Profit Taking May Lead To Extended Pullback On Wall Street

(RTTNews) – The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to extend the pullback seen over the past few sessions.

The downward momentum on Wall Street comes as traders look to continue to cash in on the recent strength in the markets.

Concerns about the economic outlook and worries about further aggressive interest rates by the Federal Reserve are likely to continue to weigh on stocks.

U.S. stocks closed lower on Tuesday, losing ground for a third straight session, as worries about an economic slowdown and tighter monetary policy weighed on sentiment.

Data showing U.S. business activity dropping for a second straight month weighed on the markets.

Investors also looked ahead to Fed Chair Jerome Powell’s speech at the central bank’s annual Jackson Hole economic symposium later this week for clues about the bank’s outlook for the economy and interest rates.

Among the major averages, the Dow ended down 154.02 points or 0.5 percent at 32,909.59 and the S&P 500 settled lower by 9.26 points or 0.2 percent at 4,128.73. The Nasdaq outperformed and ended flat at 12,381.30, less than 0.3 points down from the previous close.

Data from Markit Economics showed the S&P Global U.S. Composite PMI came in with a score of 45 for August, down from a reading of 47.7 in July.

The Manufacturing PMI fell to 51.3 in August from 52.2 a month earlier, while the Services PMI dropped to 44.1 in the month from 47.3 in July.

Data from the Commerce Department showed new home sales in the U.S. dropped 12.6 percent month-over-month to a seasonally adjusted 511,000 in July, the lowest reading since January 2016.

According to a report from the Federal Reserve Bank of Richmond, the Richmond Fed composite manufacturing index fell to -8 in August from 0 in the previous month.

Meanwhile, Redbook Research Inc. said that the Redbook index increased by 13.5 percent in the week ending August 20, 2022 over the same week in the previous year.

Commodity, Currency Markets

Crude oil futures are rising $0.66 to $94.40 a barrel after surging $3.38 to $93.74 barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,759, down $2.20 compared to the previous session’s close of $1,761.20. On Tuesday, gold climbed $12.80.

On the currency front, the U.S. dollar is trading at 136.84 yen compared to the 136.77 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $0.9923 compared to yesterday’s $0.9970.

Asia

Asian stocks fell for an eighth straight session on Wednesday, with Europe’s energy woes and a drought-fueled power crisis in China keeping investors nervous.

Investors also braced for a hawkish message from the Federal Reserve at this week’s Jackson Hole symposium.

The dollar traded firm and the 10-year U.S. Treasury yield held above 3 percent after Minneapolis Federal Reserve Bank President Neel Kashkari said the Fed needs to be more aggressive to control inflation.

Gold was little changed, while oil prices fluctuated after surging by nearly 4 percent overnight on news that OPEC could cut output to correct the recent oil price fall.

China’s Shanghai Composite Index slumped 1.9 percent to 3,215.20 on concerns that the risk from the country’s property sector could spill into the wider economy. Hong Kong’s Hang Seng Index fell 1.2 percent to 19,268.74.

Japanese stocks closed at a two-week low as recession worries persisted. The Nikkei 225 Index slipped 0.5 percent to 28,313.47, while the broader Topix ended 0.2 percent lower at 1,967.18.

Tech stocks were hit hard, with Screen Holdings and Tokyo Electron losing 1-2 percent. Video game company Konami lost 2.8 percent and Nintendo fell 2.6 percent.

Energy stocks outperformed, with Inpex Corp. adding 1.7 percent. Tokyo Electric jumped 10 percent after reports that the government wants to restart more nuclear reactors to avoid power shortages.

Seoul stocks posted modest gains to snap a five-day losing streak. The Kospi inched up half a percent to 2,447.45 as the Korean won rose against the dollar for the first time in seven sessions.

The Bank of Korea will hold its monetary policy meeting on Thursday, with economists expecting a 25-bps rate hike.

Australian stocks closed higher, led by gains in the energy and mining sectors. The benchmark S&P/ASX 200 Index rose 0.5 percent to 6,998.10, while the broader All Ordinaries Index ended 0.6 percent higher at 7,242.30.

AUB Group surged 5.5 percent and software solutions provider WiseTech Global soared 12.8 percent after reporting encouraging annual results.

Supermarket group Coles lost 4.6 percent after it flagged higher costs for the 2023 fiscal year.

Europe

European stocks were flat to slightly lower on Wednesday, as investors fretted over a worsening energy crisis and hawkish comments from Fed officials on the pace of future rate rises.

Federal Reserve Bank of Minneapolis President Neel Kashkari said on Tuesday inflation is much more embedded at a much higher level and the central bank has to be more aggressive to bring it under control.

It is believed that Fed Chair Jerome Powell’s Friday morning speech at Jackson Hole could cement the market tone until the next Federal Open Market Committee meeting next month.

Investors also await minutes of the ECB’s last policy meeting, which might provide additional hawkish signals.

Currently, the U.K.’s FTSE 100 Index is down by 0.3 percent, the German DAX Index is just above the unchanged line and the French CAC 40 Index is up by 0.1 percent.

Miners Anglo American, Antofagasta and Glencore lost 1-2 percent in London on concerns that the risk from China’s property sector could spill into the wider economy weighed on the mining sector.

Costain Group fell over 1 percent. The construction engineering firm reported that its first-half profit before tax increased to 11.2 million pounds from last year’s 9.1 million pounds.

Lookers, a car dealership chain, surged nearly 6 percent after reporting a rise in first-half profit and sales, despite the ongoing weakness of the U.K. auto market.

CTS Eventim AG, a German provider of ticketing services and live entertainment, rose 1.4 percent after it posted a surge in normalized-EBITDA for the first-half, driven by a rise in sales.

Swedish construction and project development company Skanska AB edged up slightly after it signed a contract with National Highways to upgrade a 6.6 kilometre stretch of the A46 Newark Bypass in the Midlands region, U.K.

U.S. Economic Reports

New orders for U.S. manufactured durable goods were virtually unchanged in the month of July, according to a report released by the Commerce Department on Wednesday.

The Commerce Department said durable goods orders edged down by less than a tenth of a percent in July after surging by a revised 2.2 percent in June.

Economists had expected durable goods orders to increase by 0.6 percent compared to the 2.0 percent jump that had been reported for the previous month.

Excluding a pullback in orders for transportation equipment, durable goods orders rose by 0.3 percent for the second straight month. Ex-transportation orders were expected to inch up by 0.2 percent.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of July. Pending home sales are expected to tumble by 4.0 percent in July after plunging by 8.6 percent in June.

The Energy Information Administration is due to release its report on oil inventories in the week ended August 19th at 10:30 am ET, Crude oil inventories are expected to dip by 0.9 million barrels.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $45 billion worth of five-year notes.

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