US Equities Open Roughly Flat on Another Rate Cut Expectations
By Investors Hub
The major U.S. index futures are pointing to a roughly flat opening on Tuesday, with stocks likely to extend the lackluster performance seen over the two previous sessions.
Another quiet day on the U.S. economic front may keep some traders on the sidelines as they continue to digest last Friday?s weaker than expected jobs data.
The disappointing job growth raised concerns about the economic outlook but also reinforced expectations of another interest rate cut by the Federal Reserve next week.
Traders may also be reluctant to make significant moves ahead of the European Central Bank meeting on Thursday as well as next week?s Fed meeting.
Both central banks are expected to provide additional stimulus in reaction to recent indications of a slowdown by the global economy.
With the major averages back within striking distance of record highs, traders may be questioning whether stocks will see further upside in an economy that requires support from global central banks to avoid recession.
Stocks showed a lack of direction over the course of the trading day on Monday, extending the lackluster performance seen last Friday. The major averages once again spent the day bouncing back and forth across the unchanged line before closing mixed.
While the Dow inched up 38.05 points or 0.1 percent to 26,835.51, its best closing level in over a month, the tech-heavy Nasdaq dipped 15.64 points or 0.2 percent to 8,087.44 and the S&P 500 edged down 0.28 points or less than a tenth of a percent to 2,978.43.
The choppy trading on Wall Street came amid a light day on the U.S. economic front, with a lack of major data keeping some traders on the sidelines.
Reports on producer and consumer price inflation, retail sales and consumer sentiment are likely to attract attention in the coming days.
Meanwhile, traders expressed some optimism about further stimulus from global central banks, with the European Central Bank expected to cut interest rates at a meeting on Thursday.
Expectations for another interest rate cut by the U.S. Federal Reserve next week were also bolstered by last Friday’s weaker than expected jobs data.
Data from China showing an unexpected drop in exports in August has also added to the hopes of more stimulus to stave off a global recession.
Official data showed Chinese exports in August unexpectedly fell by 1 percent compared to year ago, reflecting the ongoing trade dispute with the U.S.
Subsequently, the trade war also remained on investors’ minds, although traders seem optimistic about high-level trade talks scheduled for next month.
Some political observers have suggested President Donald Trump may soften his stance on China in order to reach an agreement and prevent a U.S. recession just before Election Day.
Despite the lackluster performance by the broader markets, energy stocks moved sharply higher amid a notable increase by the price of crude oil.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index soared by 6.5 percent and 5.8 percent, respectively.
Substantial strength was also visible among banking stocks, as reflected by the 3.6 percent spike by the KBW Bank Index. The strength in the sector reflected the optimism about more global stimulus.
Steel, transportation and computer hardware stocks also saw considerable strength on the day, while gold stocks moved sharply lower amid a drop by the price of the precious metal.
Pharmaceutical and software stocks also showed notable moves to the downside, offsetting the strength seen in the aforementioned sectors.