Futures Pointing To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to see further downside following the weakness seen in the previous session.

Ongoing uncertainty about the outlook for interest rates may weigh on Wall Street amid recent concerns the Federal Reserve won’t lower rates as early as previously anticipated.

Potentially adding to worries the Fed will hold off on cutting rates, the Commerce Department released a report this morning showing U.S. retail sales increased by more than expected in the month of December.

The report said retail sales climbed by 0.6 percent in December after rising by 0.3 percent in November. Economists had expected retail sales to advance by 0.4 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales rose by 0.4 percent in December after inching up by 0.2 percent in November. Ex-auto sales were expected to edge up by another 0.2 percent.

The Labor Department also released a report showing import prices in the U.S. unexpectedly came in unchanged in the month of December.

The Labor Department said import prices were unchanged in December after declining by a revised 0.5 percent in November.

Economists had expected import prices to decrease by 0.5 percent compared to the 0.4 percent drop originally reported for the previous month.

Meanwhile, the report said export prices slumped by 0.9 percent for the third consecutive month. Export prices were expected to fall by 0.6 percent.

The downward momentum on Wall Street also comes amid continue increase in treasury yields, with the yield on the benchmark ten-year note climbing further above 4.0 percent.

U.S. stocks closed notably lower on Tuesday as higher Treasury yields and concerns that the Federal Reserve may not cut interest rates anytime soon hurt sentiment.

The major averages all ended in the red, with the Dow finishing with a more pronounced loss. The Dow settled with a loss of 231.86 points or 0.6 percent at 37,361.12. The S&P 500 ended down 17.85 points or 0.4 percent at 4,765.98.

The Nasdaq, which managed a brief spell in positive territory around mid-morning, closed with a marginal loss of 28.41 points or 0.2 percent at 14,944.35.

In addition to digesting hawkish comments from some central bank officials, including from the Federal Reserve, investors also reacted to quarterly earnings updates from some major U.S. companies such as Goldman Sachs and Morgan Stanley.

Boeing shares dropped nearly 8 percent. The stock’s price declined after Wells Fargo downgraded the company amid ongoing issues with the 737 Max 9 model.

Morgan Stanley ended lower by more than 4 percent. Morgan Stanley’s fourth-quarter bottom line totaled $1.38 billion or $0.85 per share, compared with $2.11 billion or $1.26 per share a year ago.

PayPal, Moderna, Hewlett Packard, Nike, Warner Bros Discovery, Bakher Hughes, Delta Air Lines, Chevron, HP, Invesco, Textron, Netflix, United Airlines Holdings and Bank of America lost 2 to 4 percent.

Goldman Sachs gained about 0.7 percent. The lender reported fourth quarter net earnings of $1.87 billion of $5.48 per share, up from $1.19 billion or $3.32 per share in the year-ago quarter.

Advanced Micro Devices climbed more than 8 percent. The stock surged on upbeat analyst commentary on semiconductor demand.

Nvidia, Walt Disney, Dollar General, Seagate Technology, Verizon and Nucor gained 1 to 3.2 percent.

A report from the Federal Reserve Bank of New York said the NY Empire State Manufacturing Index plunged to -43.7 in January, the lowest reading since May 2020.

Commodity, Currency Markets

Crude oil futures are tumbling $1.62 to $70.78 a barrel after slipping $0.28 to $72.40 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,206.10, down $4.10 compared to the previous session’s close of $2,030.20. On Tuesday, gold slumped $21.40.

On the currency front, the U.S. dollar is trading at 147.92 yen compared to the 147.19 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0860 compared to yesterday’s $1.0875.

Asia

Asian stocks declined on Wednesday as investors reacted to mixed Chinese data and kept a wary eye on the latest developments in the Middle East.

Market participants reined in expectations of early interest rate cuts following cautious comments from central bank officials at the World Economic Forum (WEF) in Davos.

The dollar held near a one-month high in Asian trading and gold extended its overnight slide, while oil prices fell nearly 1 percent on Chinese demand concerns.

Chinese stocks tumbled as a slew of key economic data pointed to a patchy recovery in the world’s second-biggest economy.

The Shanghai Composite Index plunged 2.1 percent to 2,833.62, while Hong Kong’s Hang Seng Index plummeted 3.7 percent to 15,276.90.

China’s GDP grew an annual 5.2 percent in the fourth quarter of 2023, official data showed, coming in below expectations for 5.3 percent growth but up from 4.9 percent in the third quarter.

Industrial production climbed 6.8 percent year-on-year in December to beat forecasts, while retail sales grew an annual 7.4 percent, missing forecasts for 8.0 percent growth.

Japanese markets fell modestly, with a weaker yen helping limit the downside. The currency dropped to its lowest level since early December on dovish BOJ expectations.

The Nikkei 225 Index hit a new 34-year peak before reversing direction to end 0.4 percent lower at 35,477.75, extending losses for a second straight session. The broader Topix Index closed down 0.3 percent at 2,496.38.

IT multinational Fujitsu, which is at the heart of the Post Office scandal in the U.K., slumped 4.1 percent.

Seoul stocks lost ground, with the Kospi finishing 2.5 percent lower at 2,435.90 amid uncertainty over China’s economic recovery.

Hyundai Motor, Samsung Electronics, LG Energy Solution, Samsung SDI, LG Chem, Posco Holdings and Posco Future M gave up 2-5 percent.

Australian stocks ended lower, dragged down by gold miners and energy stocks. The benchmark S&P ASX 200 Index slipped 0.3 percent to 7,393.10, while the broader All Ordinaries Index closed down 0.3 percent at 7,622.50.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished marginally lower at 11,767.03.

Europe

European stocks have moved sharply lower on Wednesday after several ECB policymakers warned that markets are getting ahead on rate cut expectations.

U.K. inflation unexpectedly accelerated in December and China missed fourth-quarter GDP estimates, adding to uncertainty over the global economic and rate outlook.

While the U.K.’s FTSE 100 Index has slumped by 1.7 percent, the French CAC 40 Index is down by 1.3 percent and the German DAX Index is down by 1.1 percent.

Italy’s Enel S.p.A. has declined after launching a dual-tranche sustainability-linked bond in the Eurobond market for 1.75 billion euros.

Miner Antofagasta has also shown a notable move to the downside after releasing its annual producer figures.

Betting and gaming company 888 Holdings has also plunged as it reported weak revenues in its fourth quarter and fiscal 2023.

Airline Wizz Air Holdings has also slumped after an announcement that it will pay an additional £1.2 million pounds ($1.5 million) to customers in compensation.

Automaker Renault has also moved to the downside despite posting an increase in its annual global sales volumes.

Meanwhile, meal delivery group Just Eat Takeaway.com was marginally higher in a weak market after lifting its full-year core profit outlook.

U.S. Economic Reports

The Commerce Department released a report on Wednesday showing U.S. retail sales increased by more than expected in the month of December.

The report said retail sales climbed by 0.6 percent in December after rising by 0.3 percent in November. Economists had expected retail sales to advance by 0.4 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales rose by 0.4 percent in December after inching up by 0.2 percent in November. Ex-auto sales were expected to edge up by another 0.2 percent.

Import prices in the U.S. unexpectedly came in unchanged in the month of December, according to a report released by the Labor Department on Wednesday.

The Labor Department said import prices were unchanged in December after declining by a revised 0.5 percent in November.

Economists had expected import prices to decrease by 0.5 percent compared to the 0.4 percent drop originally reported for the previous month.

Meanwhile, the report said export prices slumped by 0.9 percent for the third consecutive month. Export prices were expected to fall by 0.6 percent.

At 9 am ET, Federal Reserve Board Governor Michelle Bowman is due to participate in a discussion on “The Path Forward for Bank Capital Reform” before the U.S. Chamber of Commerce Protect Main Street Lending Event.

Federal Reserve Vice Chair for Supervision Michael Barr is also scheduled to speak on “Cyber Risk” before the 2nd Annual Massachusetts Institute of Technology/Federal Reserve System Conference on Measuring Cyber Risk in the Financial Services Sector at 9 am ET.

At 9:15 am ET, the Federal Reserve is due to release its report on industrial production in the month of December. Industrial production is expected to come in unchanged in December after inching up by 0.2 percent in November.

The Commerce Department is scheduled to release its report on business inventories in the month of November at 10 am ET. Business inventories are expected to edge down by 0.1 percent.

Also at 10 am ET, the National Association of Home Builders is due to release its report homebuilder confidence in the month of January. The housing market index is expected to rise to 39 in January from 37 in December.

The Treasury Department is scheduled to announce the results of this month’s auction of $13 billion worth of twenty-year bonds at 1 pm ET.

At 2 pm ET, the Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.

New York Federal Reserve President John Williams is scheduled to give opening remarks before a hybrid “An Economy that Works for All: Measurement Matters” event at the Federal Reserve Bank of New York at 3 pm ET.