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Chinese Stocks Rebound May Flow to Wall Street

By Investors Hub

The major U.S. index futures are pointing to a higher opening on Friday, with stocks likely to regain ground following the sell-off seen in the previous session.

Early buying interest may generated by a rally by Chinese stocks, which rebounded strongly from an initial move to the downside despite disappointing GDP data.

Data showed Chinese GDP climbed an annual 6.5 percent in the third quarter, shy of estimates for 6.6 percent and down from 6.7 percent in the previous quarter.

However, investors reacted positively after three top Chinese financial regulators stepped in to bolster investor confidence.

The heads of the People’s Bank of China, the Securities Regulatory Commission and the Banking and Insurance Regulatory Commission all issued statements expressing support for the markets.

A positive reaction to upbeat earnings news from big-name companies such as Procter & Gamble (PG) and Honeywell (HON) may also contribute to initial strength on Wall Street.

Traders may be reluctant to make significant moves, however, as concerns about rising interest rates and tension between the U.S. and Saudi Arabia may continue to weigh on the markets.

After ending Wednesday?s trading roughly flat, stocks moved sharply lower over the course of the trading day on Thursday. The major averages attempted a recovery after seeing early weakness but saw a significant pullback as the day progressed.

The major averages ended the day firmly in negative territory. The Dow tumbled 327.23 points or 1.3 percent to 25,379.54, the Nasdaq plunged 157.56 points or 2.1 percent to 7,485.14 and the S&P 500 slumped 40.43 points or 1.4 percent to 2,768.78.

The sell-off on Wall Street on Wall Street came after Treasury Secretary Steven Mnuchin announced he will not attend an upcoming investment conference in Saudi Arabia.

“Just met with @realDonaldTrump and @SecPompeo and we have decided, I will not be participating in the Future Investment Initiative summit in Saudi Arabia,” Mnuchin said in a post on Twitter.

Mnuchin joins several other top executives and international finance leaders that have dropped out of the conference, including JPMorgan Chase (JPM) CEO Jamie Dimon and International Monetary Fund Managing Director Christine Lagarde.

The announcement by Mnuchin comes as Saudi Arabia continues to face considerable international pressure over the recent disappearance and apparent murder of journalist Jamal Khashoggi.

Lingering concerns about the outlook for interest rates also weighed on the markets as traders continued to digest the minutes of the Federal Reserve’s latest monetary policy meeting.

The minutes released Wednesday afternoon showed the Fed continues to favor a “gradual approach” to raising interest rates, with the meeting participants generally judging that the economy was evolving about as anticipated.

The Fed’s forecasts point to one more rate hike before the end of this year, with CME Group’s FedWatch indicating a nearly 80 percent chance of a quarter-point rate increase in December.

On the U.S. economic front, the Labor Department released a report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended October 13th.

The report said initial jobless claims slipped to 210,000, a decrease of 5,000 from the previous week’s revised level of 215,000. Economists had expected jobless claims to edge down to 212,000.

A separate report released by the Federal Reserve Bank of Philadelphia showed manufacturing activity in the Philadelphia area grew at a slightly slower rate in the month of October.

The Philly Fed said its diffusion index for current general activity edged down to 22.2 in October from 22.9 in September, although a positive reading still indicates growth in regional manufacturing activity. The index had been expected to drop to 20.0.

Meanwhile, the Conference Board released a report showing its index of leading U.S. economic indicators increased in line with economist estimates in September.

The Conference Board said its leading economic index climbed by 0.5 percent in September after rising by 0.4 percent in August.

Oil service stocks showed a substantial move to the downside on the day, dragging the Philadelphia Oil Service Index down by 3.6 percent. With the drop, the index fell to its lowest closing level in over a month. The weakness among oil service stocks came amid a notable decrease by the price of crude oil.

Significant weakness was also visible among steel stocks, as reflected by the 2.8 percent slump by the NYSE Arca Steel Index. Steel stocks moved lower partly due to concerns about the outlook for Chinese demand.

Transportation stocks also saw considerable weakness, resulting in a 2.6 percent drop by the Dow Jones Transportation Average.

Semiconductor, software, retail, and financial stocks also showed notables moves to the downside, reflecting broad based weakness on Wall Street.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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