By Investors Hub
The major U.S. index futures are pointing to a lower opening on Tuesday, with stocks likely to add to the losses posted in the previous session.
Geopolitical concerns may continue to weigh on the markets amid uncertainty about the U.S. response to the attacks on Saudi Arabian oil facilities.
President Donald Trump has indicated the U.S. is prepared to respond militarily but has stopped short of definitively blaming Iran for the attacks.
Trump told reporters diplomacy has not been exhausted when it comes to Iran and would not rule out meeting with Iranian President Hassan Rouhani on the sidelines of the United Nations General Assembly next week.
Overall trading activity is likely to remain somewhat subdued, however, as traders await the Federal Reserve?s monetary policy decision on Wednesday.
The Fed is widely expected to lower interest rates by another 25 basis points, with CME Group?s FedWatch Tool currently indicating a 65.8 percent chance of a quarter-point rate cut.
Traders are likely to pay close attention to the Fed?s accompanying statement for clues about the long-term outlook for rates.
Reflecting concerns about the impact of skyrocketing oil prices, stocks saw moderate weakness during trading on Monday. The major averages all moved to the downside, partly offsetting the strong gains posted last week.
The major averages climbed off their worst levels of the day but still closed in negative territory. The Dow slid 142.70 points or 0.5 percent to 27,076.82, the Nasdaq fell 23.17 points or 0.3 percent to 8,153.54 and the S&P 500 dropped 9.43 points or 0.3 percent to 2,997.96.
The weakness on Wall Street came amid a spike by the price of crude oil, with brent crude futures showing the biggest intraday jump on record after a coordinated drone attack on Saudi Arabia’s oil industry.
Crude for October delivery soared $8.05 to $62.90 a barrel, raising concerns about the impact higher energy prices could have on the already fragile global economy.
The jump in oil prices comes as attacks on an oil processing facility at Abqaiq and the nearby Khurais oil field cut Saudi Arabia’s daily crude oil output in half.
Responding to the news, President Trump said he has authorized the release of oil from the Strategic Petroleum Reserve if necessary to keep the markets well supplied.
Trump also tweeted the U.S. is “locked and loaded” to the respond to the attacks, with Secretary of State Mike Pompeo pointing the finger at Iran.
A potential military conflict between the U.S. and Iran would weigh on a global economy that is already being dragged down by the U.S.-China trade war.
On the U.S. economic front, the Federal Reserve Bank of New York released a report showing New York-area manufacturing activity was little changed in the month of September.
The New York Fed said its general business conditions index dipped to 2.0 in September from 4.8 in August, although a positive reading still indicates an increase in regional manufacturing activity. Economists had expected the index to edge down to 4.0.
Chemical stocks showed a significant move to the downside on the day, dragging the S&P Chemical Sector Index down by 1.6 percent. The index pulled back after ending last Friday’s trading at its best closing level in well over a month.
Retail and tobacco stocks also saw considerable weakness, with the Dow Jones U.S. Retail Index and the NYSE Arca Tobacco Index both falling by 1.3 percent.
On the other hand, energy stocks saw substantial strength on the day, benefiting from the sharp increase by the price of crude oil.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 8.8 percent, the NYSE Arca Natural Gas Index spiked by 6.5 percent and the NYSE Arca Oil Index jumped by 3.8 percent.
Adedapo Adesanya