Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to regain ground following the steep losses posted last week.

Traders may look to pick up stocks at relatively reduced levels following the notable decline seen in the previous week.

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

While the Fed is widely expected to slow the pace of interest rate hikes to 50 basis points, traders have recently expressed concerns about how much further the Fed will need to raise rates in order to contain inflation.

Traders are likely to pay close attention to the Fed’s accompanying statement, although a lot of key data will be released before the next meeting in late January/early February.

Stocks showed a lack of direction throughout much of the trading session on Friday before coming under pressure going into the close. The major averages moved notably lower in late-day trading after spending most of the session bouncing back and forth across the unchanged line.

The major averages finished the day just off their lows of the session. The Dow slumped 305.02 points or 0.9 percent to 33,476.46, the Nasdaq slid 77.39 points or 0.7 percent to 11,004.62 and the S&P 500 fell 29.13 points or 0.7 percent to 3,934.38.

With the pullback on the day, the major averages posted steep losses for the week. The Dow tumbled by 2.8 percent, the S&P 500 and the Nasdaq plunged by 3.4 percent and 4.0 percent, respectively.

The late-day weakness on Wall Street came as traders looked ahead to the highly-anticipated Federal Reserve meeting.

Adding to concerns about the outlook for interest rates, the Labor Department released a report showing U.S producer prices increased by more than expected in the month of November.

The Labor Department said its producer price index for final demand rose by 0.3 percent in November, matching upwardly revised increases in October and September.

Economists had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent uptick originally reported for the previous month.

However, the negative sentiment was partly offset by a report from the University of Michigan showing a decrease in consumers’ inflation expectations.

The report showed one-year inflation expectations fell to a fifteen-month low of 4.6 percent in December from 4.9 percent in November, although five-year inflation expectations held at 3.0 percent.

“Declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification,” said Surveys of Consumers Director Joanne Hsu.

Energy stocks moved sharply lower over the course of the session, with a continued decrease by the price of crude oil weighing on the sector.

With crude for January delivery falling $0.44 to $71.02 a barrel, the Philadelphia Oil Service Index plunged by 3.8 percent and the NYSE Arca Oil Index dove by 2.2 percent.

Considerable weakness also emerged among biotechnology stocks, as reflected by the 1.7 percent slump by the NYSE Arca Biotechnology Index.

Networking, gold and healthcare stocks also showed significant moves to the downside as the trading day progressed.

Commodity, Currency Markets

Crude oil futures are rising $0.48 to $71.50 a barrel after slipping $0.44 to $71.02 a barrel last Friday. Meanwhile, after climbing $9.20 to $1,810.70 an ounce in the previous session, gold futures are falling $10 to $1,800.70 an ounce.

On the currency front, the U.S. dollar is trading at 137.08 yen versus the 136.56 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0568 compared to last Friday’s $1.0540.

Asia

Asian stocks declined on Monday as data on U.S. producer prices sent mixed signals on inflation and China faced a surge in Covid 19 cases after partially easing aspects of its so-called zero-Covid policy.

Investors looked ahead to the release of U.S. consumer inflation data as well as a slew of central bank decisions this week for additional clues on the economic and interest rate outlook.

Chinese and Hong Kong stocks led regional losses after a top government health adviser warned that the epidemic in China is spreading rapidly and that it will be difficult to completely cut off the transmission chain.

China’s Shanghai Composite Index dropped 0.9 percent to 3,179.04, while Hong Kong’s Hang Seng Index tumbled 2.2 percent to 19,463.63. The Taiwan Weighted index, which is heavily exposed to China, gave up 0.6 percent.

Japanese shares edged down slightly after data showed producer price inflation in the country remained at a nearly 41-year high in November, suggesting that price pressures are likely to remain more stubborn in the near term.

The Nikkei 225 Index slipped 0.2 percent to 27,842.33, while the broader Topix ended 0.2 percent lower at 1,957.33.

While tech stocks led losses, Toshiba rallied nearly 2 percent on reports that its preferred bidder, Japan Industrial Partners, has moved closer to securing bank financing for a buyout.

Seoul stocks fell notably, with the Kospi ending 0.7 percent lower at 2,373.02 amid deepening recession fears. Samsung Electronics, Samsung Biologics and Celltrion fell 1-2 percent. Chip giant SK Hynix dropped half a percent after its gloomy forecast for fourth-quarter performance.

Australian markets closed lower, dragged down by heavyweight mining and utilities stocks. The benchmark S&P/ASX 200 Index slid 0.5 percent to 7,180.80, while the broader All Ordinaries Index closed 0.5 percent lower at 7,370.60.

Origin Energy shares slumped 7.8 percent as the government announced plans to cap coal and gas prices for a year.

Tyro Payments plummeted 19.5 percent after rejecting an improved takeover offer from Potentia Capital and ceasing talks with Westpac.

Europe

European stocks have fallen in cautious trade on Monday, as investors avoided making big bets ahead of key U.S. inflation data as well as a trio of central bank meetings due this week.

Meanwhile, the relaxation of strict Covid curbs has sparked concerns about a new wave of infections in China.

While the U.K.’s FTSE 100 Index has dipped by 0.3 percent, the German DAX Index and the French CAC 40 Index are both down by 0.4 percent.

Danish shipping major A.P. Møller – Mærsk A/S has tumbled after saying it has appointed Vincent Clerc as its new Chief Executive Officer, with effect from January 1, 2023.

Biotech firm Novozymes has also slumped, while Chr. Hansen has jumped after they announced plans to merge.

Stellantis NV has risen after it announced plans to halt operations at an assembly plant in Belvidere, Illinois, in February 2023.

Clariant AG has moved to the downside. The Swiss specialty chemicals firm announced impairment charges of around CHF 225 million related to its Sunliquid plant in Podari, Romania, for the fiscal 2022.

London Stock Exchange has jumped after Microsoft said it would buy about a 4 percent stake in the U.K. bourse operator as part of a 10-year strategic partnership.

China-exposed luxury firms such as LVMH and Hermes International are moving lower in Paris after a top government health adviser warned that the epidemic in China is spreading rapidly and that it will be difficult to completely cut off the transmission chain.

Sanofi SA shares have edged higher in choppy trading after the French drug maker said it was no longer in discussions to buy Horizon Therapeutics.

In economic news, the U.K. economy rebounded at a faster-than-expected pace in October with a strong contribution from services activity, official data revealed earlier today.

Monthly real gross domestic product expanded 0.5 percent in October, reversing a fall of 0.6 percent in September, the Office for National Statistics said.

GDP was forecast to gain 0.4 percent after additional bank holiday for the State Funeral of HM Queen Elizabeth II weighed on September GDP.

U.S. Economic Reports

The Treasury Department is due to announce the results of this month’s auction of $40 billion worth of three-year notes at 11:30 am ET.

At 1 pm ET, the Treasury is scheduled to announce the results of this month’s auction of $32 billion worth of ten-year notes.