The major U.S. index futures are pointing to a modestly lower opening on Monday, with stocks likely to see some further downside following the sell-off seen last Friday.
Lingering concerns about the outlook for the economy may continue to weigh on the markets after dragging stocks sharply lower in the previous session.
An inversion of the yield curve may generate additional selling pressure, with the yield on the benchmark ten-year note falling below the yield on three-month bills.
The inverted yield curve has not occurred since 2007 and is seen by many as an indication that a recession is on the way.
The U.S. has thus far held up relatively well amid a global economic slowdown, although Federal Reserve Chairman Jerome Powell has warned about the negative impact slowing growth in Europe and China will have on the U.S.
Powell’s comments came after the Fed revealed that it no longer expects to raise interest rates this year, which some analysts described as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.
Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep some traders on the sidelines.
Reports on housing starts, consumer confidence, pending home sales, personal income and spending and new home sales are likely to attract attention in the coming days.
Traders are also likely to keep an eye on the latest round of high-level trade talks between the U.S. and China set to take place in Beijing this week.
Stocks moved sharply lower over the course of the trading session on Friday, more than offsetting the rally seen in the previous session. The Nasdaq and the S&P 500 pulled back well off Thursday’s five-month closing highs.
The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 460.19 points or 1.8 percent to 25,502.32, the Nasdaq plummeted 196.29 points or 2.5 percent to 7,642.67 and the S&P 500 plunged 54.17 points or 1.9 percent to 2,800.71.
With the steep losses on the day, the major averages also moved lower for the week. The Dow slumped by 1.3 percent, while the Nasdaq and the S&P 500 slid by 0.6 percent and 0.8 percent, respectively.
The sell-off on Wall Street partly reflected profit taking, with traders cashing in on recent gains after yesterday’s strong upward move.
Lingering uncertainty about trade talks between the U.S. and China also weighed on the markets ahead of another round of high-level negotiations next week.
Traders also continued to digest the Federal Reserve’s dovish monetary policy announcement earlier in the week.
The Fed’s decision to move away from plans to continue raising interest rates this year has been described by some analysts as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.
The central bank has also been accused of bending to pressure from President Donald Trump, who has claimed U.S. economic growth would be even stronger if the Fed had not raised rates last year.
Powell has continually touted the Fed’s independence, however, suggesting the dovish tone could also reflect legitimate concerns about the economic outlook.
Adding to the concerns about the outlook for the economy, the yield on the benchmark ten-year note fell below the yield on the three-month bond, which is seen by many as a reliable harbinger of a recession.
Meanwhile, traders largely shrugged off a report from the National Association of Realtors showing a substantial rebound in existing home sales in the month of February.
NAR said existing home sales soared by 11.8 percent to an annual rate of 5.51 million in February after slumping by 1.4 percent to a revised rate of 4.93 million in January.
Economists had expected existing home sales to surge up by 3.2 percent to a rate of 5.10 million from the 4.94 million originally reported for the previous month.
Oil service stocks moved sharply lower over the course of the trading session, resulting in a 5.2 percent nosedive by the Philadelphia Oil Service Index. The index pulled back well off its best closing level in well over a month. The sell-off by oil service stocks came amid a notable decrease by the price of crude oil.
Concerns about global demand also contributed to substantial weakness in the steel sector, as reflected by the 4.2 percent slump by the NYSE Arca Steel Index.
Significant weakness was also visible among financial stocks, which extended the sell-off seen since the Fed announcement.
While the KBW Bank Index plummeted by 3.9 percent, the NYSE Arca Broker/Dealer Index plunged by 3.4 percent.
Computer hardware, biotechnology, and chemical stocks also saw considerable weakness on the day, while utilities and gold stocks bucked the downtrend.
Commodity, Currency Markets
Crude oil futures are slipping $0.13 to $58.91 a barrel after tumbling $0.94 to $59.04 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,318.50, up $6.20 from the previous session’s close of $1,312.30. On Friday, gold rose $5.
On the currency front, the U.S. dollar is trading at 110.03 yen compared to the 109.92 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1322 compared to last Friday’s $1.1302.
Asian stocks succumbed to heavy selling pressure on Monday as growing worries about growth and Brexit-related uncertainty weighed on investors’ appetite for risk.
With an inverted yield curve in the U.S. stoking fears of a recession, investors largely ignored news that the Muller report did not find sufficient evidence against President Donald Trump.
Chinese shares followed global peers lower as investors looked forward to another round of U.S.-China trade negotiations set to begin in Beijing this week.
The benchmark Shanghai Composite Index tumbled 61.12 points or 2 percent to 3,043.03, while Hong Kong’s Hang Seng Index plunged 590.01 points or 2.03 percent to 28,523.35.
Japanese shares led regional losses as an inverted yield curve suggested that a recession could be looming. The Nikkei 225 Index plummeted 650.23 points or 3 percent to finish at 20,977.11, while the broader Topix closed 2.5 percent lower at 1,577.41.
Exporters Canon, Panasonic, Mazda Motor, Honda Motor and Toyota Motor fell 2-3 percent as the safe-haven yen strengthened.
Shares of Eisai slumped 19.8 percent after the drug maker and its partner Biogen last week decided to end two late-stage clinical trials of their experimental drug for Alzheimer’s disease, aducanumab.
Tech stocks such as Advantest and Tokyo Electron dropped 2-3 percent, while banks Mitsubishi UFJ Financial, Sumitomo Mitsui Financial and Mizuho Financial declined 1-3 percent. In the energy sector, Inpex and Japan Petroleum fell nearly 4 percent.
Australian markets ended at over one-month lows, with banking and mining stocks pacing the decliners on worries about a possible U.S. recession.
The benchmark S&P/ASX 200 Index slumped 69.00 points or 1.1 percent to 6,126.20, while the broader All Ordinaries Index ended down 72.20 points or 1.2 percent at 6,208.70.
Banks ANZ, Commonwealth and NAB dropped 1-2 percent. Westpac fell 1.5 percent as it set aside another A$260 million to remediate customers.
Mining heavyweights BHP and Rio Tinto also declined more than 1 percent after copper prices fell.
On the other hand, gold miners Evolution Mining and Newcrest surged up 2-3 percent as the precious metal rose on safe-haven buying.
Seoul stocks fell by the most in five months amid fears over a global economic slowdown. The benchmark Kospi shed 42.09 points or 1.9 percent to finish at 2,144.86, marking its largest single-day loss since October 23, 2018.
Large-cap shares fell across the board, with Samsung Electronics, Hyundai Motor, SK Hynix and Hyundai Heavy Industries losing 2-7 percent.
South Korea’s central bank chief said today that uncertainties stemming from external downside risks are affecting the country’s growth.
Energy stocks such as Woodside Petroleum, Santos, Origin Energy and Oil Search lost 3-4 percent as oil extended losses on concerns of a sharp economic slowdown.
European stocks have moved modestly lower on Monday, adding to the steep losses posted last Friday, as weak data deepen fears about faltering global growth, risks of a disorderly Brexit mount and investors look ahead to another round of high-level trade talks set to begin in Beijing this week.
While the U.K.’s FTSE 100 Index has slid by 0.7 percent, the French CAC 40 Index and the German DAX Index are down by 0.2 percent and 0.1 percent, respectively.
German chemicals giant Bayer has moved sharply lower as its management retained the backing of its supervisory board.
Sanofi has also fallen as the U.S. FDA declined to approve a drug developed by the French company and Lexicon Pharmaceuticals Inc.
Shares of Leeds Group have slumped in London after the company focused on the import and sale of fabric said its profit before tax for full-year 2019 is expected to be below the Board’s expectations.
Wood Group has also come under pressure after it agreed to sell its Terra Nova Technologies, a conveying and material handling systems solutions business, to Cementation Americas.
Provident Financial has also dropped after reiterating its opposition to a “risky and flawed” hostile offer from Non-Standard Finance Plc.
On the other hand, satellite operator Inmarsat has soared after it agreed to a $3.4 billion takeover by a private equity-led consortium.
In economic news, German business confidence strengthened in March after weakening in the previous six months, data from the Munich-based Ifo Institute revealed.
The Ifo business confidence index rose to 99.6, while economists had expected the reading to remain unchanged at February’s score of 98.5. The index rose for the first time since August 2018.
U.S. Economic Reports
No major U.S. economic data is scheduled to be released today, although reports on housing starts, consumer confidence, pending home sales, personal income and spending and new home sales are likely to attract attention in the coming days.
Stocks In Focus
Shares of Viacom (VIAB) are moving significantly higher in pre-market trading after the media giant reportedly reached an agreement with AT&T (T) to continue airing channels on DirecTV.
Biogen (BIIB) may rebound from a steep drop on Friday after the biotechnology company announced a new $5.0 billion stock repurchase program.
On the other hand, shares of Winnebago (WGO) may move to the downside after the recreational vehicle maker reported better than expected fiscal second quarter earnings but revenues that missed estimates.
Biedex.com Skin Enterprises (NUS) is likely to extend a recent downward trend after Stifel Nicolaus downgraded its rating on the health producer maker’s stock to Sell from Hold.
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