Interest Rate Anxiety May Continue To Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to see further downside after ending last Friday’s trading mostly lower.

Ongoing anxiety about the outlook for interest rates may continue to weigh on the markets following last week’s hotter-than-expectation inflation data.

CME Group’s FedWatch Tool is indicating just an 8.5 percent chance the Federal Reserve will lower rates by a quarter point in March, while the chances of a quarter point rate cut in early May have fallen to 35.8 percent.

The Fed may provide additional insight into the outlook for interest rates with the release of the minutes of its latest monetary policy meeting on Wednesday.

The downward momentum on Wall Street also comes amid a notable decline by shares of Home Depot (HD), with the home improvement retailer slumping by 2.6 percent in pre-market trading.

The drop by Home Depot comes after the company reported better than expected fourth quarter results but provided disappointing guidance.

Meanwhile, shares of Walmart (WMT) are surging by 5.0 percent in pre-market trading after the retail giant reported fourth quarter results that exceeded estimates and announced a deal to acquire TV maker Vizio (VZIO) for $2.3 billion.

U.S. stocks settled lower on Friday as robust producer price inflation data raised concerns the Federal Reserve may not consider lowering interest rate anytime soon.

The major averages all ended weak, with the downside of the tech-laden Nasdaq more pronounced. The Dow, which briefly emerged into positive territory around mid afternoon, ended with a loss of 145.13 points or 0.4 percent at 38,627.99.

The S&P 500 ended down 21.16 points or 0.5 percent at 5,005.57, while the Nasdaq settled at 15,775.65, losing 130.52 points or 0.8 percent.

Digital Realty tumbled more than 8 percent. Adobe Systems dropped about 7.4 percent, while Airbnb, Moderna, Micron Technology, Nike and Equinix lost 2 to 4 percent.

Amgen, Advanced Micro Devices, Invesco, Netflix, Alphabet, Whirlpool, Oracle, Cisco Systems, Intel, Microchip Technology and Visa ended down 1 to 2 percent.

Dollar General rallied nearly 5 percent. Bio-Rad Laboratories, Eli Lily, Target, eBay, Kroger, Merck, Morgan Stanley, Walmart and Dollar Tree posted sharp to moderate gains.

Data from the Labor Department showed a bigger than expected increase in U.S. producer prices in the month of January.

The report said the producer price index for final demand rose by 0.3 percent in January after edging down by 0.1 percent in December. Economists had expected producer prices to inch up by 0.1 percent.

Excluding prices for food, energy, and trade services, core producer prices climbed by 0.6 percent in January after rising by 0.2 percent in December.

The report also showed the annual rate of producer price growth slowed to 0.9 percent in January from 1.0 percent in December. Economists had expected the pace of growth to decelerate to 0.6 percent.

Following the hotter-than expected consumer price inflation data released earlier in the week, the data added to concerns the Federal Reserve will postpone cutting interest rates longer than investors had hoped.

However, the negative sentiment was partly offset by a separate report from the University of Michigan showing an uptick in consumer sentiment in the month of February.

The report said the consumer sentiment index inched up to 79.6 in February after spiking to 79.0 in January. With the increase, the consumer sentiment index reached its highest level since hitting 81.2 in July 2021.

Commodity, Currency Markets

Crude oil futures are edging down $0.08 to $79.11 a barrel after jumping $1.16 to $79.19 a barrel last Friday. Meanwhile, after rising $9.20 to $2,024.10 an ounce in the previous session, gold futures are ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬climbing $15.50 to $2,039.60 an ounce.

On the currency front, the U.S. dollar is trading at 150.07 yen versus the 150.13 yen it fetched on Monday. Against the euro, the dollar is trading at $1.0809 compared to yesterday’s $1.0779.

Asia

The People’s Bank of China cutting its 5-year loan prime rate by 25 basis points, far more than by 15 basis points that the markets were expecting, failed to revive market sentiment in the Asia-Pacific region. Nervousness about the Fed’s monetary policy outlook as well as anxiety ahead of the release of the FOMC Minutes due on Wednesday limited gains.

China’s Shanghai Composite Index added 0.4 percent to finish trading at 2,922.73. The day’s trading ranged between 2,927.31 and 2,887.47. The Shenzhen Component Index edged up less than a tenth percent to close at 8,905.96.

The Japanese benchmark Nikkei 225 Index slipped 0.3 percent to close at 38,363.61. The day’s trading range was between 38,742.33 and 38,288.04.

Hitachi Zosen Corp. gained 4.1 percent. Aozora Bank, Omron Corp., Fanuc Corp. and Yaskawa Electric Corp. all gained more than 3 percent.

Mitsui Engineering and Shipbuilding slumped close to 7 percent. Rakuten followed with a loss of 5.4 percent. Sapporo Holdings declined 4.6 percent. Yamaha Corp. declined 3.2 percent whereas Tokio Marine Holdings declined 2.8 percent.

The Hang Seng Index of the Hong Kong Stock Exchange rose 0.6 percent from the previous close to finish trading at 16,247.51. The day’s trading range was between a high of 16,274.56 and a low of 16,055.08.

The Korean Stock Exchange’s Kospi Index slid 0.8 percent to close trading at 2,657.79. The day’s trading range was between 2,643.93 and 2,673.84.

Australia’s S&P/ASX 200 Index closed trading at 7,659, shedding 0.1 percent. The day’s trading range was between 7,633.8 and 7,670.9.

ARB Corporation gained 10.2 percent whereas HMC Capital rallied 9.6 percent. Reliance Worldwide Corporation and Pro Medicus, both added more than 8 percent. Suncorp Group recorded an increase of close to 6 percent after the Australian Competition Tribunal cleared ANZ Group’s buyout of Suncorp’s banking business.

Oil and gas producer Strike Energy tumbled almost 26 percent following an update on its South Erregulla gas well. The Star Entertainment Group plunged close to 20 percent following deferral of the results announcement. Chalice Mining slumped 10.5 percent, followed by SIMS that declined 9.7 percent and Sayona Mining that dropped 7.8 percent.

The NZX 50 of the New Zealand Stock Exchange shed 0.7 percent to close trading at 11,571.22, versus the previous close of 11,653.27. Trading ranged between 11,541.51 and 11,653.27.

Westpac Banking Corp. rallied 5.3 percent, followed by healthcare business Pacific Edge that added 4.7 percent. Manawa Energy, Mercury NZ and Heartland Group Holdings all added more than 1 percent.

KMD Brands dove 11.3 percent. Ryman Healthcare declined 6.8 percent followed by Tourism Holdings and Oceania Healthcare that both slipped more than 4 percent. A2 Milk Company also lost 2.8 percent in the day’s trading.

Europe

European stocks are turning in a relatively lackluster performance during trading on Tuesday, with the major market indexes on opposite sides of the unchanged line.

While the German DAX Index is down by 0.2 percent, the U.K.’s FTSE 100 Index is up by 0.1 percent and the French CAC 40 Index is up by 0.3 percent.

The advance by French stocks comes amidst strong corporate results announcement. However lingering anxiety ahead of the release of the ECB minutes limited gains.

Specialty chemicals business Air Liquide has surged after reporting a rise in net profit and sales that surpassed expectations.

The uptick by the U.K.’s FTSE 100 Index comes following dovish comments from Governor Andrew Bailey and other officials of the Bank of England.

Meanwhile, the dip by the German DAX Index comes as markets brace for the release of the ECB minutes as well as PMI, GDP and Business Climate readings later in the week.

U.S. Economic Reports

The Conference Board is scheduled to release its report on leading economic indicators in the month of January at 10 am ET. The leading economic index is expected to decrease by 0.3 percent in January after edging down by 0.1 percent in December.