Futures Pointing To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to see further downside after closing lower for fourth consecutive sessions.

Concerns about the economic outlook may continue to weigh on Wall Street amid worries aggressive interest rate hikes by the Federal Reserve will tip the economy into a recession.

On Friday, the Commerce Department is due to release its report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require “substantially more evidence” inflation is on a sustained downward trend before halting its rate hikes, traders are likely to keep a close eye on the inflation reading.

Reports on consumer confidence, new and existing home sales and durable goods orders are also likely to attract attention in the coming days.

U.S. stocks closed lower on Monday, extending losses to a fourth straight session, as rising concerns over a recession amid rising interest rates hurt sentiment.

The Federal Reserve last week indicated it plans to continue raising interest rates next year, leading to worries the aggressive monetary policy tightening will tip the economy into a recession.

The major averages all ended notably lower. The Dow settled with a loss of 162.92 points or 0.5 percent at 32,757.54, the S&P 500 dropped 34.70 points or 0.9 percent to settle at 3,817.66, and the Nasdaq ended lower by 159.38 points or 1.5 percent at 10,546.03.

In U.S. economic news, the National Association of Home Builders released a report showing homebuilder confidence in the U.S. has unexpectedly seen a continued deterioration in the month of December.

The report showed the NAHB/Wells Fargo Housing Market Index fell to 31 in December from 33 in November. The decreased surprised economists, who had expected the index to rise to 36.

The housing market index declined for the twelfth straight month, falling to its lowest reading since mid-2012, with the exception of the onset of the pandemic in the spring of 2020.

Technology stocks posted sharp losses as bond yields rose amid bets the central bank will continue with its rate hikes. Shares of Apple (AAPL)., Microsoft (MSFT) and Alphabet (GOOGL) all ended notably lower.

Meta Platforms (META) shed more than 4 percent, weighed down by an announcement from the European Commission that it could impose a fine of up to 10 percent of the company’ annual global turnover if there is evidence showing Meta has infringed antitrust laws.

Disney (DIS) shares dropped nearly 5 percent after its “Avatar. The Way of the Water” reported lower than expected sales in its opening weekend.

Commodity, Currency Markets

Crude oil futures are rising $0.77 to $75.96 a barrel after climbing $0.90 to $75.19 a barrel on Monday. Meanwhile, after edging down $2.50 to $1,797.70 an ounce in the previous session, gold futures are advancing $13.70 to $1,811.40 an ounce.

On the currency front, the U.S. dollar is trading at 132.48 yen compared to the 136.91 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0609 compared to yesterday’s $1.0607.

Asia

Asian stocks tumbled on Tuesday and the yen surged against the dollar after the Bank of Japan said it would review its yield curve control policy and widened its target band for interest rates – a move that analysts said would allow long-term interest rates to rise more.

Hawkish comments on interest rates from former Federal Reserve official William Dudley also fueled worries about a worldwide recession.

China’s Shanghai Composite Index fell 1.1 percent to 3,073.77 as the country’s central bank kept its loan prime rates unchanged for the fourth consecutive month.

Hong Kong’s Hang Seng Index slumped 1.3 percent to 19,094.80 as China struggles with record-high daily increases in Covid-19 cases, creating uncertainty over an economic reopening.

Japanese shares led regional losses after the hawkish BoJ policy tweak. The yen surged across the board, rising to a four-month high against the dollar after the central bank expanded its 10-year Japanese government bond yield target band – raising fears of an eventual tightening in policy.

The Nikkei 225 Index plummeted 2.5 percent to 26,568.03, marking its lowest close since October 13 in its sharpest daily decline since October 11. The broader Topix closed 1.5 percent lower at 1,905.59.

Tech stocks suffered heavy losses, with Advantest, Tokyo Electron and SoftBank Group falling 3-5 percent.

Banks Mitsubishi UFJ Financial and Sumitomo Mitsui Financial surged 5-6 percent as the latest BoJ decision signaled the beginning of the slow unwind of ultra-low interest rates in the country.

Seoul stocks fell notably, with the Kospi ending 0.8 percent lower at 2,333.29 – extending losses for a fourth straight session on fears of a global recession.

Australian markets slumped, led by losses in resources and technology stocks. The benchmark S&P/ASX 200 Index dropped 1.5 percent to 7,024.30, while the broader All Ordinaries Index ended 1.7 percent lower at 7,199.60.

Domain Holdings Australia plunged 9.1 percent after the digital property portal updated the market that conditions in the real estate market have deteriorated since its annual general meeting.

Europe

European stocks have fallen in cautious trading on Tuesday after the Bank of Japan rattled markets with a surprise policy shift that allows long-term interest rates to rise more.

Investors are also reacting to comments by ECB policymaker Peter Kazimir that the “monetary policy should tighten at a stable pace.”

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

Shares of Engie SA have moved sharply lower in Paris. The energy provider announced that its earnings in fiscal 2022 and 2023 would be impacted by the implementation of inframarginal rent caps in Europe.

Orange SA shares have also fallen. The telecom group said in a statement that its deputy chief executive and head of finance, Ramon Fernandez, would leave the company at the end of the first quarter of 2023.

Oilfield services provider Petrofac has also shown a significant move to the downside in London after forecasting an annual operating loss.

On the other hand, Pfeiffer Vacuum, a manufacturer of vacuum pumps, has moved sharply higher after raising its full-year sales outlook.

Klöckner has also advanced. The German steel and metal company has agreed to acquire National Material of Mexico for US$340 million on a cash and debt free basis.

In economic news, German producer price inflation eased more than expected in November to reach its lowest level in nine months amid a slowdown in energy price growth, data from Destatis showed.

Producer prices climbed 28.2 percent year-over-year in November, slower than the 34.5 percent surge in October. That was also slower than the 30.6 percent increase economists had expected.

Further, the latest inflation rate was the weakest since February, when prices had risen 25.9 percent.

U.S. Economic Reports

The Commerce Department released a report on Tuesday showing a decrease in new residential construction in the U.S. in the month of November.

The report said housing starts fell by 0.5 percent to an annual rate of 1.427 million in November after tumbling by 2.1 percent to a revised rate of 1.434 million in October.

Economists had expected housing starts to decline by 0.7 percent to a rate of 1.415 million from the 1.425 million originally reported for the previous month.

The Commerce Department also said building permits plunged by 11.2 percent to an annual rate of 1.342 million in November after slumping by 3.3 percent to a revised rate of 1.512 million in October.

Building permits, an indicator of future housing demand, were expected to dive by 3.7 percent to 1.470 million from the 1.526 million originally reported for the previous month.

Stocks In Focus

Shares of Lucid Group (LCID) are seeing significant pre-market strength after the elective vehicle maker announced the successful capital raise of approximately $1.515 billion.

Office furniture maker Steelcase (SCS) may also move to the upside after reporting better than expected fiscal third quarter results and providing upbeat guidance.

Meanwhile, shares of General Mills (GIS) are moving lower in pre-market trading even though the food producer reported fiscal second quarter results that exceeded estimates and raised its full-year outlook.