The major U.S. index futures are pointing to a higher opening on Wednesday after the sharp pullback seen over the course of the previous session.
Bargain hunting may contribute to early strength on Wall Street following yesterday’s sell-off, which reflected geopolitical concerns on the heels of North Korea’s latest nuclear test.
Trading activity may be somewhat subdued, however, with uncertainty about the European Central Bank’s monetary policy meeting on Thursday likely to keep some traders on the sidelines.
Following the strength seen last week, stocks moved sharply lower over the course of the trading session on Tuesday. With the steep drop on the day, the tech-heavy Nasdaq pulled back well off the record closing high set last Friday.
The major averages ended the day firmly in negative territory but off their lows of the session. The Dow plunged 234.25 points or 1.1 percent to 21,753.31, the Nasdaq tumbled 59.76 points or 0.9 percent to 6,375.57 and the S&P 500 slumped 18.70 points or 0.8 percent to 2,457.85.
The pullback on Wall Street partly reflected geopolitical concerns following news North Korea conducted a major nuclear test on Sunday.
President Donald Trump condemned the nuclear test in posts on Twitter, saying North Korea’s words and actions continue to be very hostile and dangerous to the U.S.
Trump said the U.S. is considering stopping all trade with any country doing business with North Korea in response to the test.
Traders also kept an eye on any developments in Washington, as lawmakers returned following the August recess.
Lawmakers are under pressure to raise the debt ceiling and pass a government spending bill before deadlines at the end of the month.
Selling pressure may have been generated by concerns about the economic impact of Trump’s decision to end a program offering protections for undocumented immigrants known as Dreamers.
On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in factory orders in the month of July.
The Commerce Department said factory orders plunged by 3.3 percent in July after surging up by an upwardly revised 3.2 percent in June.
Economists had expected orders to tumble by 3.2 percent compared to the 3.0 percent jump originally reported for the previous month.
Financial stocks saw substantial weakness on the day due to the geopolitical concerns, with the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index tumbling by 2.8 percent and 2.5 percent, respectively.
With the steep drops during the session, both the broker/dealer index and the banks index fell to their lowest closing levels in over two months.
Significant weakness was also visible among telecom stocks, as reflected by the 2.6 percent slump by the NYSE Arca Telecom Index. The index dropped to its lowest closing level in over a year.
Chemical, networking, and semiconductor stocks also saw considerable weakness, while oil service and gold stocks bucked the downtrend on Wall Street.
Commodity, Currency Markets
Crude oil futures are climbing $0.54 to $49.20 a barrel after jumping $1.37 to $48.66 a barrel on Tuesday. Gold futures, which surged up $14.10 to $1,344.50 an ounce in the previous session, are inching up $0.40 to $1,344.90 an ounce.
On the currency front, the U.S. dollar is trading at 108.87 yen compared to the 108.81 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1937 compared to yesterday’s $1.1914.
Asian stocks closed flat to slightly lower on Wednesday as tensions between the U.S. and North Korea persisted and investors kept an eye on Hurricane Irma, which is bearing down on the Caribbean islands and Florida.
Chinese shares pared early losses to end little changed on expectations that Beijing will step up the reform of state-owned enterprises. The benchmark Shanghai Composite Index inched up 1.56 points or 0.1 percent to 3,385.88, although Hong Kong’s Hang Seng Index fell 127.59 points or 0.5 percent to 27,613.76.
The Japanese markets ended roughly flat even as the dollar edged lower against the yen to linger near a 4-1/2-month low amid the simmering North Korea tensions. The Nikkei 225 Index edged down 27.84 points or 0.1 percent to 19,357.97, while the broader Topix index reversed early losses to finish marginally higher at 1,592.
Japan Post Holdings surged 1.9 percent and Recruit Holdings jumped as much as 7.8 percent after Nikkei said it will add these stocks to the Nikkei 225 Index.
Meanwhile, Hokuetsu Kishu Paper lost 6.1 percent and Meidensha Corp plunged 6.8 percent after the index provider said it would drop them from the index.
Australian shares retreated on renewed geopolitical tensions after a top North Korean diplomat warned that his country is ready to send “more gift packages” to the United States.
Investors ignored in-line GDP data, which showed that the economy climbed an annual 1.8 percent in the second quarter of 2017, up from 1.7 percent in the previous three months.
The benchmark S&P/ASX 200 Index dropped 16.50 points or 0.3 percent to finish at 5,689.70, while the broader All Ordinaries Index ended down 14.90 points or 0.3 percent at 5,752.90.
Commonwealth Bank of Australia, which is facing a class-action suit over a money-laundering scandal, shed 1.2 percent. The other three big banks fell between 0.5 percent and 1.1 percent.
On the other hand, gold miners and industrial stocks were among the best performers. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group eked out modest gains despite Chinese iron ore futures snapping a three-day winning streak on Tuesday.
AGL Energy shares rose 0.3 percent after the electricity generator said it has made no commitment to neither sell its Liddell coal-fired power station in New South Wales nor extend its life beyond 2022.
European stocks have once again turned mixed, as geopolitical tensions continued to simmer and investors wait for the outcome of the European Central Bank’s policy meeting on Thursday.
Worries about Hurricane Irma as well as disappointing factory orders and construction activity data from Germany also weighed on markets.
While the U.K.’s FTSE 100 Index is down by 0.4 percent, the French CAC 40 Index is up by 0.2 percent and the German DAX Index is up by 0.6 percent.
Denmark’s Jyske Bank has come under pressure after BRFholding reduced its stake in the lender. Barratt Developments shares have also tumbled after the homebuilder provided a cautious outlook, saying it would “carefully” monitor Brexit’s impact on the housing market.
Similarly, Berkeley Group Holdings has moved to the downside after warning over the impact of Brexit uncertainty on London’s property market.
Royal Mail has also moved lower following reports that the Communications Workers Union will vote on industrial action.
Meanwhile, German automaker Daimler has rallied on speculation of a change in its corporate structure. Rivals BMW, Volkswagen, Renault and Peugeot climbed 1-2 percent.
British software group Micro Focus has also soared after posting improved third-quarter results for the newly-acquired software business of Hewlett Packard Enterprises (HPE).
U.S. Economic Reports
A report released by the Commerce Department showed the U.S. trade deficit came in slightly wider in the month of July.
The Commerce Department said the trade deficit widened to $43.7 billion in July from a revised $43.5 billion in June.
Economists had expected the deficit to widen to $44.6 billion from the $43.6 billion originally reported for the previous month.
At 10 am ET, the Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of August.
The ISM’s non-manufacturing index is expected to climb to 55.8 in August from 53.9 in July, with a reading above 50 indicating growth in the service sector.
The Federal Reserve is due to release its Beige Book at 2 pm ET. The Beige Book is a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.
Stocks In Focus
Shares of Sarepta Therapeutics (SRPT) are moving sharply higher in pre-market trading after the drug maker announced positive results from a study of its treatment for Duchenne Muscular Dystrophy.
Licensed apparel maker G-III Apparel (GIII) may also see early strength after reporting a narrower than expected second quarter loss and raising its full-year guidance.
Shares of Fred’s (FRED) are also likely to move to the upside after the discount retailer reported a narrower than expected second quarter loss on better than expected sales.
On the other hand, shares of Trivago (TRVG) are likely to come under pressure after the travel website operator warned of weaker than expected full-year results.
Apparel retailer Francesca’s (FRAN) may also see early weakness after reporting better than expected second quarter results but warning of the impact of Hurricane Harvey on its third quarter results.
Shares of Dave & Buster’s (PLAY) could also move to the downside after the restaurant chain reported second quarter earnings that beat estimates but on weaker than expected revenues.
by RTT Staff Writer
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