaders agreed to extend the country’s coronavirus lockdown until April 18 to contain a new wave of infections.

While the French CAC 40 Index has fallen by 0.4 percent, the U.K.’s FTSE 100 Index is down by 0.2 percent and the German DAX Index is down by 0.1 percent.

Roche has moved to the downside. The Swiss pharma firm announced that it will discontinue dosing in a Phase III study evaluating its investigational candidate tominersen in manifest Huntington’s disease.

AstraZeneca has also fallen. A U.S. health agency said the drugmaker “may have included outdated information” in its initial data of the U.S. arm of Covid-19 vaccine trials.

Total SE, BP Plc and Royal Dutch Shell have also slumped as oil prices fall sharply on concerns that new pandemic curbs and slow vaccine rollouts in Europe will slow a recovery in demand.

Cineworld has also declined after saying it planned to reopen its U.S. cinemas in April and its U.K. cinemas in May.

Meanwhile, Nordex has surged after the wind turbine manufacturer said it expects the impact of the Covid-19 pandemic on its business to be reduced from the second quarter onwards.

Novartis AG has also risen as it announced positive results from its phase III VISION study evaluating the efficacy and safety of radioligand therapy 177Lu-PSMA-617 in patients with advanced prostate cancer.

In economic news, official data showed Britain’s jobless rate unexpectedly fell to 5.0 percent in the three months to January, when the country entered a new virus lockdown. That was below economists’ forecast of 5.2 percent.

U.S. Economic Reports

St. Louis Federal Reserve President James Bullard is due to give a presentation on the U.S. economy and monetary policy before a virtual London School of Economics Central Banking Society Series: Perspectives Across the Atlantic.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of February. New home sales are expected to plunge by 5.2 percent.

Atlanta Federal Reserve President Raphael Bostic is due to speak at a Recording of Clark Atlanta University’s The Innovators Podcast in Zoom webinar at 10:10 am ET.

At 11 am ET, Richmond Federal Reserve President is scheduled to speak virtually to the Greenville County (S.C.) United Way.

Federal Reserve Chair Jerome Powell is due to give virtual testimony on the Coronavirus Aid, Relief, and Economic Security Act before the House Financial Services Committee at 12 pm ET.

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

Federal Reserve Governor Lael Brainard is due to speak virtually on climate change at the Ceres Conference 2021 at 1:25 pm ET.

At 2:45 pm ET, New York Federal Reserve President John Williams is scheduled to participate in a virtual roundtable with central New York business leaders to discuss how the central New York economy is faring amid the pandemic.

Brainard is due to speak on “A View From the Federal Reserve Board” before a virtual National Association for Business Economics 2021 NABE Policy Conference to Explore Post-COVID Economic Policy Challenges at 3:45 pm ET.

At 4:20 pm ET, Bullard is scheduled to participate in a “Wither the Dollar?” discussion before the virtual National Association for Business Economics 2021 NABE Policy Conference.

Stocks In Focus

Shares of ViacomCBS (VIAC) are seeing significant pre-market weakness after the media giant announced it has commenced concurrent offerings of $2.0 billion of its Class B common stock and $1.0 billion of its Series A Mandatory Convertible Preferred Stock.

Chinese music streaming service Tencent Music (TME) may also move to the downside after reporting weaker than expected fourth quarter results. Tencent also announced an agreement to establish a join record label with Warner Music.

On the other hand, shares of Sunrun (RUN) are likely to see initial strength after Goldman Sachs upgraded its rating on the solar power company’s stock to Buy from Neutral.