U.S. Stocks May Move Back To The Downside In Early Trading

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground following the rebound seen over the two previous sessions.

Trades may look to cash in on the recent recovery by the markets amid lingering concerns about the impact of President Donald Trump’s trade policies and the economic outlook.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed is almost universally expected to leave interest rates unchanged, traders will look to the accompanying statement as well as officials’ latest projections for clues about the outlook for rates.

After rebounding last Friday but still posting steep weekly losses, stocks continued to regain ground during trading on Monday. The major averages all moved to the upside over the course of the session.

The major averages pulled back well off their highs going into the end of trading but remained in positive territory. The Dow jumped 353.44 points or 0.9 percent to 41,841.63, the S&P 500 climbed 36.18 points or 0.6 percent to 5,675.12 and the Nasdaq rose 54.58 points or 0.3 percent to 17,808.66.

The strength on Wall Street came as traders continued to pick up stocks at relatively reduced levels following recent weakness, which saw the S&P 500 plunge into correction territory last Thursday.

Positive sentiment was also generated in reaction to the Commerce Department’s report on U.S. retail sales in the month of February.

The Commerce Department said retail sales rose by 0.2 percent in February after tumbling by a revised 1.2 percent in January.

While the uptick by retail sales missed expectations for an increase of 0.7 percent, traders seem relieved that the data wasn’t even worse.

However, traders seemed reluctant to make more significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

Gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2.7 percent to a nearly five-month closing high. The strength among gold stocks came amid a modest increase by the price of the precious metal.

Significant strength was also visible among brokerage stocks, as reflected by the 2.5 percent jump by the NYSE Arca Broker/Dealer Index. The index continued to regain ground after ending last Thursday’s trading at its lowest closing level in over four months.

Oil producer stocks also turned in a strong performance amid an increase by the price of crude oil, with the NYSE Arca Oil Index climbing by 1.7 percent.

Commercial real estate, semiconductor and natural gas stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are jumping $0.89 to $68.47 a barrel after climbing $0.40 to $67.58 a barrel on Monday. Meanwhile, after inching up $5 to $3,006.10 an ounce in the previous session, gold futures are surging $31.90 to $3,038 an ounce.

On the currency front, the U.S. dollar is trading at 149.90 yen compared to the 149.21 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0901 compared to yesterday’s $1.0922.

Asia

Asian stocks advanced on Tuesday after data showed U.S. retail sales rebounded marginally in February, helping ease recession concerns.

Regional gains were also driven by optimism over China’s economy, fueled by the latest economic stimulus initiatives.

The dollar steadied near a five-month low against major peers, while gold scaled a record peak above the key $3,000 mark ahead of the Federal Reserve’s policy meeting scheduled for March 18-19.

The Fed is expected to keep interest rates steady and maintain its hawkish outlook amid economic uncertainties.

Oil extended gains for a third straight session as escalating tensions in the Middle East overshadowed concerns about a potential global glut.

Chinese shares edged up slightly after recent announcements to boost consumer spending. The benchmark Shanghai Composite Index closed up 0.1 percent at 3,429.76.

Hong Kong’s Hang Seng Index surged 2.5 percent to 24,740.57, reaching a three-year peak as investors turned positive on the outlook for China. BYD shares surged 4.1 percent after the electric vehicle giant unveiled its new fast-charging technology.

Japanese markets rallied to end near a three-week high after Berkshire Hathaway Inc. increased its stake in five trading houses.

Investors also looked ahead to the Bank of Japan’s interest-rate decision on Wednesday, with the central bank expected to keep the policy rate at 0.5 percent amid concerns over global economic prospects due to escalating trade tensions.

The Nikkei 225 Index jumped 1.2 percent to 37,845.42, while the broader Topix Index settled 1.3 percent higher at 2,783.56. Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo surged 2-4 percent.

Seoul stocks gave up early gains to end on a flat note amid lingering tariff woes. Chip giant SK Hynix and leading chemical firm LG Chem both fell around 1.5 percent, while bio firm Samsung Biologics gained 1.4 percent.

Australian markets finished on a flat note after Reserve Bank of Australia Assistant Governor (Economic) Sarah Hunter said the monetary policy is always data dependent and the link between the central bank’s forecast and policy decision is not mechanical – dashing hopes for imminent rate cuts.

Both the S&P/ASX 200 and the All-Ordinaries Index finished marginally higher, giving up early gains as banks declined, offsetting strength in the real estate and mining sectors. Goodman Group rose 1.1 percent on hopes of decreased mortgage rates.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.7 percent to 12,076.85, continuing its downward trend to reach a fresh low since last July.

Europe

European stocks have moved mostly higher on Tuesday, with an upcoming German vote on historic debt reforms and Ukraine peace talks in focus.

The German parliament vote seeks to exempt defense spending from debt limits and create a 500-billion-euro infrastructure plan fund.

U.S. President Donald Trump will talk to his Russian counterpart Vladimir Putin later in the session and discuss ending the war in Ukraine.

While the German DAX Index is up by 1.3 percent, the French CAC 40 Index is up by 0.7 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.

Trustpilot Group shares have spiked. The Danish consumer business operating a review website has topped up its share buyback program with another 20 million pounds.

Likewise, food delivery giant Deliveroo has jumped after announcing an extension of its share buyback program.

U.S. Economic News

New residential construction in the U.S. rebounded by much more than anticipated in the month of February, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said housing starts spiked by 11.2 percent to an annual rate of 1.501 million in February after plunging by 11.5 percent to a revised rate of 1.350 million in January.

Economists had expected housing starts to increase by 1.0 percent to an annual rate of 1.380 million from the 1.366 million originally reported for the previous month.

Meanwhile, the report said building permits slumped by 1.2 percent to an annual rate of 1.456 million in February after falling by 0.6 percent to a revised rate of 1.473 million in January.

Building permits, an indicator of future housing demand, were expected to tumble by 2.2 percent to an annual rate of 1.450 million from the 1.483 million originally reported for the previous month.

A separate report released by the Labor Department on Tuesday showed an unexpected increase by U.S. import prices in the month of February.

The Labor Department said import prices climbed by 0.4 percent in February, matching an upwardly revised increase in January.

Economists had expected import prices to edge down by 0.1 percent compared to the 0.3 percent growth originally reported for the previous month.

The report also said export prices inched up by 0.1 percent in February after jumping by 1.3 percent in January. Export prices were expected to dip by 0.2 percent.

At 9:15 am ET, the Federal Reserve is due to release its report on industrial production in the month of February. Industrial production is expected to rise by 0.2 percent in February after climbing by 0.5 percent in January.

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.