Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move back to the upside following the significant downturn seen over the course of the previous session.

Traders may make another attempt at bargain hunting after the rally seen in early trading on Monday faded as the day progressed.

However, lingering concerns about the economy, inflation and interest rates may continue to hang over the markets ahead of the next week’s Federal Reserve meeting.

A slump by shares of IBM Corp. (IBM) may also limit any early upside, with the tech giant plunging by 5.5 percent in pre-market trading.

The drop by IBM comes after the company reported better than expected second quarter results but lowered its cash flow forecast.

Healthcare giant Johnson & Johnson (JNJ) is also likely to be in focus after reporting second quarter results that beat analyst estimates but cutting its full-year guidance.

On the U.S. economic front, the Commerce Department released a report unexpectedly showing a continued decline in housing starts in the month of June.

Stocks showed a strong move to the upside in early trading on Monday but saw a substantial downturn over the course of the session. The major averages pulled back well off their early highs and into negative territory.

After surging by more than 350 points early in the session, the Dow fell 215.65 points or 0.7 percent to 31,072.61. The Nasdaq also slumped 92.37 points or 0.8 percent to 11,360.05, while the S&P 500 slid 32.31 points or 0.8 percent to 3,830.85.

The early strength on Wall Street came as traders continued to pick up stocks at relatively reduced levels after the rally seen last Friday halted a recent downward trend.

Positive sentiment was also generated in reaction to upbeat earnings news from Goldman Sachs (GS), with the financial giant jumping by 2.5 percent.

The advance by Goldman Sachs came after the company reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Bank of America (BAC) have also moved modestly higher even though the financial giant reported weaker than expected second quarter earnings.

Buying interest waned over the course of the session, however, as traders continued to worry about the economic outlook ahead of next week’s Federal Reserve meeting.

Traders may also have been reluctant to make significant bets ahead of the release of earnings news from a slew of big-name companies later this week.

In U.S. economic news, the National Association of Home Builders released a report showing a substantial deterioration in U.S homebuilder confidence in the month of July.

The report showed the NAHB/Wells Fargo Housing Market Index plunged to 55 in July from 67 in June. Economists had expected the index to edge down to 66.

The HMI showed its second biggest single-month drop after a 42-point nosedive in April 2020, tumbling to its lowest level since May 2020.

Healthcare stocks came under pressure over the course of the session, dragging the Dow Jones U.S. Health Care Index down by 2.2 percent.

Significant weakness also emerged among biotechnology stocks, as reflected by the 2.1 percent slump by the NYSE Arca Biotechnology Index.

Pharmaceutical, utilities and networking stocks also moved notably lower as the day progressed, contributing to the downturn by the broader markets.

On the other hand, energy stocks held on to strong gains amid a sharp increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 3.6 percent, the NYSE Arca Oil Index surged by 2.4 percent and the NYSE Arca Natural Gas Index jumped by 1.7 percent.

Commodity, Currency Markets

Crude oil futures are slumping $1.87 to $100.73 a barrel after soaring $5.01 to $102.60 a barrel on Monday. Meanwhile, after rising $6.60 to $1,710.20 an ounce in the previous session, gold futures are edging down $1.70 to $1,708.50 an ounce.

On the currency front, the U.S. dollar is trading at 137.64 yen compared to the 138.14 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0226 compared to yesterday’s $1.0143.
Asia

Asian stocks ended mostly lower on Tuesday as investors fretted about the earnings outlook in the face of economic and financial challenges.

A rebound in commodity prices on the back of a weaker dollar and IBM’s reduced cash flow forecast served to keep underlying sentiment cautious.

Chinese shares ended little changed as China stepped up daily cash injections and data showed new Covid-19 cases in China jumped to 699 on Monday – the highest daily tally since May 22.

China’s central bank injected additional liquidity into the financial system for the first time since June as authorities try to prevent a crisis of confidence in the housing market. Hong Kong’s Hang Seng Index ended 0.9 percent lower at 20,661.06.

Japanese shares bucked the weak trend to end notably higher as traders returned to their desks after a holiday on Monday.

The Nikkei 225 Index closed 0.7 percent higher at 26,961.68 ahead of this week’s Bank of Japan policy meeting, where the central bank is expected to stay firm on easy policies. The broader Topix climbed 0.5 percent to 1,902.79.

Kawasaki Heavy Industries surged 5.2 percent and Mitsubishi Heavy Industries rallied 2.5 percent after Nikkei reported that the government will forego setting a ceiling on defense spending in next fiscal year’s annual budget. Utilities Kansai Electric Power and Tokyo Electric Power dropped 2-3 percent.

Seoul stocks edged lower to snap a two-day winning streak on concerns about aggressive monetary policy tightening and its impact on economic growth. The Kospi slipped 0.2 percent to close at 2,370.97.

Australian markets fell as the minutes of the RBA’s July meeting showed the board remains committed to doing what is necessary to curb inflation. The benchmark S&P/ASX 200 Index dropped 0.6 percent to 6,649.60, while the broader All Ordinaries Index ended 0.5 percent lower at 6,853.

Tech stocks paced the declines, with Block Inc. falling 2.9 percent. Healthcare stocks also succumbed to selling pressure, with CSL, Sonic Healthcare and Resmed losing 2-5 percent. Whitehaven Coal jumped 5.3 percent after forecasting a record A$3 billion profit.

Europe

European stocks are turning in a lackluster performance on Tuesday despite reports of a spending slowdown at tech giant Apple and a mixed earnings update from IBM.

While stronger-than-expected U.K. jobs data heightened fears of more interest-rate hikes, Eurostat data showed inflation in the region accelerated as estimated in June to set a fresh record high, driven by higher energy and food prices.

Headline consumer price inflation surged to 8.6 percent from 8.1 percent in May. In the U.K., the ILO unemployment rate came in at 3.8 percent in three months to May, unchanged from three months to April but down by 0.1 percentage points on the quarter. The rate was forecast to rise to 3.9 percent.

The euro hit a two-week high and bonds slid across Europe after Reuters reported that ECB policymakers will discuss whether to raise rates by 25 or 50 points at their meeting on Thursday to tame record high inflation.

While the German DAX Index has inched up by 0.1 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.3 percent.

Swiss drug maker Novartis has moved to the upside after saying it no longer expects a decline in earning at its Sandoz unit.

Events and academic publishing group Informa has also moved sharply higher percent after backing its full-year guidance.

Kier Group has also rallied. The construction, services and property group said it expects full-year results to be in line with the Board’s expectations, reflecting a strong operational performance.

EDF shares have also soared after the French government offered 12 euros per share to take full control of the company in a 9.7 billion-euros (US$9.85 billion) buyout offer to nationalize Europe’s biggest nuclear power operator.

The offer price represented a premium of 53 percent to the closing price of EDF shares on July 5, the day before Prime Minister Elisabeth Borne announced the nationalization.

Meanwhile, Norwegian telecommunications provider Telenor ASA has slumped as it reported a second quarter net loss attributable to equity holders of 1.11 billion Norwegian Kroner compared to profit of 2.19 billion Kroner last year.

Miners Anglo American, Antofagasta and Glencore have also fallen in London as rising COVID-19 cases in China raised fears of a further slowdown in economic growth.

Alstom shares have also plunged in Paris. The train maker warned of challenges from inflation and the shortage in electronic components after reporting an 8 percent increase in first quarter sales.

U.S. Economic Reports

After reporting a steep drop in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Tuesday unexpectedly showing a continued decline in housing starts in the month of June.

The Commerce Department said housing starts slumped by 2.0 percent to an annual rate of 1.559 million after plunging by 11.9 percent to a revised rate of 1.591 million in May.

The continued decrease came as a surprise to economists, who had expected housing starts to jump by 2.3 percent to an annual rate of 1.585 million from the 1.549 million originally reported for the previous month.

With the unexpected decrease, housing starts dropped to the lowest annual rate since hitting 1.505 million in April of 2021.

The report showed building permits also fell by 0.6 percent to an annual rate of 1.685 million in June after tumbling by 7.0 percent to a rate of 1.695 million in May.

Building permits, an indicator of future housing demand, were expected to slump by 2.7 percent to an annual rate of 1.650 million.

Stocks In Focus

Shares of NCR Corp. (NCR) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said the financial technology provider is in exclusive talks to be sold to private-equity firm Veritas Capital.

Banking company Truist Financial (TFC) is also likely to see initial strength after reporting second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Lockheed Martin (LMT) may come under pressure after the aerospace and defense contractor reported weaker than expected second quarter results and lowered its full-year revenue guidance.