Bargain Hunting May Lead to Initial Rebound on Wall Street
By Investors Hub
The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to regain some ground following the sell-off seen in the previous session.
The markets may benefit from bargain hunting, as traders pick up stocks at reduced levels after the steep losses posted on Monday.
While the markets may show an initial rebound, trading activity may be somewhat subdued amid a quiet day on the U.S. economic front.
Traders may look ahead to the release of the closely watched monthly jobs report on Friday as well as reports on private sector employment, factory orders, service sector activity and international trade due in the coming days.
Stocks moved sharply lower over the course of the trading session on Monday as traders returned to their desks following the long holiday weekend. The major averages all showed notable moves to the downside, with the Nasdaq and the S&P 500 falling to their lowest closing levels in almost two months.
The major averages climbed off their lows of the session going into the close but still ended the day firmly in the red. The Dow slumped 458.92 points or 1.9 percent to 23,644.19, the Nasdaq plunged 193.33 points or 2.7 percent to 6,870.12 and the S&P 500 tumbled 58.99 points or 2.2 percent to 2,581.88.
The sell-off on Wall Street came after China announced it is imposing tariffs on 128 imported goods originating in the U.S.
The move by China was in response to President Donald Trump’s decision to impose tariffs on steel and aluminum imports.
China revealed it is imposing a 15 percent tariff on 120 American products such as fruits, nuts, wine and steel pipes and a 25 percent tariff on eight other products, including pork and scrap aluminum.
The decision by China has added to recent concerns about a potential trade war after Trump also announced plans to impose about $50 billion of tariffs on Chinese goods over intellectual-property violations.
A notable decline by Amazon (AMZN) also weighed on the markets after Trump once again attacked the online retail giant on Twitter.
“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed,” Trump tweeted. “Also, our fully tax paying retailers are closing stores all over the country…not a level playing field!”
On the U.S. economic front, the Institute for Supply Management released a report showing activity in the manufacturing sector grew at a slower than expected rate in the month of March.
The ISM said its purchasing managers index fell to 59.3 in March from 60.8 in February, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to edge down to 60.0.
A separate report from the Commerce Department showed construction spending rose by much less than expected in February.
Biotechnology stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 4.9 percent. With the drop, the index ended the session at its lowest closing level in nearly three months.
Within the biotech sector, Alkermes (ALKS) posted a steep loss after the FDA rejected the biopharmaceutical company’s application for approval of an experimental depression treatment.
Significant weakness was also visible among retail stocks, as reflected by the 3.7 percent loss posted by the Dow Jones Retail Index. The steep decline by shares of Amazon weighed on the sector.
Energy stocks also saw considerable weakness, moving lower along with the price of crude oil. Semiconductor, telecom, housing, and computer hardware stocks also showed notable moves to the downside, reflecting broad based weakness on Wall Street.
Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index climbing by 1.3 percent. The strength among gold stocks came amid a sharp increase by the price of the precious metal.