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 give back ground after moving notably higher over the course of the previous session.

Some trades may look to cash in on yesterday’s strong gains amid lingering uncertainty about the outlook for interest rates.

While the Federal Reserve is widely expected to leave interest rates unchanged later this month, traders have recently become increasingly tentative about whether the central bank will cut rates in March.

CME Group’s FedWatch Tool still indicates a 57.3 percent chance the Fed will lower rates by a quarter point in March, but that figure is well below recent highs.

An increase in treasury yields may also weigh on the markets, with the yield on the benchmark ten-year note rebounding after turning lower over the course of the previous session.

U.S. stocks ended on a buoyant note on Monday, with the Nasdaq outperforming the other major averages thanks to hectic buying in the technology sector.

A drop in bond yields and optimism about the outlook for stocks despite recent uncertainty about the likelihood of near-term interest rate cuts helped push stock prices higher.

The major averages all ended with strong gains. The Dow ended up 216.90 points or 0.6 percent at 37,683.01, the S&P 500 jumped 66.30 points or 1.4 percent to 4,763.54, and the Nasdaq settled with a gain of 319.70 points or 2.2 percent at 14,843.77.

The Dow was weighed down by Boeing shares, which fell 8 percent after the Federal Aviation Administration ordered airlines to ground dozens of the company’s 737 Max 9 aircraft after a door plug blew out in the middle of an Alaska Airlines flight on Friday.

American Airlines climbed more than 7 percent. Chipmaker Nvidia rallied more than 6 percent. Intel and Advanced Micro Devices climbed about 5.5 percent.

Organon & Co. shares soared 13 percent. Atista Networks, Fortinet, Dexcom, Global Payments, Teleflex and Moderna gained 4 to 7 percent.

Salesforce.com, HP, Intel, Airbnb, Adobe Systems, Amazon, United Airlines Holdings, PayPal, Netflix and Texas Instruments were among the other major gainers in the session.

Commodity, Currency Markets

Crude oil futures are jumping $1.85 to $72.62 a barrel after plunging $3.04 to $70.77 a barrel on Monday. Meanwhile, after falling $16.30 to $2,033.50 an ounce in the previous session, gold futures are inching up $5.40 to $2,038.90 an ounce.

On the currency front, the U.S. dollar is trading at 143.89 yen compared to the 144.23 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0942 compared to yesterday’s $1.0950.

Asia

Asian stocks rose on Tuesday after a drop in Treasury yields helped spur a rally in technology stocks on Wall Street overnight. Regional gains, however, remained capped ahead of key U.S. inflation data and bank earnings due this week.

The dollar steadied in Asian trading, helping gold prices recover from a three-week low. Oil ticked higher after tumbling around 4 percent in the U.S. trading session on demand worries.

Chinese shares eked out modest gains as traders ramped up bets on more monetary easing this year. The benchmark Shanghai Composite Index edged up 0.2 percent to 2,893.25 as authorities indicated they may lower the amount of money banks must set aside as reserves to boost lending.

Hong Kong’s Hang Seng Index finished 0.2 percent lower at 16,190.02 after a choppy session.

Japanese markets rallied as traders returned from a holiday break. The Nikkei 225 Index jumped 1.2 percent to 33,763.18, reaching its highest level since March 1990. The broader Topix Index settled 0.8 percent higher at 2,413.09.

Tech stocks surged, with Tokyo Electron and Advantest gaining 3.3 percent and 6 percent, respectively. Nintendo jumped 4.4 percent on reports it may launch the next-gen Switch console, potentially called “Switch 2,” this year.

Sony rose 1.3 percent after reports that it may cancel the merger deal of its India unit with Zee Entertainment Enterprises.

In economic news, inflation in Tokyo slowed for a second month in December, while household spending dropped for the 13th consecutive month in November, separate reports revealed.

Seoul stocks edged lower, with the Kospi closing down 0.3 percent at 2,561.24 – falling for a fifth consecutive session due to extended selling spree by institutions.

Samsung Electronics fell 2.4 percent after posting its sixth straight quarter of declining operating profit.

Australian markets advanced to snap a four-day losing streak after retail sales topped forecasts.

The benchmark S&P/ASX 200 Index climbed 0.9 percent to 7,520.50 in its best day since December 14 ahead of November inflation data due on Wednesday. The broader All Ordinaries Index closed 1.0 percent higher at 7,749.50, led by mining and banking stocks.

Alumina soared 7.7 percent as Alcoa announced its decision to curtail output at one of its three Western Australian refineries.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index closed up 0.9 percent at 11,844.39, its highest close since early August.

Europe

European stocks have moved lower on Tuesday after opening on a firm note on expectations for Fed rate cuts and a soft landing by the world’s largest economy.

Markets reversed gains after data showed German industrial production unexpectedly declined in November, marking the sixth monthly fall in a row.

Industrial production slid 0.7 percent on a monthly basis in November following a revised 0.3 percent drop in October. Output was forecast to grow 0.2 percent.

Elsewhere, France’s trade deficit decreased in November due to a sharp drop in imports, data released by customs office showed earlier today.

The trade deficit narrowed more-than-expected to 5.9 billion euros in November from 8.5 billion euros in October. The shortfall was forecast to fall moderately to 7.9 billion euros.

Investors also awaited key U.S. inflation data this week for important clues on the Fed’s rate trajectory.

Additionally, the U.S. earnings season starts in earnest later this week, with banks JPMorgan Chase, Bank of America and Citigroup due to report fourth quarter and full-year results on Friday.

While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the German DAX Index and the French CAC 40 Index are both down by 0.5 percent.

German insurance giant Munich Re has moved to the downside after sharing an update on cost of natural disasters in 2023.

Warhammer maker Games Workshop Group has also slumped in London despite delivering strong half-year results.

Hill & Smith, the provider of sustainable infrastructure products and services, has also fallen after acquiring Capital Steel Service, LLC for $6.25 million.

Meanwhile, camping vans maker Trigano has jumped in Paris after posting higher revenue in its fiscal first quarter.

GSK has also moved to the upside after it struck a $1.4 billion deal to acquire Anglo-American biotech Aiolos Bio.

U.S. Economic Reports

The Commerce Department released a report on Tuesday showing the U.S. trade deficit unexpectedly shrank in the month of November.

The report said the trade deficit narrowed to $63.2 billion in November from a revised $64.5 billion in October. Economists had expected the trade deficit to widen to $65.0 billion from the $64.3 billion originally reported for the previous month.

The unexpectedly smaller trade deficit came as the value of imports tumbled by 1.9 percent to $316.9 billion, while the value of export slumped by 1.9 percent to $253.7 billion.

At 12 pm ET, Federal Reserve Vice Chair for Supervision Michael Barr is due to participate in a “Bank Regulation” moderated discussion with Women in Housing and Finance.

The Treasury Department is scheduled to announce the results of this month’s auction of $52 billion worth of three-year notes.

Stocks In Focus

Shares of Hewlett Packard Enterprise (HPE) are moving sharply lower in pre-market trading after a report from the Wall Street Journal said the company is in advanced talks to buy Juniper Networks (JNPR) for about $13 billion.

Streaming giant Netflix (NFLX) may also move to the downside after Citi downgraded its rating on the company’s stock to Neutral from Buy.

Meanwhile, shares of Match Group (MTCH) are seeing significant pre-market strength after a report from the Wall Street Journal said Elliott Investment Management has built a big stake the online-dating company and plans to take steps to boost its languishing stock.