The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks poised to extend the pullback seen in the previous session.
Traders may continue to cash in on recent strength in the markets amid concerns optimism about the outlook for interest rates have led to overbought conditions.
While the Federal Reserve is widely expected to leave interest rates unchanged in the coming months, traders may need more evidence to solidify hopes of a rate cut in the near future.
The Labor Department’s closely watched monthly jobs report, which is due to be released on Friday, could have a significant impact on the outlook for rates.
Economists currently expect employment to increase by 185,000 jobs in November after rising by 150,000 jobs in October, while the unemployment rate is expected to hold at 3.9 percent.
Stocks showed a notable move to the downside in early trading on Monday, giving back ground after turning in a strong performance last Friday. The major averages subsequently climbed well off their worst levels but still ended the day in negative territory.
The Nasdaq slid 119.54 points or 0.8 percent to 14,185.49 and the S&P 500 fell 24.85 points or 0.5 percent to 4,569.78, while the narrower Dow edged down 41.06 points or 0.1 percent to 36,204.44 after falling more than 200 points early in the session.
The early pullback on Wall Street partly reflected profit taking, with some traders looking to cash in on the recent strength in the markets.
The Dow and the S&P 500 ended last Friday’s trading at their best closing levels since early 2022, while the Nasdaq reached a four-month closing high.
Stocks have recently benefited from optimism about the outlook for interest rates, as the Federal Reserve is widely expected to leave rates unchanged until cutting rates as early as March 2024.
A rebound by treasury yields may also have contributed to the weakness on Wall Street, as the yield on the benchmark ten-year note bounced off its lowest levels in three months.
Selling pressure waned over the course of the session, however, as traders looked ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.
Reports on private sector jobs, weekly jobless claims and consumer sentiment may also attract attention in the coming days.
The Commerce Department released a report Monday morning showing factory orders pulled back by much more than expected in the month of October.
The report said factory orders plunged by 3.6 percent in October after jumping by a downwardly revised 2.3 percent in September.
Economists had expected factory orders to tumble by 2.6 percent compared to the 2.8 percent surge originally reported for the previous month.
Gold stocks showed a substantial move to the downside on the day, with the NYSE Arca Gold Bugs Index plunging by 2.5 percent after ending last Friday’s trading at a four-month closing high.
The sell-off by gold stocks came as the price of gold pulled back sharply after reaching a record intraday high earlier in the day.
Software, computer hardware and semiconductor stocks also saw considerable weakness, contributing to the pullback by the tech-heavy Nasdaq.
Meanwhile, significant strength was visible among airline stocks, as reflected by the 10.8 percent spike by the NYSE Arca Airline Index. The index reached its best closing level in almost four months.
Shares of Hawaiian Holdings (HA) skyrocketed after the parent of Hawaiian Airlines agreed to be acquired by Alaska Air Group (ALK) for $18.00 per share in cash.