Futures Pointing To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending last Friday’s trading sharply higher.

Traders may look to cash in on the previous session’s gains amid lingering uncertainty about the outlook for interest rates.

The Federal Reserve is almost universally expected to lower rates at its next meeting later this month, but there is some disagreement about the pace of rate cuts.

According to CME Group’s FedWatch Tool, there is a 67.0 percent chance of a quarter point rate cut later this month and a 33.0 percent chance of a half point rate cut.

Some analysts, such as Harris Financial Group managing partner Jamie Cox, have said there is no justification for a 50 basis point rate cut.

However, ING Chief International Economist James Knightley said, “A soft jobs report [on Friday] could still tip the odds in favour of a 50bp rate cut.”

The monthly jobs data will be in focus later this week, with economists currently expecting employment to climb by 165,000 jobs in August after rising by 114,000 jobs in July.

The unemployment rate is expected to edge down to 4.2 percent in August after rising to 4.3 percent in July, reaching its highest level since October 2021.

Stocks fluctuated over the course of the trading session on Friday before eventually ending day sharply higher. The Dow closed higher for the fifth time in the past six sessions, reaching a new record closing high.

The major averages reached new highs for the session going into the close of trading. The Nasdaq surged 197.19 points or 1.1 percent to 17,713.62, the S&P 500 jumped 56.44 points or 1.0 percent to 5,648.40 and the Dow climbed 228.03 points or 0.6 percent to 41,563.08.

Meanwhile, the major averages turned in a mixed performance for the week. The Nasdaq slid by 0.9 percent, but the S&P 500 edged up by 0.2 percent and Dow advanced by 0.9 percent.

The higher close on Wall Street came after the Commerce Department released readings on U.S. consumer price inflation that are said to be preferred by the Federal Reserve.

The Commerce Department report showed consumer prices increased in line with economist estimates in the month of July, while the annual rate of price growth was unexpectedly flat.

The report said the personal consumption expenditures (PCE) price index rose by 0.2 percent in July after inching up by 0.1 percent in June. The modest increase matched expectations.

The core PCE price index, which excludes food and energy prices, also crept up by 0.2 percent in July. The uptick matched the increase seen in June as well as economist estimates.

Meanwhile, the report said the annual rates of growth by the PCE price index and the core PCE price index were both unchanged at 2.5 percent and 2.6 percent, respectively.

Economists had expected the year-over-year growth by both the PCE price index and the core PCE price index to tick up by 0.1 percentage point.

While the data has reinforced expectations of an interest rate cut by the Fed this month, traders expressed uncertainty about the pace of rate cuts, leading to some volatility in the markets.

Semiconductor stocks showed a substantial move to the upside on the day, resulting in a 2.6 percent surge by the Philadelphia Semiconductor Index.

Intel (INTC) helped lead the sector higher, spiking by 9.5 percent after a report from Bloomberg said the chipmaker is working with investment bankers to consider various options, including a split of its product-design and manufacturing businesses.

Chipmaker Marvell Technology (MRVL) also soared by 9.2 percent after reporting better than expected fiscal second quarter results.

Significant strength also emerged among retail stocks, as reflected by the 1.7 percent gain posted by the Dow Jones U.S. Retail Index.

Computer hardware, banking and housing stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are falling $0.62 to $72.93 a barrel after plunging $2.36 to $73.55 a barrel last Friday. Meanwhile, after tumbling $32.70 to $2,527.60 an ounce in the previous session, gold futures are edging down $2 to $2,525.60 an ounce.

On the currency front, the U.S. dollar is trading at 145.99 yen compared to the 146.90 yen it fetched on Monday. Against the euro, the dollar is valued at $1.1048 compared to yesterday’s $1.1072.

Asia

Asian stocks ended on a subdued note Tuesday as investors awaited more U.S. economic data, including Friday’s non-farm payrolls report for August to gauge the size of the Federal Reserve’s rate cut later this month.

Signs of sluggish demand in China and heightened tensions in the Middle East also weighed on regional markets.

Oil and gold prices dipped in Asian trading as the dollar extended its rebound ahead of the release of manufacturing and service PMI readings.

China’s Shanghai Composite Index dipped 0.3 percent to 2,802.98, dragged down by banks and energy stocks. Hong Kong’s Hang Seng Index slipped 0.2 percent to 17,651.49.

Sanergy Group, a maker of graphite products, plummeted 98 percent after Hong Kong’s securities regulator warned of its highly concentrated ownership.

Japanese stocks ended lower as the yen rebounded from a two-week low hit earlier in the session. The Nikkei 225 Index finished marginally lower at 38,686.31, while the broader Topix Index settled 0.6 percent higher at 2,733.27.

Tech stocks such as Advantest and Tokyo Electron fell 1-2 percent. Banks advanced amid higher bond yields at home and abroad. Mitsubishi UFJ Financial Group surged 3.3 percent and Mizuho Financial Group climbed 2.6 percent.

Seoul stocks fell notably even as soft inflation data backed the case for a rate cut next month. The Kospi dropped 0.6 percent to 2,664.63, with tech stocks pacing the decliners. Samsung Electronics lost 2.6 percent and SK Hynix gave up 3.3 percent.

Data showed South Korea’s headline inflation eased from 2.6 percent to 2.0 percent in August, marking its lowest level on a year-on-year basis since March 2021.

Australian markets ended marginally lower, primarily due to losses in consumer-related and mining stocks. Retailer Woolworths declined 1.7 percent after it decided to sell its stake in liquor stores.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index eased 0.2 percent to close at 12,534.51.

Europe

European stocks are modestly lower on Tuesday as investors await comments from European Central Bank policymakers and the release of the U.S. ISM manufacturing survey later in the day for directional cues.

The pan European STOXX 600 Index has slipped 0.3 percent to 523.25 after ending flat with a negative bias on Monday.

The German DAX Index is also down by 0.3 percent, while the French CAC 40 Index is down by 0.2 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

Swiss private-equity firm Partners Group has moved sharply lower after its first-half results missed expectations.

Miners Anglo American, Antofagasta and Glencore have also moved lower in London as metal prices decline on the back of a firmer dollar and amid concerns about slowing Chinese growth.

Meanwhile, Wizz Air Holdings, a Hungarian ultra low-cost air carrier, has edged up slightly after reporting an increase in load factor and passengers for the month of August from last year.

Rolls-Royce has jumped after Hong Kong airline Cathay Pacific said issues identified in the British manufacturer’s Trent XWB-97 engines could be resolved by Sept. 7.

Watches Of Switzerland has also soared after the luxury watch and jewelry retailer confirmed its FY25 guidance.

Equipment rental company Ashtead Group has also shown a strong move to the upside after keeping its annual profit forecast.

Valneva SE shares have also surged in Paris. The specialty vaccine company and its U.S. partner Pfizer have announced positive phase II booster results for their Lyme disease vaccine candidate VLA15.

U.S. Economic News

The Institute for Supply Management is scheduled to release its report on activity in the manufacturing sector in the month of August at 10 am ET.

The ISM’s manufacturing index is expected to tick up to 47.5 in August after falling to 46.8 in July, but a reading below 50 would still indicate contraction.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of July. Construction spending is expected to come in unchanged in July after dipping by 0.3 percent in June.

Stocks In Focus

Shares of U.S. Steel (X) are seeing significant pre-market weakness after Vice President Kamala Harris express opposition to the sale of the steel producer to Japan’s Nippon Steel.

Aerospace giant Boeing (BA) may also come under pressure after Wells Fargo downgraded its rating on the company’s stock to Underweight from Equal Weight.

On the other hand, shares of Unity Software (U) are likely to see initial strength after Morgan Stanley upgraded its rating on the video game software development company’s stock to Overweight from Equal Weight.