RTTN Weakness In Overseas Markets May Weigh On Wall Street
The major U.S. index futures are pointing to a slightly lower opening on Monday, with stocks likely to give back ground after moving notably higher last week. Weakness overseas may weigh on the markets, although trading activity may be somewhat subdued ahead of tonight's highly anticipated presidential debate.
U.S. stocks advanced in the week ended September 23rd, as two days of positive reaction to the U.S. Federal Reserve's decision to hold off on an interest rate hike benefited stocks.
Last Monday, the major averages came under pressure, as a strong housing market reading sent stocks lower for the session. The averages rose amid caution on Tuesday ahead of two major interest rate decisions.
Come Wednesday, the Fed warmed the hearts of traders with its decision to hold rates unchanged. The averages ended notably higher for the session. Optimism over the Fed decision and a rally by commodities kept the momentum going on Thursday, sending the averages higher yet again. Profit taking following three sessions of gains and a sharp pullback by the price of crude oil pressured stocks on Friday, resulting in a lower close.
For the week ended September 23rd, the Dow Industrials climbed 137.65 points or 0.8 percent to 18,262 for the week. The S&P 500 Index added 25.53 points or 1.2 percent before ending at 2,165, and the Nasdaq Composite ended at 5,306, up 61.18 points or 1.2 percent.
Among the sectors, the NYSE Arca Gold Bugs Index rallied 4.19 percent for the week and the Dow Jones Utility Average jumped 3.34 percent. Additionally, the Dow Jones Transportation Average, the NYSE Arca Biotechnology Index and the NYSE Arca Computer Hardware Index all rose over 2 percent each. On the other hand, the Philadelphia Housing Sector Index and the NYSE Arca Broker/Dealer Index fell close to 1.5 percent each.
Commodity, Currency Markets
Crude oil futures are climbing $0.62 to $45.10 a barrel after jumping $1.45 or 3.4 percent to $44.48 a barrel in the week ended September 23rd. Along with the dollar's weakness, optimism that OPEC would agree on production cuts also propped up the price of oil last week. If not for the steep drop on Friday, oil would have ended higher by an even bigger margin.
Gold futures, which rallied $31.50 or 2.4 percent to $1,341.70 in the previous week, are currently rising $0.70 to $1,342.40 an ounce.
Among currencies, the dollar moved to the downside in the previous week. The dollar fell 1.2 percent against the yen before ending the week at 101.02 yen, impacted by additional easing measures announced by the Bank of Japan and the unchanged stance from the U.S. Federal Reserve. The dollar also fell 0.6 percent against the euro before ending at $1.1226.
The greenback is currently drifting lower against the euro and is at $1.1263 and is also weaker against the yen at 100.51 yen.
Asia
The major Asian markets fell across the board, with Friday's losses on Wall Street and the recent gains making traders wary. The Japanese, Indian, Hong Kong and Chinese markets saw notable weakness.
The Japanese market ended lower, as the yen strengthened in the wake of risk aversion. The Nikkei 225 Index opened lower and moved roughly sideways. After seeing further downside in late trading, the index ended down 209.46 points or 1.25 percent at 16,545.
A majority of stocks retreated, with export and insurance stocks leading the slide. T&D Holdings, Dai-ichi Life Insurance, Sony Financial Holdings and TDK were among the worst performers of the session.
China's Shanghai Composite Index settled down 53.47 points or 1.76 percent at 2,981, and Hong Kong's Hang Seng Index ended 23,318, down 368.56 points or 1.56 percent.
Meanwhile, Australia's All Ordinaries Index languished below the unchanged line for the better part of the session but cut its losses in late trading and moved nervously around the unchanged line. The index ended up merely 0.50 points or 0.01 percent at 5,519, marking the fourth session of gains.
Real estate stocks rose notably and material, IT, utility and consumer discretionary stocks also gained some ground. However, consumer staple and healthcare stocks saw notable weakness.
On the economic front, Japan's Cabinet Office reported that its leading economic indicators index for Japan fell to 100 in July from 100.6 in June, downwardly revised from the 100.7 reported initially. The coincident index rose 112.1 from 112, although it was revised down from 112.8. The lagging index was down to 113.1.
Europe
European stocks opened lower and have seen further downside since then, as risk aversion rules the roost.
On the economic front, the results of IfO's German business sentiment survey showed that confidence among German businesses rose to 109.5 in September from 106.2 in August. The current conditions and expectations indexes all improved and were above expectations.
U.K. mortgage approvals declined to the lowest level in 20 months in August, the British Bankers' Association said. The number of mortgages approved for house purchases fell to 36,997 in August from 37,672 in July. This was the lowest since January 2015, when mortgages totaled 36,615. Nonetheless, approvals stood above the consensus estimate of 36,750.
U.S. Economic Reports
Manufacturing, housing and consumer readings are set to dominate proceedings in the unfolding week, as the Fed and the markets scout for evidence concerning the economic momentum.
Traders are likely to closely watch reports on new home sales, consumer confidence, durable goods orders, and personal income and spending. Several Fed speeches strewn across the week could also create ripples in the markets.
The Commerce Department is scheduled to release its new home sales report for August at 10 am ET. Economists expect new home sales to come in at a seasonally adjusted annual rate of 598,000 compared to a 654,000 rate in July.
New home sales rose 12.4 percent to a seasonally adjusted annual rate of 654,000 in July compared to a revised 582,000 rate for June. The median price of a new home fell 5.1 percent month-over-month to $294,600. New home inventories fell by 7,000 to 233,000, with inventories measured in terms of months of supply dipping to 4.3 months from 4.9 months.
The Dallas Federal Reserve is due to release its production index for September at 10:30 am ET. In August, the index came in at 4.5.
The Treasury is set to announce the results of its auction of 2-year notes at 1 pm ET.
Dallas Federal Reserve Bank President Robert Kaplan will participate in a moderated Q&A session at the Independent Bankers Association of Texas Annual Convention, followed by Q&A with media, in San Antonio, Texas. The event is scheduled for 1:30 pm ET.
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