Traders May Go Bargain Hunting As Markets Search For Bottom

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move back to the upside after coming under pressure over the course of the previous session.

Traders may once again look to pick up stocks at reduced levels following the recent weakness in the markets.

The drop seen on Monday dragged the tech-heavy Nasdaq down to its lowest closing level in over a year, while the S&P 500 finished the day just above the nearly nine-month closing low set last Tuesday.

The markets continue to search for the bottom following the intense selling sparked by the Russia-Ukraine war and the subsequent spike in oil prices.

A continued sharp pullback by the price of crude oil may also generate some buying interest, with crude for April delivery plunging $7.10 to $95.91 a barrel after tumbling $6.32 to $103.01 a barrel on Monday.

Positive sentiment may also be generated in reaction to a report from the Labor Department showing producer prices increased by slightly less than expected in the month of February.

The slightly smaller than expected increase in producer prices may ease concerns about inflation ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

Stocks moved mostly lower over the course of the trading session on Monday, adding to the losses posted last week. The tech-heavy Nasdaq showed a particularly steep drop on the day, ending the session at its lowest closing level in over a year.

The Nasdaq plunged 262.59 points or 2 percent to 12,581.22, while the S&P 500 slid 31.20 points or 0.7 percent to 4,173.11.

Meanwhile, the narrower Dow turned negative after climbing as much as 450 points but recovered to end the day up 1.05 points or less than a tenth of a percent at 32,945.24.

The steep drop by the Nasdaq came amid a spike in treasury yields, with the yield on the benchmark ten-year note reaching its highest levels in well over two years.

Treasury yields soared as traders looked ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

With the Fed widely expected to raise interest rates by 25 basis points, traders will pay close attention to the accompanying statement for clues about further rate hikes.

The central bank is likely to continue raising rates over the comings months in an effort to combat elevated inflation, although the economic impact of the Russia-Ukraine conflict may affect the pace.

The roughly flat close by the Dow came as strong gains by credit card giants American Express (AXP) and Visa (V) helped offset steep losses by tech giants Intel (INTC) and Apple (AAPL).

Traders also kept an eye on developments in the commodities markets, with crude for April delivery plunging $6.32 to $103.01 a barrel amid optimism about peace talks between Russia and Ukraine

Energy stocks moved sharply lower along with the price of crude oil. Reflecting the weakness in the sector, the Philadelphia Oil Service Index dove by 5.2 percent, the NYSE Arca Natural Gas Index tumbled by 3.6 percent and the NYSE Arca Oil Index slumped by 2.3 percent.

Significant weakness was also visible among gold stocks, which came under pressure amid a notable decrease by the price of the precious metal.

With gold for April delivery falling $24.20 to $1,960.80 an ounce, the NYSE Arca Gold Bugs Index plummeted by 4.3 percent.

Semiconductor and computer hardware stocks also saw substantial weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq.

Steel, biotechnology and housing stocks also showed notable moves to the downside, while banking stocks benefited from the jump by treasury yields.

Commodity, Currency Markets

Crude oil futures are plunging $7.10 to $95.91 a barrel after plummeting $6.32 to $103.01 a barrel on Monday. Meanwhile, after tumbling $24.20 to $1,960.80 an ounce in the previous session, gold futures are diving $38.30 to $1,922.50 an ounce.

On the currency front, the U.S. dollar is trading at 117.80 yen compared to the 118.19 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0990 compared to yesterday’s $1.0940.

Asia

Asian stocks fell on Tuesday as investors assessed the impacts of the latest Covid-19 resurgence in China as well as a looming conflict between Beijing and Washington over the former’s support for Russia’s invasion of Ukraine.

Anxiety over the war in Ukraine and the outlook for higher interest rates also kept investors on edge ahead of this week’s Federal Reserve meeting.

China’s Shanghai Composite Index plunged 5 percent to finish at 3,063.96 on concerns about surging Covid-19 cases and the country’s ties with Russia.

Investors ignored data showing that Chinese retail sales and industrial production grew more than expected in the January to February period.

According to the National Bureau of Statistics, retail sales advanced 6.7 percent on a yearly basis, bigger than economists’ forecast of 3.0 percent. Nonetheless, the pace of growth slowed from the 12.5 percent expansion seen in December.

Industrial output logged annual growth of 7.5 percent, which was also better than the 3.9 percent rise expected by economists. Fixed asset investment advanced 12.2 percent from the last year versus the expected growth of 5.0 percent.

Hong Kong’s Hang Seng Index plummeted 5.7 percent to 18,415.08 after the neighboring city of Shenzhen was ordered into a shutdown to combat China’s worst Covid-19 outbreak in two years.

Japanese shares fluctuated before ending slightly higher on the strong Chinese economic data. The Nikkei 225 Index edged up 38.63 points, or 0.2 percent, to 25,346.48, while the broader Topix ended 0.8 percent higher at 1,826.63.

Automakers topped the gainers list, with Toyota, Nissan and Subaru climbing 2-5 percent. Startup investor SoftBank Group slumped 4.2 percent and Uniqlo store operator Fast Retailing declined 4.5 percent.

Australian markets fell notably amid the continuing war in Ukraine and Covid-19-related lockdowns in China. The benchmark S&P/ASX 200 Index dropped 52 points, or 0.7 percent, to 7,097.40, while the broader All Ordinaries Index ended down 66.10 points, or 0.9 percent, at 7,356.10. The Aussie dollar slipped after dovish RBA minutes.

Tech stocks suffered heavy losses, with Block Inc. falling 5.2 percent. Mining heavyweights BHP and Rio Tinto lost around 4 percent each as iron ore prices fell after a surge in Covid-19 cases in China. Energy and gold stocks also declined, tracking weak commodity prices after diplomatic efforts to resolve the Russia-Ukraine conflict calmed supply-disruption fears.

Seoul stocks ended lower for a third straight session as yields rose ahead of Wednesday’s Fed meeting. The Kospi slid 24.12 points, or 0.9 percent, to close at 2,621.53.

Samsung Electronics, SK Hynix and LG Chem gave up 1-4 percent, while financial heavyweight KB Financial Group added 1.6 percent and Kakao Bank surged 5.4 percent.

Europe

European stocks have moved back to the downside on Tuesday, as investors assess the impacts of the latest Covid-19 resurgence in China.

China’s worst Covid-19 outbreak since the initial wave of the pandemic worsened Tuesday, with a major factory city ordering production halts.

Anxiety over the war in Ukraine and the outlook for higher interest rates also kept investors on edge ahead of this week’s Federal Reserve meeting.

While the U.K.’s FTSE 100 Index has fallen by 0.5 percent, the German DAX Index and the French CAC 40 Index are both down by 0.6 percent.

Sweden’s H&M, the world’s second-biggest fashion retailer, has dropped. The company reported a 23 percent increase in first quarter sales, matching market expectations.

Tobacco and nicotine products maker Swedish Match has also slumped after providing an update on its plans for the separation of its U.S. cigar business.

Dutch technology investor Prosus, which holds a 29 percent stake in the Chinese tech giant Tencent, has plummeted as the Chinese tech sell-off continued unabated.

Miners Anglo American, Antofagasta and Glencore have also moved to the downside in London as base metal prices plunged.

Oil & gas firm BP Plc and Royal Dutch Shell have also come under pressure as oil extends declines to fall below $100 a barrel.

Tobacco form Imperial Brands has also moved lower after issuing an update in view of the Russian-Ukraine conflict.

Automotive firm Inchcape has also declined after saying it has started a process to transition its business in Russia.

Volkswagen has also fallen after saying it had sold 2 million fewer cars than planned last year due to the semiconductor shortage.

Meanwhile, Wacker Chemie has jumped. The chemicals company reported that its fiscal 2021 net income surged to 828 million euros from last year’s 202 million euros.

U.S. Economic Reports

A report released by the Labor Department on Tuesday showed producer prices in the U.S. increased by slightly less than expected in the month of February.

The Labor Department said its producer price index for final demand climbed by 0.8 percent in February after surging by an upwardly revised 1.2 percent in January.

Economists had expected producer prices to advance by 0.9 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding prices for food, energy and trade services, core producer prices edged up by 0.2 percent in February following a 0.8 percent increase in January.

Meanwhile, the Federal Reserve Bank of New York released a report showing New York manufacturing activity unexpectedly contracted in the month of March.

The New York Fed said its general business conditions index tumbled to a negative 11.8 in March from a positive 3.1 in February, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to dip to a positive 7.0.

With the much bigger than expected decrease, the general business conditions index dropped to its lowest level since May 2020.

Stocks In Focus

Shares of GitLab (GTLB) are seeing significant pre-market strength after the development operations platform company reported better than expected fiscal fourth quarter results and provided upbeat guidance.

Delta Air Lines (DAL), United Airlines (UAL) and Southwest Airlines (LUV) are also likely to move to the upside after all three airlines raised their revenue outlooks.

On the other hand, shares of Coupa Software (COUP) are moving sharply lower in pre-market trading after the business software company reported fiscal fourth quarter results that exceeded estimates but provided a disappointing outlook.