US Market
The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to move to the downside following the lackluster performance seen in the previous session.
Traders may look to cash in on recent strength in the markets ahead of the Federal Reserve’s monetary policy announcement on Wednesday.
With the Fed widely expected to raise interest rates by another 25 basis points, traders will pay close attention to the accompanying statement for clues about the outlook for rates.
CME Group’s FedWatch Tool is indicating a 90.9 percent chance the Fed will raise rates by 25 basis points and a 59.0 percent chance the central bank will subsequently leave rates unchanged in June.
Concerns about lawmakers’ struggles to reach an agreement on raising the U.S. debt ceiling may also weigh on Wall Street.
U.S. Treasury Secretary Janet Yellen has warned the Treasury might run out of money to cover obligations as soon as June 1.
Following the notable advance seen to close out the previous week, stocks showed a lack of direction throughout much of the trading session on Friday. The major averages spent the day bouncing back and forth across the unchanged line.
The major averages eventually ended the session slightly lower. While the Dow dipped 46.46 points or 0.1 percent to 34,051.70, the Nasdaq slipped 13.96 points or 0.1 percent to 12,212.60 and the S&P 500 edged down 1.61 points or less than a tenth of a percent to 4,167.87.
The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.
The Labor Department’s closely watched monthly jobs report is also likely to attract attention later in the week, with the report due to be released on Friday.
Meanwhile, shares of JPMorgan Chase (JPM) jumped by 2.1 percent after the financial giant announced the acquisition of the substantial majority of assets and assumed the deposits and certain other liabilities of troubled lender First Republic Bank (FRC).
“Our government invited us and others to step up, and we did,” said JPMorgan Chase Chairman and CEO Jamie Dimon. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
In U.S. economic news, the Institute for Supply Management released a report showing manufacturing activity contracted for the sixth consecutive month in April, although the pace of contraction slowed by more than expected.
The ISM said its manufacturing PMI rose to 47.1 in April from 46.3 in March, with a reading below 50 indicating a contraction. Economists had expected the index to inch up to 46.6.
The Commerce Department also released a report showing an unexpected increase in U.S construction spending in the month of March.
Most of the major sectors ended the day showing only modest moves, contributing to the lackluster performance by the broader markets.
Banking stocks showed a significant move to the downside, however, with the KBW Bank Index falling by 1.8 percent.
Considerable weakness was also visible among retail stocks, as reflected by the 1.5 percent drop by the Dow Jones U.S. Retail Index.
Steel and commercial real estate stocks also saw notable weakness on the day, while transportation and pharmaceutical stocks moved to the upside.
U.S. Economic Reports
The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of March at 10 am ET. Factory orders are expected to increase by 0.8 percent in March after falling by 0.7 percent in February.
Also at 10 am ET, the Labor Department is due to release its report on job openings in the month of March. Job openings are expected to dip to 9.775 million in March from 9.931 million in February.
Stocks in Focus
Shares of Chegg (CHGG) are moving sharply lower in pre-market trading after the education technology company reported better than expected first quarter results but provided disappointing second quarter revenue guidance.
Chemical giant DuPont (DD) may also come under pressure after reporting first quarter earnings that exceeded expectations but forecast weaker than expected second quarter results.
Meanwhile, shares of Uber (UBER) are likely to see initial strength after the ride sharing company reported better than expected first quarter results.
Europe
European stocks have moved lower on Tuesday as trading resumes after a three-day holiday break. Growth worries have resurfaced after data showed Chinese manufacturing activity contracted in April.
Elsewhere, a measure of U.S. manufacturing contracted for the sixth consecutive month in April but climbed off a three-year low as new orders improved slightly and employment rebounded.
Meanwhile, preliminary data from Eurostat showed the headline inflation rate in the euro zone rose slightly to 7.0 percent in April after having dropped to 6.9 percent the previous month.
While the French CAC 40 Index is down by 0.6 percent, the German DAX Index is down by 0.4 percent and the U.K.’s FTSE 100 Index is down by 0.1 percent.
The U.S. Federal Reserve is expected to raise its benchmark interest rate by 25 basis points on Wednesday despite signs of an impending slowdown.
Fed chief Jerome Powell’s post-decision press conference will be closely watched for comments around the future of monetary policy.
The European Central Bank (ECB) is widely expected to raise rates for a seventh straight meeting on Thursday and the big question is whether it will be a 25 or 50 basis point rate hike.
Oil and gas stocks have led the markets lower, with BP Plc tumbling after slowing the pace of share buybacks.
German real estate investor Patrizia has also fallen after it appointed Asoka Wöhrmann as new chief executive-designate of the company and Slava Shafir as new chief operating officer.
On the other hand, British lender HSBC has moved sharply higher after tripling its quarterly profit.
Iron ore pellet producer Ferrexpo has also gained on news its chief executive Jim North will step down after nine years with the company.
Restaurant Group has also jumped after saying its performance for the first fourth months of 2023 continued to be very encouraging.
Subsea-equipment rental group Ashtead has also rallied on share buyback news.
Asia
Asian stocks ended Tuesday’s session on a mixed note, with weak manufacturing data from China and uncertainty over the U.S. debt ceiling keeping investors nervous.
Investors also looked ahead to the Fed and ECB meetings this week for additional clues on the economic and interest rate outlook.
The U.S. dollar, oil and gold all moved lower in Asian trading. The cost of insuring against a U.S. default hit fresh highs after U.S. Treasury Secretary Janet Yellen said the Treasury might run out of money to cover obligations as soon as June 1.
Mainland Chinese markets were closed for the Labour Day holiday. Hong Kong’s Hang Seng Index rose 0.2 percent to 19,933.81 as investors assessed mixed Chinese data released over the weekend.
An official survey showed a contraction in Chinese manufacturing activity in April, casting doubt on the country’s economic recovery. However, activity in the services sector grew at a healthy pace during the month.
Japanese shares fluctuated before ending slightly higher for the day. The Nikkei 225 Index hit a 16-month high before closing 0.1 percent higher at 29,157.95.
The broader Topix index 0.1 percent lower at 2,075.53 ahead of a break for Golden Week holidays, the upcoming Fed meeting and key U.S. payrolls data.
While a weaker yen helped lift exporters, financials lost ground amid jitters surrounding the U.S. banking system. Resona Holdings and Nomura Holdings gave up 1-2 percent.
Electronics maker Panasonic gained 2.4 percent and chip-testing equipment maker Advantest added 3.5 percent.
Seoul stocks climbed, led by energy and chemical stocks. Leading refiner SK Innovation jumped 3.9 percent and battery components producer POSCO Future M soared 5.2 percent.
The Kospi rallied 0.9 percent to 2,524.39 after data showed the country’s headline inflation eased further in April to fall below 4 percent for the first time in 14 months.
Factory activity shrank for a tenth consecutive month in April, while exports fell for the seventh consecutive month, separate reports showed.
Australian markets fell sharply and government bond yields jumped after a surprise rate hike of 25 basis points by the country’s central bank. The Reserve Bank also signaled further policy tightening to ensure that inflation returns to target in a reasonable timeframe.
The benchmark S&P/ASX 200 Index fell 0.9 percent to 7,267.40, dragged down by banks, miners and energy stocks. The broader All Ordinaries Index ended 0.9 percent lower at 7,459.80.
Commodities
Crude oil futures are dipping $0.26 to $75.40 a barrel after slumping $1.12 to $75.66 a barrel on Monday. Meanwhile, after slipping $6.90 to $1,992.20 an ounce in the previous session, gold futures are inching up $3.40 to $1,995.60 an ounce.
On the currency front, the U.S. dollar is trading at 137.57 yen compared to the 137.50 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0962 compared to yesterday’s $1.0976.