Futures Pointing To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to move back to the downside after recovering from early weakness to end the previous session roughly flat.

The downward momentum on Wall Street comes amid a continued increase by treasury yields, which have moved sharply higher over the past few sessions.

The ten-year yield has risen to its highest level in almost three months amid worries the Federal Reserve will lower interest rates slower than previously anticipated.

After the Fed slashed interest rates by 50 basis points last month, CME Group’s FedWatch Tool is currently indicating a 91.0 percent chance of just a 25 basis point rate cut next month.

A steep drop by shares of McDonald’s (MCD) is likely to weigh on the Dow, with the fast food giant plunging by 6.8 percent in pre-market trading.

McDonald’s is under pressure after the Center for Disease control said a severe E. coli outbreak in Mountain West states has been linked to the chain’s Quarter Pounders.

Coffee giant Starbucks (SBUX) is also seeing significant pre-market weakness after reporting a decrease in fiscal fourth quarter sales and suspending its guidance for fiscal year 2025.

Meanwhile, shares of AT&T (T) are likely to see initial strength after the telecom giant reported better than expected third quarter earnings.

After coming under pressure early in the session, stocks regained ground over the course of the trading day on Tuesday. The major averages climbed well off their worst levels of the day before ending the day little changed.

The major averages moved to the downside going into the close, finishing narrowly mixed. While the Nasdaq rose 33.12 points or 0.2 percent to 18,573.13, the Dow edged down 6.71 points or less than a tenth of a percent to 42,924.89 and the S&P 500 slipped 2.78 points or 0.1 percent to 5,851.20.

The early weakness on Wall Street partly reflected renewed concerns about the outlook for interest rates following a recent surge by U.S. treasury yields.

Treasury yields have moved notably higher in recent days amid worries about the U.S. fiscal deficit and comments from Federal Reserve officials hinting at gradual rate cuts.

The subsequent recovery by the markets came even though the yield on the benchmark ten-year note crept up to a nearly three-month closing high, as traders remain optimistic about the economic outlook

A steep drop by shares of Verizon (VZ) contributed to the dip by the Dow, with the telecom giant tumbling by 5.0 percent on the day.

The slump by Verizon came after the company reported third quarter earnings that beat analyst estimates but weaker than expected revenues.

Fellow Dow component 3M (MMM) also moved to the downside even though the industrial conglomerate reported third quarter earnings that exceeded expectations.

On the other hand, shares of General Motors (GM) spiked by 9.8 percent after the auto giant reported better than expected third quarter results.

Housing stocks moved sharply lower amid concerns about the outlook for interest rates, resulting in a 3.1 percent plunge by the Philadelphia Housing Sector Index. The index pulled back further off the record closing high set last Friday.

Substantial weakness was also visible among computer hardware stocks, as reflected by the 2.3 percent slump by the NYSE Arca Computer Hardware Index.

Logitech (LOGI) helped lead the sector lower, with the computer accessories maker plummeting by 8.5 percent despite reporting better than expected fiscal second quarter results.

Telecom and airline stocks also saw notable weakness on the day, while tobacco and gold stocks showed significant moves to the upside.

Commodity, Currency Markets

Crude oil futures are slumping $1.20 to $70.54 a barrel after jumping $1.70 to $71.74 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,757.90, down $1.90 compared to the previous session’s close of $2,759.80. On Tuesday, gold climbed $20.90.

On the currency front, the U.S. dollar is trading at 153.09 yen compared to the 151.08 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0768 compared to yesterday’s $1.0799.

Asia

Asian stocks ended mixed on Wednesday and the U.S. dollar index surpassed the 104 mark, tracking elevated U.S. treasury yields amid easing expectations of aggressive Federal Reserve rate cuts and fears the U.S. may be heading toward fiscal collapse.

Gold reached a new record high, while oil prices fell after industry data showed U.S. crude inventories swelled more than expected.

Chinese shares eked out modest gains after reports emerged that the government may deploy as much as 2 trillion yuan (US$280 billion) to establish a stock market stabilization fund.

The benchmark Shanghai Composite Index rose 0.5 percent to 3,302.80, while Hong Kong’s Hang Seng Index rallied 1.2 percent to 20,760.15.

Japanese markets lost ground, as investors were reluctant to place major bets ahead of the country’s upcoming lower house election.

Sentiment was also dented by rising Treasury yields due to shifting expectations around how fast and deep the Federal Reserve will cut rates.

The Nikkei 225 Index fell 0.8 percent to 38,104.86 after media polls suggested that the ruling Liberal Democratic Party and its coalition partner Komeito may lose their majority in the election. The broader Topix Index settled 0.6 percent lower at 2,636.96.

Staffing agency Recruit Holdings slumped 4.9 percent and Uniqlo-owner Fast Retailing dropped 1.7 percent, while automakers Honda Motor and Toyota surged 2-3 percent on the back of a weaker yen.

Tokyo Metro shares jumped 45 percent on the first day of trading for the company.

Seoul stocks rose sharply, with automakers and technology stocks leading the rally. The Kospi jumped 1.1 percent to 2,599.62.

Market bellwether Samsung Electronics surged 2.4 percent, while No. 2 chipmaker SK Hynix spiked 4.4 percent. Top carmaker Hyundai Motor gained 2.8 percent.

Australian markets finished marginally higher, led by consumer staple stocks. The benchmark S&P/ASX 200 Index edged up 0.1 percent to 8,216, while the broader All Ordinaries Index ended marginally higher at 8,476.30.

Supermarket operator Woolworths advanced 1.6 percent and Coles Group added 1.4 percent as their lawyers began defending allegations of dodgy discount behavior in the Federal Court.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dipped 0.2 percent to 12,787.60.

Europe

European stocks have moved mostly lower on Wednesday, as investors digest mixed earnings results and brace for the upcoming U.K. autumn budget.

The dollar was on the rise again and U.S. Treasury yields hovered near three-month highs as traders pondered the prospect of a Donald Trump presidency.

It is feared that Trump policies, including tariffs and restrictions on undocumented immigration, could increase inflation and keep interest rates relatively high for a longer-than-anticipated period.

The French CAC 40 Index is down by 0.6 percent, the U.K.’s FTSE 100 Index is down by 0.5 percent and the German DAX Index is down by 0.2 percent.

L’Oreal has tumbled after the French cosmetics giant reported a rise in third quarter sales that missed expectations due to low consumer confidence in China.

Thales has also moved to the downside despite reporting higher sales and orders in the first nine months of the year.

Air Liquide has also fallen. The industrial gases supplier delivered third-quarter revenue in line with market expectations.

Ipsen has also declined. The global specialty-care biopharmaceutical company reported strong sales momentum in the first nine months of 2024.

Deutsche Bank has also slumped after the German lender returned to profit in the third quarter but flagged credit risks.

On the other hand, British lender Lloyds has moved to the upside after its third quarter profit beat expectations.

Reckitt Benckiser has also rallied as the consumer goods company reported a smaller than expected fall in third-quarter underlying sales.

Barratt Redrow has also jumped. The homebuilder said it is encouraged by solid trading in recent weeks amid more stable market conditions.

Advertising group WPP has also surged as it reported a better-than-expected 0.5 percent rise in like-for-like organic revenue in the third quarter.

U.S. Economic News

Federal Reserve Board Governor Michelle Bowman is scheduled to give opening remarks at the Eighth Annual Fintech Conference at 9 am ET.

At 10 am ET, the National Association of Realtors is due to release its report on existing home sales in the month of September. Existing home sales are expected to rise to an annual rate of 3.90 million in September from a rate of 3.86 million in August.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended October 18th at 10:30 am ET.

Crude oil inventories to expected to inch up by 0.7 million barrels after falling by 2.2 million barrels in the previous week.

At 12 pm ET, Richmond Federal Reserve President Thomas Barkin is due to speak on “Recognizing the Impact of Community Colleges” before the 2024 Virginia Education and Workforce Conference.

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.