Lingering Rate Uncertainty May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction following the mixed performance seen in the previous session.

Traders may take a step back to assess the recent strength in the markets, which has seen the major averages climb to new record highs.

Renewed confidence the Federal Reserve will lower interest rates in the coming months has contributed to the advance, but recent comments from some Fed officials have once again created some uncertainty.

While the likelihood rates will be lower by September remains high, the chances have fallen to 75.3 percent from close to 90 percent last week, according to CME Group’s FedWatch Tool.

Another quiet day on the U.S. economic front may also keep some traders on the sidelines ahead of the release of the minutes of the Fed’s latest monetary policy meeting on Wednesday.

The minutes of the April 30-May 1 meeting may shed additional light on Fed officials’ thinking with regard to the outlook for rates.

After an early advance, the major U.S. stock indexes moved in opposite directions over the course of the trading session on Monday.

The tech-heavy Nasdaq added to last week’s strong gains, reaching a new record closing high, while the Dow gave back ground after closing above 40,000 for the first time last Friday.

The Nasdaq ended the day up 108.91 points or 0.7 percent at 16,794.87. The S&P 500 also crept up 4.86 points or 0.1 percent to 5,308.13, but the Dow fell 196.82 points or 0.5 percent at 39,806.77.

The advance by the Nasdaq reflected strength in the tech sector, with semiconductor stocks turning in a particularly strong performance on the day.

Reflecting the strength among semiconductor stocks, the Philadelphia Semiconductor Index jumped by 2.2 percent to a two-month closing high.

Chipmaker Micron Technology (MU) helped lead the way higher, surging by 3.0 percent after Morgan Stanley upgraded its rating on the company’s stock to Equal Weight from Underweight.

Ai darling Nvidia (NVDA) also shot up by 2.5 percent ahead of the release of its fiscal first quarter results after the close of trading on Wednesday.

Gold stocks also saw notable strength on the day, as the price of the precious metal reached a new record high, while banking stocks and telecom stocks moved to the downside.

A steep drop by shares of JPMorgan Chase (JPM) weighed on the Dow, with the financial giant tumbling by 4.5 percent after ending last Friday’s trading at a record closing high.

The pullback by JPMorgan came after CEO Jamie Dimon implied during remarks at the company’s annual investor day that he may retire in fewer than five years.

Overall trading remained somewhat subdued, however, as traders seemed reluctant to make more significant bets amid a lack of major U.S. economic data on the day.

The economic calendar remains relatively quiet throughout the week, although reports on durable goods orders and new and existing home sales may attract some attention along with the minutes of the latest Fed meeting.

Commodity, Currency Markets

Crude oil futures are tumbling $1.66 to $78.14 a barrel after slipping $0.26 to $79.80 a barrel on Monday. Meanwhile, after jumping $21.10 to $2,438.50 an ounce in the previous session, gold futures are falling $7.60 to $2,430.90 an ounce.

On the currency front, the U.S. dollar is trading at 156.27 yen compared to the 156.26 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0856 compared to yesterday’s $1.0857.

Asia

Asian stocks ended lower on Tuesday as a stimulus-driven China rally paused and minutes of the May 2024 Reserve Bank of Australia meeting showed the central bank considered increasing interest rates during the meeting.

Gold slipped from record highs touched the previous day and the dollar firmed up after U.S. Federal Reserve officials tempered investor enthusiasm about potential interest rate cuts.

Oil prices dipped despite a recent uptick in geopolitical tensions and chances of crude oil production and exports being affected in the aftermath of Iranian president’s death in a helicopter crash.

China’s Shanghai Composite Index dropped 0.4 percent to 3,157.97, dragged down by cyclical shares.

Hong Kong’s Hang Seng Index slumped 2.1 percent to 19,220.62, with electric vehicle and technology stocks leading losses.

Alibaba Group Holding fell over 1 percent after its cloud unit further slashed the API input price for its GPT-4 class “Qwen-Long” foundation model from the Tongyi Qianwen series.

Japanese stocks also moved to the downside after seeing early strength, with the Nikkei 225 Index falling 0.3 percent to 38,946.93. The broader Topix Index dipped 0.3 percent to 2,759.72.

Seoul stocks declined ahead of the release of the minutes from the U.S. Federal Reserve’s latest monetary policy meeting.

The Kospi slid 0.7 percent to 2,724.18, with Posco Holdings and LG Chem falling around 2 percent each. IT services company Samsung SDS surged 5 percent.

Australian markets ended slightly lower as hawkish RBA minutes weighed. The benchmark S&P ASX 200 Index dipped 0.2 percent to 7,851.70, while the broader All Ordinaries Index settled 0.2 percent lower at 8,120.20.

James Hardie Industries, the largest global maker of fibre cement products, plunged 14.8 percent after lowering its fiscal 2025 outlook.

Casino operator Star Entertainment Group lost 7.4 percent after Hard Rock International denied any involvement in a takeover bid.

Diagnostics firm Sonic Healthcare gave up 6 percent after cutting its FY24 guidance.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index ended down 0.5 percent at 11,675.99.

Europe

European stocks have moved lower on Tuesday following cautious comments from Federal Reserve officials on inflation and the interest rate outlook.

In economic news, the euro area current account surplus increased in March on improving primary income, the European Central Bank reported.

The current account balance posted a surplus of 36 billion euros in March compared to a 29 billion euros surplus in February. In the same period last year, the balance was a 13 billion euro surplus.

The surplus on goods trade fell to 33 billion euros from 34 billion euros in the prior month. Likewise, the services surplus decreased to 5 billion euros from 7 billion euros.

German producer prices decreased 3.3 percent on a yearly basis in April, faster than the 2.9 percent fall in March, data from Destatis revealed. Economists had forecast an annual fall of 3.2 percent.

On a monthly basis, producer prices advanced 0.2 percent, the same pace of growth as seen in March and matching economists’ expectations.

While the French CAC 40 Index has slumped by 1.0 percent, the German DAX Index is down by 0.6 percent and the U.K.’s FTSE 100 Index is down by 0.4 percent.

Eurozone sovereign bond yields have climbed for the second day as investors look ahead to the release of business activity data later this week for fresh clues on the European Central Bank’s monetary path.

Italian insurer Generali has tumbled after first quarter profitability was slightly weaker in its property and casualty business.

Vodafone has also moved downside. Stephen van Rooyen has been appointed Chief Executive Officer of VodafoneZiggo, effective from September 2024.

On the other hand, energy contractor Saipem has moved sharply higher after securing three new contracts worth $3.7 billion.

AstraZeneca has also moved to the upside after the drug maker said it is aiming for $80 billion in total revenue by 2030.

Greencore shares have soared. The foods maker announced a share buyback after delivering first-half profit before taxation of 14.7 million pounds, compared to last year’s loss of 6.2 million pounds.

Kontron has also rallied. The German IoT technology company said it had received a major order to supply smart wallboxes.

U.S. Economic Reports

Richmond Federal Reserve President Thomas Barkin is due to give opening remarks before the “2024 Investing in Rural America Conference: Building and Maintaining Momentum” hosted by the Richmond Fed at 9 am ET.

Also at 9 am ET, Federal Reserve Board Governor Christopher Waller is scheduled to speak on the economic outlook before an event hosted by the Peterson Institute for International Economics.

New York Federal Reserve President John Williams is due to give opening remarks at the 2024 Governance and Culture Reform Conference at 9:05 am ET.

At 9:10 am ET, Atlanta Federal Reserve President Raphael Bostic is scheduled to give “welcome back” remarks before the 2024 Financial Markets Conference hosted by the Atlanta Fed.

Federal Reserve Vice Chair for Supervision Michael Barr is due to participate virtually in a “Bank Supervision and Regulation” discussion before the 2024 Director & Executive Regional State Member Bank Conference hosted by the Federal Reserve Bank of Dallas at 11:45 am ET.

At 7 pm ET, Bostic is scheduled to moderate a “Central Banking in the Post-Pandemic Financial System” panel before the 2024 Financial Markets Conference.

Stocks In Focus

Shares of Palo Alto Networks (PANW) are moving sharply lower in pre-market trading after the cybersecurity company forecast fiscal fourth quarter revenues and billings toward the low end of analyst estimates.

Exercise equipment and media company Peloton Interactive (PTON) may also came under pressure after announcing a global refinancing that includes an offering of $275.0 million worth of convertible senior notes due 2029.

Meanwhile, shares of Macy’s (M) are likely to see initial strength after the department store operator reported better than expected fiscal fourth quarter earnings and raised its full-year earnings guidance.

Home improvement retailer Lowe’s (LOW) may also move to the upside after reporting fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines.