Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open for the markets on Tuesday, with stocks likely to give back ground after trending higher over the past several sessions.

Traders may look to cash in on the recent strength in the markets, which partly reflected optimism that the Federal Reserve is done raising interest rates.

The tech-heavy Nasdaq has closed higher for seven consecutive sessions, while the Dow and the S&P 500 have closed higher for six straight sessions.

The Dow inched slightly higher on Monday, with the uptick lifting the blue chip index to its highest closing level in well over a month.

Overall trading activity may remain somewhat subdued, however, as traders look ahead to speeches by Fed Chair Jerome Powell on Wednesday and Thursday.

Powell is due to deliver opening remarks at the Division of Research and Statistics Centennial Conference on Wednesday and participate in a policy panel discussion before the 24th Jacques Polak Annual Research Conference on Thursday.

Traders are likely to pay close attention to Powell’s remarks, looking for additional confirmation the Fed will leave interest rates unchanged for the foreseeable future.

After moving sharply higher over the course of the previous week, stocks turned in a relatively lackluster performance during trading on Monday. The major averages spent most of the day lingering near the unchanged line before closing modestly higher.

While the Nasdaq climbed 40.50 points or 0.3 percent to 13,518.78 and the S&P 500 rose 7.64 points or 0.2 percent to 4,365.98, the narrower Dow inched up 34.54 points or 0.1 percent to 34,095.86, its best closing level in well over a month.

The modestly higher close on Wall Street came as traders continued to express optimism about the outlook for interest rates.

The Federal Reserve’s monetary policy announcement last Wednesday combined with softer than expected jobs data last Friday has led to optimism that the central bank is done raising interest rates.

CME Group’s FedWatch Tool currently indicates the Fed is likely to leave rates unchanged in the coming months until potentially cutting rates in mid-2024.

Trading activity remained somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

Several Fed officials, including Powell, are due to speak in the coming days, while traders are also likely to keep an eye on reports on initial jobless claims and consumer sentiment.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Steel stocks turned in a strong performance on the day, however, with the NYSE Arca Steel Index climbing by 1.5 percent.

Significant strength was also visible among pharmaceutical stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Pharmaceutical Index.

On the other hand, airline stocks showed a substantial move to the downside, dragging the NYSE Arca Airline Index down by 2.8 percent.

Natural gas, oil service and commercial real estate stocks also saw considerable strength, partly offsetting the strength in the aforementioned sectors.

Commodity, Currency Markets

Crude oil futures are slumping $1.69 to $79.13 a barrel after rising $0.31 to $80.82 on Monday. Meanwhile, after falling $10.60 to $1,988.60 an ounce in the previous session, gold futures are sliding $22.40 to $1,966.20 an ounce.

On the currency front, the U.S. dollar is trading at 150.59 yen compared to the 150.07 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0678 compared to yesterday’s $1.0718.

Asia

Asian stocks declined on Tuesday, with a resurgence in U.S, Treasury yields and mixed Chinese data weighing on investor sentiment.

The dollar bounced back amidst signs of an ease in geopolitical tensions after Israel said it would consider “tactical little pauses” in fighting to allow the entry of aid or the exit of hostages from the Gaza Strip.

Bond yields steadied after climbing overnight as Minneapolis Federal Reserve Bank President Neel Kashkari said he’s not convinced rate hikes are done. Gold nursed losses, while oil prices were down over 1 percent in Asian trading.

China’s Shanghai Composite Index recouped early losses to finish marginally lower at 3,057.27 as October trade data painted a mixed picture of the world’s second largest economy. Hong Kong’s Hang Seng Index tumbled 1.7 percent to 17,670.16.

Chinese exports shrank 6.4 percent year-on-year in October, while imports unexpectedly grew 3.0 percent to snap 11 straight months of decline, official data showed in a sign that the recovery in the world’s second-largest economy remains uneven despite a series of government stimulus measures.

Japanese shares fell sharply as investors booked profits after a recent string of gains. The Nikkei 225 Index slumped 1.3 percent to 32,271.82, snapping a four-session winning streak after having hit over a one-month high the previous day. The broader Topix Index settled 1.2 percent lower at 2,332.91.

Tech stocks such as Advantest and Tokyo Electron gave up 1-2 percent, while Uniqlo brand owner Fast Retailing lost about 1 percent.

Food maker Ajinomoto plunged 10.2 percent despite raising its annual net profit forecast. Machinery maker Hitachi Zosen rallied 4.3 percent after lifting its annual profit forecast.

South Korea’s Kospi plunged 2.3 percent to close at 2,443.96 after rallying by the most in over three years on Monday due to the re-imposition of a ban on short selling.

Australian markets finished modestly lower after the Reserve Bank of Australia lifted the official cash rate by 25 basis to 4.35 percent, as widely expected, in its bid to control persisting inflation.

The benchmark S&P/ASX 200 Index slipped 0.3 percent to 6,977.10, while the broader All Ordinaries Index closed 0.2 percent lower at 7,176.60.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended down 0.3 percent at 11,223.86.

Europe

European stocks are flat to slightly lower on Tuesday as China reported mixed trade data and investors look ahead to Fed Chair Jerome Powell’s speeches on Wednesday and Thursday for additional clarity on the U.S. rate outlook.

Meanwhile, data showed German industrial output registered a monthly decrease of 1.4 percent in September, faster than the revised 0.1 percent drop in August. This was the fourth consecutive decline. On a yearly basis, industrial production registered a 3.7 percent drop in September.

Elsewhere, U.K. house prices rose in October after falling for six months in a row, results of a survey by the Lloyds Bank subsidiary Halifax and S&P Global showed.

The house price index rose 1.1 percent from September, when prices declined 0.3 percent. Economists had forecast a 0.2 percent gain.

While the U.K.’s FTSE 100 Index is up by 0.1 percent, the German DAX Index is down by 0.2 percent and the French CAC 40 Index is down by 0.5 percent.

Swiss banking giant UBS Group has rallied after reporting stronger-than-expected client inflows and progress in meeting cost-saving goals.

Shares of Watches of Switzerland Group has also surged after the luxury watch retailer reported higher revenues in its second quarter and said it expects to more than double sales and profits by fiscal 2028.

Housebuilder Persimmon has also shown a notable move to the upside after raising its guidance for new home completions.

Primark owner Associated British Foods has also soared after it reported a 5 percent increase in annual profit and declared a special dividend.

Engie has also advanced. The French energy company raised its full-year outlook after reporting earnings before interest and taxes of 8.322 billion euros for the 9-month period, up 14.7 percent from 7.254 billion euros in the same period a year ago.

Meanwhile, Germany’s Evotec has fallen after it entered into a R&D collaboration with Dewpoint Therapeutics to advance Dewpoint’s oncology pipeline programs of condensate modifying therapeutics to Investigational New Drug Applications using Evotec’s data-driven platform.

U.S. Economic Reports

A report released by the Commerce Department on Monday showed the U.S. trade deficit widened by more than expected in the month of September.

The Commerce Department said the trade deficit increased to $61.5 billion from a revised $58.7 billion in August.

Economists had expected the trade deficit to climb to $60.2 billion from the $58.3 billion originally reported for the previous month.

The wider than expected deficit came as the value of imports surged by 2.7 percent to $322.7 billion, while the value of exports jumped by 2.2 percent to $261.1 billion.

At 9:50 am ET, Kansas City Federal Reserve President Jeffrey Schmid is due to speak before the “Energy and the Economy: Reshuffling the Energy Deck” conference.

New York Federal Reserve President John Williams is scheduled to moderate a hybrid discussion organized by the Economic Club of New York at 12 pm ET.

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

Dallas Federal Reserve President Lorie Logan is scheduled to speak before the “Energy and the Economy: Reshuffling the Energy Deck” conference at 1:30 pm ET.

At 3 pm ET, the Federal Reserve is due to release its report on consumer credit in the month of September. Consumer credit is expected to increase by $10.0 billion in September after falling by $15.6 billion in August.

Stocks In Focus

Shares of Sanmina (SANM) are moving sharply lower in pre-market trading after the electronics manufacturing services provider forecast fiscal first quarter revenues below analyst estimates.

Exercise equipment and media company Peloton (PTON) may also come under pressure after Deutsche Bank downgraded its rating on the company’s stock to Hold from Buy.

On the other hand, shares of Planet Fitness (PLNT) are seeing significant pre-market strength after the gym chain reported better than expected third quarter results and raised its full-year guidance.

Online travel platform Tripadvisor (TRIP) is also likely to move to the upside after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.