Modupe Gbadeyanka
By Investors Hub
The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to extend the downward move seen last Friday.
Renewed concerns about the global economic outlook may generate some selling pressure following the release of disappointing European economic data.
Survey data from IHS Markit showed the euro area private sector was close to stalling at the end of the third quarter. The flash composite output index unexpectedly fell to a 75-month low of 50.4 in September from 51.9 in August.
Germany’s private sector contracted the most since late 2012 as a downturn in manufacturing deepened and service sector growth lost momentum.
Waning optimism about a potential U.S.-China trade deal may also weigh on the markets after the Chinese cut short a visit to the U.S. last week and President Donald Trump indicated he is not in a hurry to reach an agreement.
Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep some traders on the sidelines.
Reports on consumer confidence, new home sales, durable goods orders and personal income and spending are likely to attract attention in the coming days.
After seeing modest strength throughout the morning, stocks once again came under pressure in afternoon trading on Friday. The major averages pulled back well off their best levels of the day and firmly into negative territory.
The major averages ended the day off their lows of the session but stuck in the red. The Dow fell 159.72 points or 0.6 percent to 26,935.07, the Nasdaq slid 65.20 points or 0.8 percent to 8,117.67 and the S&P 500 dropped 14.72 points or 0.5 percent to 2,992.07.
With the downturn on the day, the major averages also moved lower for the week, the Dow slumped by 1 percent, while the Nasdaq and the S&P 500 fell by 0.7 percent and 0.5 percent, respectively.
Stocks showed a notable move to the downside on news Chinese trade negotiators canceled a scheduled visit to U.S. farm states next week.
The Chinese delegation was in Washington this week for deputy-level trade talks and had been scheduled to visit American farms next week as a gesture of goodwill.
However, the Montana Farm Bureau revealed that the visit has been canceled, as the delegation is heading back to China sooner than expected.
The news offset some of the recent optimism about a potential end to the U.S.-China trade war, with the deputy-level talks expected to help pave the way for more productive high-level talks next month.
Comments from President Donald Trump indicating he is not interested in a “partial deal” with China also dashed hopes of a possible “interim deal.”
Trump also told reporters he doesn’t think he needs to reach a trade deal with China before the 2020 elections, claiming the U.S. is not being affected by the trade war.
Uncertainty about the outlook for interest also weighed on stocks, with Boston Federal Reserve President Eric Rosengren arguing that it is not necessary and potentially risky for the central bank to continue lowering rates.
Rosengren noted in a speech at the Stern School of Business at New York University that the U.S. economy has held up well in the face of trade-related impediments.
“Additional accommodation is not needed for an economy where labor markets are already tight – and risks further inflating the prices of riskier assets, and encouraging households and firms to take on what may be too much leverage,” Rosengren said.
Reflecting a divide at the Fed, Rosengren’s speech came the same day St. Louis Fed President James Bullard released a statement explaining his preference for cutting interest rates by 50 basis points at the Fed meeting earlier this week.
Bullard cited signs that U.S. economic growth is expected to slow in the near horizon as well as continued indications of low inflation.
Semiconductor stocks showed a significant move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 1.8 percent.
Xilinx (XLNX) posted a steep loss after the chipmaker said its CFO Lorenzo Flores is stepping down from his position to pursue another executive opportunity.
Considerable weakness also emerged among computer hardware stocks, as reflected by the 1.4 percent drop by the NYSE Arca Computer Hardware Index.
Retail, tobacco, and oil service stocks also came under pressure over the course of the session, while gold and pharmaceutical stocks showed strong moves to the upside.
