U.S. Stocks May Show Lack Of Direction In Early Trading

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the weakness seen in the previous session.

After a gap down opening and a subsequent fall to lower levels, U.S. stocks languished in the red right through the day’s session and eventually ended on a weak note on Tuesday.

Rising worries about the health of China’s economy, and concerns about U.S. interest rate after data showed a bigger than expected increase in retail sales in the month of July rendered the mood bearish.

Higher bond yields, and a warning from Fitch that it may have to downgrade credit ratings of several banks, including JP Morgan, hurt as well.

The major averages all ended notably lower. The Dow ended with a loss of 361.24 points or 1.02 percent at 34,946.39. The S&P 500 ended down 51.86 points or 1.16 percent at 4,437.86, and the Nasdaq settled at 13,631.05, recording a loss of 157.28 points or 1.14 percent.

Data from the Commerce Department showed retail sales in the U.S. increased 0.7 percent month-over-month in July, rising for the fourth consecutive month. Retail sales rose 0.3 percent in June.

The bigger than expected increase in retail sales has raised the possibility of the Federal Reserve deciding to keep interest rates higher for longer.

Data from the Labor Department showed export prices in the U.S. surged 0.7 percent month-over-month in July after a downwardly revised 0.7 percent fall in June. On a yearly basis, export prices dropped 7.9 percent, following an 11.9 percent decline in June.

Import prices rose 0.4 percent in July, following a downwardly revised 0.1 percent drop in June. Year-on-year, import prices were down 4.4 percent compared to 6.1 percent plunge in June.

Major banks JP Morgan, American Express, Wells Fargo, Citigroup and Goldman Sachs, all ended weak, losing between 1.7 to 2.8 percent.

Chevron, Caterpillar, Intel, 3M and Walt Disney lost 2 to 2.8 percent. Boeing, Travelers Companies, Walgreens Boots Alliance, Visa, Cisco Systems and Nike ended lower by 1 to 1.7 percent.

Apple, Meta Platforms and Alphabet also ended notably lower.

Amgen climbed nearly 2 percent. Home Depot gained about 0.8 percent.

Commodity, Currency Markets

Crude oil futures are rising $0.36 to $81.35 a barrel after tumbling $1.52 to $80.99 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,932, down $3.20 compared to the previous session’s close of $1,935.20. On Tuesday, gold slid $8.80.

On the currency front, the U.S. dollar is trading at 145.81 yen compared to the 145.57 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0910 compared to yesterday’s $1.0905.

Asia

Asian stocks retreated on Wednesday, with uncertainty over the Federal Reserve’s future rate hike path, more disappointing Chinese economic data and fresh concerns over the health of the U.S. banking sector keeping investors nervous.

U.S. consumer spending continues to show signs of persistent strength, raising concerns that interest rates will remain higher for longer.

Data showed that China’s house prices continued to decline in July, in a further sign of the property slowdown.

Fitch has warned that it may downgrade dozens of U.S. banks including JP Morgan Chase because of turbulence in the industry.

The dollar was on the front foot in Asian trade and oil extended overnight losses on China demand worries while gold edged up slightly against a backdrop of risk aversion.

Chinese shares fell sharply on signs of a faltering economy and the lack of meaningful stimulus from policymakers to revive growth.

The benchmark Shanghai Composite index fell 0.82 percent to 3,150.13 while Hong Kong’s Hang Seng index tumbled 1.36 percent to 18,329.30.

Japanese shares closed at a more than two-month low on concerns about weakening growth in China and fears of a possible downgrade of U.S. major banks.

The Nikkei average slumped 1.46 percent to 31,766.82 while the broader Topix index settled 1.29 percent lower at 2,260.84.

Banks led losses, with Mitsubishi UFJ Financial, Sumitomo Mitsui Financial and Mizuho Financial losing 2-3 percent.

Uniqlo brand owner Fast Retailing gave up 1.9 percent and technology investor SoftBank lost 3.1 percent.

Seoul stocks slumped and the Korean won weakened to a three-month low in the wake of rising global uncertainties. The Kospi average plummeted 1.76 percent to 2,525.64.

Australian markets succumbed to selling pressure on China jitters, with tech, mining and financial stocks pacing the decliners.

The benchmark S&P/ASX 200 ended down 1.50 percent at 7,195.20, marking its biggest fall in about six weeks. The broader All Ordinaries index closed 1.44 percent lower at 7,411.80.

Lender NAB fell over 1 percent despite announcing plans to buy back as much as A$1.5 billion ($970 million) of its shares to help further bolster its balance sheet.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 index recouped some early losses to finish 0.49 percent lower at 11,763.11 after the Reserve Bank kept interest rates steady.

Europe

European shares were mostly higher on Wednesday after the release of Eurozone industrial production and Q2 GDP data.

Euro area industrial production unexpectedly rose by 0.5 percent month-over-month in June 2023, after a revised flat reading in the prior month, the Eurostats reported.

Separate data revealed the Eurozone economy expanded by 0.3 percent on a quarterly basis in the three months to June of 2023, matching the consensus estimates.

The pan European STOXX 600 was up 0.2 percent at 456.50 after closing at its lowest level in more than a month on Tuesday.

The German DAX edged up 0.2 percent and France’s CAC 40 added 0.4 percent while the U.K.’s FTSE 100 was down 0.2 percent at 7,372 after the release of U.K. inflation data.

U.K. consumer prices rose at the slowest pace in nearly one-and-a-half years in July reflecting lower energy prices, the Office for National Statistics said today.

Consumer price inflation slowed to 6.8 percent in July, as expected, from 7.9 percent in June. This was the weakest since March 2022, when inflation was 6.2 percent.

However, core inflation remained at a high of 6.9 percent, underscoring rate hike predictions.

In corporate news, Danish brewer Carlsberg A/S edged up slightly after lifting its 2023 profit forecast.

Swiss eye-care firm Alcon dropped half a percent despite reporting a rise in Q2 sales and raising its full-year outlook.

Miners fell on China growth worries, with Antofagasta down 1.4 percent and Rio Tinto falling half a percent.

Insurer Admiral Group soared 5.2 percent after posting a marginal rise in its first-half pre-tax profit.

Likewise, Aviva rallied nearly 3 percent after reporting strong first half results with profitable growth momentum across the group.

Essentra, a supplier of plastic and fiber products, fell about 1 percent after half-year revenue declined 5.5 percent year-on-year.

U.S. Economic Reports

New residential construction in the U.S. saw a substantial rebound in the month of July, according to a report released by the Commerce Department on Wednesday.

The Commerce Department said housing starts surged 3.9 percent to an annual rate of 1.452 million in July after plunging by 11.7 percent to a revised rate of 1.398 million in June.

Economists had expected housing starts to increase to a rate of 1.448 million from the 1.434 million originally reported for the previous month.

Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.442 million after tumbling by 3.7 percent to a revised rate of 1.441 million in June.

Building permits, an indicator of future housing demand, were expected to climb to a rate of 1.463 million from the 1.440 million originally reported for the previous month.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of July. Industrial production is expected to rise by 0.3 percent in July after falling by 0.5 percent in June.

The Energy Information Administration is due to release its report on oil inventories in the week ended August 11th at 10:30 am ET.

Crude oil inventories are expected to decrease by 2.3 million barrels after jumping by 5.9 million barrels in the previous week.

At 2 pm ET, the Federal reserve is scheduled to release the minutes of the latest Federal Open Market Committee meeting.