Futures Pointing To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Wednesday, with stocks likely to see further downside after ending the previous session firmly negative.

Concerns about the economic outlook amid a surge in new coronavirus cases may continue to weigh on Wall Street following yesterday’s disappointing retail sales data.

Potentially adding to the economic worries, the Commerce Department released a report this morning showing a sharp pullback in new residential construction in the U.S. in the month of July.

The Commerce Department said housing starts plunged by 7.0 percent to an annual rate of 1.534 million in July after jumping by 3.5 percent to a revised rate of 1.650 million in June.

Economists had expected housing starts to slump by 2.6 percent to a rate of 1.600 million from the 1.643 million originally reported for the previous month.

However, traders have largely been able to shrug off concerns about the economy in recent sessions, with the Dow and the S&P 500 setting new record highs earlier this week.

Optimism the Federal Reserve will continue to prop up the markets with its asset purchase program has helped to offset any worries about the economy.

The minutes of the Fed’s latest monetary policy meeting, due to be released this afternoon, may subsequently attract increased attention.

Following the release of disappointing retail sales data, stocks saw significant weakness during trading on Tuesday. With the notable drop on the day, the Dow and the S&P 500 pulled back off Monday’s record closing highs.

The major averages climbed off their worst levels in afternoon trading but remained firmly negative. The Dow slumped 282.12 points or 0.8 percent to 35,343.28, the Nasdaq tumbled 137.58 points or 0.9 percent to 14,656.18 and the S&P 500 slid 31.63 points or 0.7 percent to 4,448.08.

The weakness on Wall Street came after the Commerce Department released a report showing U.S. retail sales tumbled by much more than expected in the month of July.

The report said retail sales slumped by 1.1 percent in July after climbing by an upwardly revised 0.7 percent in June.

Economists had expected retail sales to dip by 0.3 percent compared to the 0.6 percent increase originally reported for the previous month.

Excluding a steep drop in sales by motor vehicles and parts dealers, retail sales fell by 0.4 percent in July after jumping by 1.6 percent in June. Ex-auto sales were expected to inch up by 0.1 percent.

A steep drop by shares of Home Depot (HD) also weighed on the markets, with the home improvement retailer plunging by 4.3 percent after reporting second quarter earnings that beat estimates but weaker than expected same-store sales growth.

Meanwhile, retail giant Wal-Mart (WMT) closed nearly unchanged after reporting better than expected second quarter results and raising its full-year guidance.

Steel stocks showed a substantial move to the downside amid concerns about the global economic outlook, resulting in a 3.1 percent nosedive by the NYSE Arca Steel Index.

Considerable weakness was also visible among housing stocks, as reflected by the 2.9 percent slump by the Philadelphia Housing Sector Index.

The sell-off by housing stocks came after the National Association of Home Builders released a report showing homebuilder confidence fell to its lowest level in a year in August.

Airline stocks also saw significant weakness on the day, with the NYSE Arca Airline Index tumbling by 2.4 percent to its lowest closing level in almost a month.

Oil service, semiconductor, retail and banking stocks also showed notable moves to the downside, reflecting broad based selling pressure on Wall Street.

Commodity, Currency Markets

Crude oil futures are climbing $0.55 to $67.14 a barrel after falling $0.70 to $66.59 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,790.90, up $3.10 compared to the previous session’s close of $1,787.80. On Tuesday, gold edged down $2.

On the currency front, the U.S. dollar is trading at 109.81 yen compared to the 109.60 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1714 compared to yesterday’s $1.1710.

Asia

Asian stocks advanced on Wednesday despite lingering concerns about the spread of COVID-19 and signs of slowing global growth.

Investors watched for the Federal Reserve’s release of the minutes of its July policy meeting later in the day for clues on the central bank’s tapering plans.

Fed Chair Jerome Powell said at a town hall meeting on Tuesday that it remains to be seen how the U.S. economy will weather the recent COVID-19 surge.

Chinese and Hong Kong shares rebounded after seeing steep losses in the previous session as China’s market regulator issued draft rules aimed at stopping unfair competition on the internet.

The benchmark Shanghai Composite Index jumped 38.31 points, or 1.1 percent, to 3,485.29 after plunging 2 percent the previous day. Hong Kong’s Hang Seng Index ended up 121.14 points, or 0.5 percent, at 25,867.01.

Japanese shares ended higher to snap a four-day losing streak, a day after Prime Minister Yoshihide Suga officially expanded and extended the nation’s coronavirus state of emergency.

The Nikkei 225 Index rose 161.44 points, or 0.6 percent, to 27,585.91, while the broader Topix closed 0.4 percent higher at 1,923.97.

Fujifilm jumped 3.3 percent to extend gains after upwardly revising its net profit estimate for the business year through March. Investors chased defensive companies, with Astellas Pharma rallying 2.1 percent and Chugai Pharmaceutical ending up 1.1 percent.

In economic news, the total value of core machinery orders in Japan fell a seasonally adjusted 1.5 percent sequentially in June, the Cabinet Office said in a report. That beat expectations for a decline of 2.8 percent following the 7.8 percent jump in May.

On a yearly basis, core machinery orders climbed 18.6 percent – again exceeding expectations for an increase of 15.8 percent following the 12.2 percent gain in the previous month.

Another report showed that Japan posted a merchandise trade surplus of 441 billion yen in July – exceeding expectations for a surplus of 202.3 billion yen.

Australian markets ended a range-bound session slightly lower as the country’s most populous state reported a record 633 new coronavirus infections. The benchmark S&P/ASX 200 Index slipped 8.90 points, or 0.1 percent, to 7,502.10 while the broader All Ordinaries Index ended down 2.60 points at 7,770.70.

Mining giant BHP slumped 7.1 percent after it agreed to divest its $20 billion petroleum business to Woodside Petroleum in a retreat from fossil fuels. Shares of the latter declined 2.1 percent.

Banks finished broadly higher, with Westpac climbing 1.4 percent. Payment solutions firm EML Payments, a tailored payment solutions provider, advanced 2.3 percent after reporting a 60 percent spike in fiscal 2021 revenue.

Domino’s Pizza Enterprises jumped 7.1 percent. The company lifted its final dividend and increased the outlook for new store openings after posting a nearly 33 percent surge in annual profit.

Seoul stocks closed higher to snap an eight-session losing streak as weak U.S. data raised doubts over the timing of the Fed’s plan to begin tapering its asset buying program. The benchmark Kospi rose 15.84 points, or 0.5 percent, to settle at 3,158.93. SK Hynix climbed 2.5 percent, while Samsung Biologics and Kakao Bank lost 2-3 percent.

Europe

European stocks are mostly lower on Wednesday amid worries about global growth as new coronavirus cases continued to surge worldwide.

Investors also await the latest Federal Reserve minutes for clues on when the central bank might start tapering its massive asset purchases program.

Fed Chair Jerome Powell said at a town hall meeting on Tuesday that it remains to be seen how the U.S. economy will weather the recent COVID-19 surge.

Separately, Minneapolis Federal Reserve President Neel Kashkari said there is still “a lot of slack” in the U.S. labor market and argued high inflation readings will subside as workers return to the labor force.

While the German DAX Index is just below the unchanged line, the U.K.’s FTSE 100 Index is down by 0.4 percent and the French CAC 40 Index is down by 0.6 percent.

Construction company Balfour Beatty has moved sharply lower on the day despite swinging to a half-year profit.

Online pharmacy chain Zur Rose has also shown a notable move to the downside after reporting disappointing first-half results.

Miners Anglo American, Antofagasta and Glencore have also fallen even as copper prices rebound after two days of losses.

On the other hand, Danish brewer Carlsberg and Swiss medical device maker Alcon have jumped after raising their full-year earnings guidance.

British industrial group Rotork has also moved notably higher after launching a £50 million share buy-back program.

Sirius Real Estate has also advanced. The company said it has completed the acquisition of four business park assets and one land parcel for about 84.8 million euros.

In economic news, Eurostat’s final reading on Eurozone CPI inflation for July came in at 2.2 percent on an annual basis, meeting the flash estimate.

On a monthly basis, the bloc’s CPI figure for July came in at -0.1 percent, matching expectations.

Elsewhere, U.K. consumer price inflation slowed sharply in July to the Bank of England’s target, preliminary data from the Office for National Statistics showed.

The consumer price index rose 2.0 percent year-on-year following a 2.5 percent increase in June. Economists had forecast 2.3 percent inflation. Headline inflation slowed for the first time in five months.

U.S. Economic Reports

A report released by the Commerce Department on Wednesday showed a sharp pullback in new residential construction in the U.S. in the month of July.

The Commerce Department said housing starts plunged by 7.0 percent to an annual rate of 1.534 million in July after jumping by 3.5 percent to a revised rate of 1.650 million in June.

Economists had expected housing starts to slump by 2.6 percent to a rate of 1.600 million from the 1.643 million originally reported for the previous month.

Meanwhile, the report said building permits shot up by 2.6 percent to an annual rate of 1.635 million in July after tumbling by 5.3 percent to a revised rate of 1.594 million in June.

Building permits, an indicator of future housing demand, had been expected to climb by 0.8 percent to a rate of 1.610 million from the 1.598 million originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended August 13th.

Crude oil inventories are expected to dip by 1.3 million barrels after edging down by 0.4 million barrels in the previous week.

The Treasury Department is due to announce the results of this month’s auction of $27 billion worth of twenty-year bonds at 1 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release the minutes of its monetary policy meeting held July 27-28.

Stocks In Focus

Shares of Tilray (TLRY) are moving sharply higher in pre-market trading after the Canadian cannabis producer announced a deal to buy $166 million in convertible debt of U.S. rival MedMen. The deal provides Tilray with a potential accelerated path into the U.S. cannabis market upon federal legalization.

Eye care products company Alcon (ALC) is also likely to see initial strength after reporting better than expected second quarter results and raising its full-year guidance.

Shares of Lowe’s (LOW) may also move to the upside after the home improvement retailer reported second quarter results beat expectations and raised its full-year guidance.

On the other hand, shares of Children’s Place (PLCE) may come under pressure after the kids clothing and accessories retailer reported second quarter revenues that missed analyst estimates.

Chipmaker Cree Inc. (CREE) is also seeing pre-market weakness despite reporting a narrower than expected fiscal fourth quarter loss on revenues that beat expectations.

Shares of Target (TGT) may also move to the downside even though the retail giant reported second quarter results that exceeded analyst estimates.