U.S. Stocks May Move Back To The Downside In Early Trading

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 yesterday’s choppy trading session moderately higher.

Traders may look to cash in on the previous session’s gains amid ongoing concerns about the outlook for interest rates.

Last week, the Federal Reserve left interest rates unchanged as widely expected but forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

CME Group’s Fed Watch Tool is currently indicating a 74.5 percent chance the Fed will leave interest rates unchanged at its next meeting in late October/early November and just a 25.5 percent chance of a quarter point rate hike.

Meanwhile, the Fed Watch Tool is indicating a 59.3 percent chance the Fed will leave rates unchanged at its December meeting and a 35.5 percent chance the central bank will raise rates by a quarter point.

Later in the week, the Commerce Department is due to release its report on personal income and spending in the month of August, which includes readings on inflation said to be preferred by the Fed.

Following the sell-off seen last week, stocks showed a lack of direction over the course of the trading session on Monday. The major averages spent the day bouncing back and forth across the unchanged line before closing in positive territory.

The major averages moved to the upside going into the close of trading. The Nasdaq climbed 59.51 points or 0.5 percent to 13,271.32, the S&P 500 rose 17.38 points or 0.4 percent to 4,337.44 and the Dow inched up 43.04 points or 0.1 percent to 34,006.88.

The higher close on Wall Street partly reflected bargain hunting, with traders pick up stocks at reduced levels following the steep drop seen last week.

The turnarounds by the Nasdaq and the S&P 500 came after they ended last Friday’s trading at their lower closing levels in well over three months.

Buying interest remained somewhat subdued, however, as ongoing concerns about the outlook for interest rates continued to hang over the markets.

Energy stocks turned in a strong performance despite a modest decrease by the price of crude oil. Reflecting the strength in the sector, the Philadelphia Oil Service Index advanced by 1.7 percent and the NYSE Arca Oil Index climbed by 1.3 percent.

Natural gas, retail and transportation stocks also moved to the upside, while airline and gold stocks showed notable moves to the downside.

While the NYSE Arca Airline Index slid 1.2 percent to its lowest closing level in six months, the NYSE Arca Gold Bugs Index dropped by 1.0 percent amid a modest decrease by the price of gold.

Commodity, Currency Markets

Crude oil futures are sliding $0.63 to $89.05 a barrel after falling $0.35 to $89.68 barrel on Monday. Meanwhile, after slipping $9 to $1,936.60 an ounce in the previous session, gold futures are edging down $7.70 to $1,928.90 an ounce.

On the currency front, the U.S. dollar is trading at 148.83 yen compared to the 148.88 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0605 compared to yesterday’s $1.0593.

Asia

Asian stocks retreated on Tuesday, as the dollar reached its peak for the year and the 10-year U.S. Treasury yield topped 4.5 percent amid bets that borrowing costs in the U.S. and Europe will remain higher for longer.

Fresh signs of stress in China’s property sector and worries about a possible U.S. government shutdown also kept investors nervous.

Chinese markets closed lower as investors awaited industrial profit, manufacturing and services PMI data due later in the week for direction.

China’s Shanghai Composite Index dropped 0.4 percent to 3,102.27 ahead of the week-long National Day holiday beginning on Friday.

Hong Kong’s Hang Seng Index tumbled 1.5 percent to 17,466.90 on lingering economic and geopolitical worries.

U.S. President Joe Biden’s administration on Monday imposed new trade restrictions on 11 Chinese and five Russian companies for allegedly supplying a blacklisted Russian firm with parts to make drones for Russia’s war effort in Ukraine.

Japanese markets fell sharply as rising U.S. Treasury yields pulled down chip-related shares. The Nikkei 225 Index slumped 1.1 percent to 32,315.05, while the broader Topix Index settled 0.6 percent lower at 2,371.94.

Advantest, Tokyo Electron and Screen Holdings plunged 2-4 percent as U.S. Treasury yields hit their highest level since October 2007 amid the possibility of a prolonged high interest-rate environment.

Japan Exchange Group rallied 2.4 percent after the operator of the Tokyo Stock Exchange raised its annual net profit forecast.

Seoul stocks hit a five-month low as developments at Chinese developers China Evergrande Group and China Oceanwide Holdings dampened hopes for an economic recovery in the world’s second largest economy.

The Kospi ended down 1.3 percent at 2,462.97 – extending losses to a fourth straight session. Samsung Electronics, POSCO Holdings, SK Hynix and Samsung Biologics lost 1-2 percent.

Australian markets ended lower as weak commodity prices due to a stronger dollar weighed on gold and mining stocks.

The benchmark S&P/ASX 200 Index slid 0.5 percent to 7,038.20 ahead of August inflation sales data due on Wednesday. The broader All Ordinaries Index settled 0.5 percent lower at 7,242.90.

Europe

European stocks have moved mostly lower on Tuesday, as investors continue to fret about stubbornly higher interest rates and a weakening Chinese economy. High oil prices and worries around a possible U.S. government shutdown have also weighed on markets.

The pan European STOXX 600 Index has fallen by 0.5 percent after losing 0.6 percent on Monday. The French CAC 40 Index and the German DAX Index are also down by 0.7 percent and 0.6 percent, respectively, while the U.K.’s FTSE 100 has bucked the downtrend and edged up by 0.2 percent.

Rheinmetall AG, a German automotive and arms maker, has fallen despite news that it bagged two new orders with aggregate order value in the three-digit million euro range from two undisclosed companies.

ASOS has also moved lower after the online fashion retailer reported a drop in sales in the fourth quarter and warned profit would be around the bottom of its guided range.

China-exposed LVMH, Kering and Hermes International have also dropped in Paris, as developments at Chinese developers China Evergrande Group and China Oceanwide Holdings dampened hopes for an economic recovery in the world’s second largest economy.

On the other hand, engineering giant Smiths Group has moved to the upside after reporting a record increase in operating profit for the year to July.

Swiss drug major Novartis AG has also gained. Its unit Sandoz announced that the European Commission granted marketing authorization for Tyruko (natalizumab) for multiple sclerosis in Europe.

Origin Enterprises, a farm services provider, has also rallied in London despite reporting lower profit before tax for fiscal 2023.

British lender Barclays has also jumped after announcing plans to shut down the U.K. current and savings accounts of British expatriates.

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of July at 9 am ET.

At 10 am ET, the Commerce Department is due to release its report on new home sales in the month of August. Economists expect new home sales to decrease to an annual rate of 700,000 in August after surging to a rate of 714,000 in July.

The Conference Board is also scheduled to release its report on consumer confidence in the month of September at 10 am ET. The consumer confidence index is expected to edge down to 105.9 in September from 106.1 in August.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $48 billion worth of two-year notes.

Stocks In Focus

Shares of United Natural Foods (UNFI) are plunging in pre-market trading after the natural and organic food company swung to a fiscal fourth quarter loss and provided disappointing guidance.

Recreational vehicle maker Thor Industries (THO) may also see initial weakness after reporting better than expected fiscal fourth quarter results but forecasting a decrease in net sales in the coming year.

Meanwhile, shares of DraftKings (DKNG) are seeing significant pre-market strength after JPMorgan upgraded its rating on the sports betting company to Overweight from Neutral.

Automotive company Fisker (FSR) may also move to the upside after Bank of America resumed coverage of the company’s stock with a Buy rating.