Profit Taking, Slump By Apple May Weigh 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 following the pullback to close out 2023.

Profit taking may contribute to initial weakness on the first trading day of the new year, as some traders look to cash in on last year’s substantial gains.

The tech-heavy Nasdaq skyrocketed by 43.4 percent in 2023, while the S&P 500 soared by 24.2 percent and the Dow surged by 13.7 percent.

A steep drop by shares of Apple (AAPL) may also weigh on the markets, with the tech giant tumbling by 2.2 percent in pre-market trading.

The slump by Apple comes after Barclays downgraded its rating on the company’s stock to Underweight from Equal Weight.

Nonetheless, some traders may remain away from their desks following the New Year’s Day holiday, looking ahead to the release of some key U.S. economic data in the coming days.

The Labor Department’s monthly jobs report is likely to be in focus, while reports on manufacturing and service sector activity may also attract attention along with the minutes of the latest Federal Reserve meeting.

Following the lackluster performance seen in recent sessions, stocks fluctuated over the course of the trading session on Friday before ending the day mostly lower.

The major averages showed a lack of direction in early trading but slid more firmly into negative territory as the session progressed.

Despite an afternoon recovery attempt, the major averages all finished the day in the red. The Dow edged down 20.56 points or 0.1 percent to 37,689.54, the Nasdaq slid 83.78 points or 0.6 percent at 15,011.35 and the S&P 500 fell 13.52 points or 0.3 percent to 4,769.83.

The major averages still posted substantial gains for the year. The Nasdaq skyrocketed by 43.4 percent, the S&P 500 soared by 24.2 percent and the Dow surged by 13.7 percent.

The lower close on Wall Street may partly have reflected profit taking, as some traders looked to cash in on the recent strength in the markets.

Traders previously seemed hesitant to cash in on the recent gains amid concerns about missing out on further upside but apparently decided the final trading day of the year was the right time to lock in some profits.

Overall trading activity remained relatively subdued, however, with some traders looking to get a head start on New Year’s festivities.

Trading activity may pick back up next week, as the Labor Department is scheduled to release its closely watched monthly jobs report next Friday.

Reports on manufacturing and service sector activity may also attract attention along with the minutes of the latest Federal Reserve meeting.

In U.S. economic news, MNI Indicators released a report showing a substantial downturn by Chicago-area business activity in the month of December.

MNI Indicators said its Chicago business barometer tumbled to 46.9 in December from 55.8 in November, with a reading below 50 indicating contraction. Economists had expected the index to drop to 51.0.

Airline stocks showed a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 2.0 percent.

Considerable weakness also emerged among commercial real estate stocks, as reflected by the 1.2 percent loss posted by the Dow Jones U.S. Real Estate Index. The index ended Thursday’s trading at a ten-month closing high.

Oil service stocks also moved notably lower amid a modest decrease by the price of crude oil, while weakness was also visible among networking, computer hardware and steel stocks.

Commodity, Currency Markets

Crude oil futures are surging $1.63 to $73.28 a barrel after edging down $0.12 to $71.65 a barrel last Friday. Meanwhile, after falling $11.70 to $2,071.80 an ounce in the previous session, gold futures are inching up $5.50 to $2,077.30 an ounce.

On the currency front, the U.S. dollar is trading at 141.91 yen versus the 141.06 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0961 compared to last Friday’s $1.1036.

Asia

Asian stocks ended mixed on Tuesday as traders returned to their desks after the New Year break. The Japanese market remains closed until Thursday as the country assesses the damage from the earthquake that rocked the central region on New Year’s Day.

The dollar started 2024 on a firm footing as investors looked ahead to a busy week of economic data for important clues to the economic and interest rate outlook.

Oil prices were up nearly 2 percent in Asian trading after Iran sent a warship to the Red Sea in response to the U.S. Navy’s sinking of three Houthi boats over the weekend.

China’s Shanghai Composite Index dropped 0.4 percent to 2,962.28 as mixed manufacturing data called for adjustments in fiscal and monetary policies.

The Caixin factory activity gauge gained momentum in December, contrasting with the official reading showing activity contracted further in the month.

Hong Kong’s Hang Seng Index tumbled 1.5 percent to 16,788.55 as concerns persisted about the health of China’s property sector.

Baidu ended 0.6 percent lower after scraping its planned $3.6 billion acquisition of Nasdaq-listed JOYY Inc.’s live-streaming business in China.

Seoul stocks advanced ahead of a slew of U.S. data due this week, including the jobs report and the release of the Fed’s December meeting minutes. The Kospi ended up 0.6 percent at 2,669.81, led by technology, airline and shipbuilding stocks.

Australian markets ended at an over two-year high as strong commodity prices boosted mining and energy stocks. The benchmark S&P ASX 200 Index rose 0.5 percent to 7,627.80, while the broader All Ordinaries Index settled 0.5 percent higher at 7,867.40.

Investors shrugged off Judo Bank’s survey results showing that Australian factory activity in December saw its sharpest contraction since May 2020.

Europe

European stocks have moved mostly lower over the course of the trading session on Tuesday after the release of mixed Chinese manufacturing data.

The Eurozone’s PMI Manufacturing was finalized at 44.4 in December, up slightly from November’s 44.2.

Growth in the lending to households in the euro area slowed in November, while loans to the non-financial institutions were unchanged, preliminary data from the European Central Bank showed.

While the French CAC 40 Index has slid by 0.8 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.5 percent.

ASML has edged down slightly after the Dutch government blocked the company’s exports of some chip-making equipment to China.

Denmark’s shipping giant Maersk has surged. The company suspended the passage of vessels through a key Red Sea strait for 48 hours, after Yemeni rebels attacked one of its merchant ships.

Germany’s Hapag-Lloyd has also jumped after announcing on Friday that it had decided to continue diverting its vessels away from Suez and the Red Sea for security reasons.

TotalEnergies has also risen. The French company announced the start of crude oil production from the second development phase of the Mero field on the Libra block located over 180 kilometers off the coast of Rio de Janeiro, Brazil, in the pre-salt area of the Santos Basin.

Oil and gas engineering services business Plexus Holdings has also advanced. The company said its existing surface production wellhead license agreement with SLB, an oilfield services company, has been replaced by a new agreement with wider field of use for a consideration of $5.2 million to be paid in cash.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on construction spending in the month of November at 10 am ET.

Economists expect construction spending to climb by 0.5 percent in November following a 0.6 percent increase in October.

Stocks In Focus

Shares of GoodRx (GDRX) are moving sharply lower after Bank of America Securities downgraded its rating on the company’s stock to Underperform from Buy.

Cosmetics giant Estee Lauder (EL) may also move to the downside after Deutsche Bank downgraded its rating on the company’s stock to Hold from Buy.

Meanwhile, shares of Coinbase (COIN) are likely to see initial strength after Bitcoin topped $45,000 late Monday, reaching its highest level in nearly 21 months.