Stocks May Give Back Ground After Yesterday's Rally - U.S. Commentary

(RTTNews) - Stocks are likely to give back ground in early trading on Wednesday following the rally seen in the previous session. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 113 points.

Profit taking may contribute to initial weakness on Wall Street, as traders cash in on yesterday's gains amid lingering uncertainty about the near-term outlook for the markets.

A negative reaction to the latest batch of earnings news may also weigh on the markets, with tech giant IBM Corp. (IBM) under pressure in pre-market trading after reporting third quarter earnings that beat analyst estimates but weaker than expected revenues.

On the other hand, shares of Netflix (NFLX) are moving sharply higher in pre-market trading after the video streaming service reported better than expected third quarter earnings, revenues, and subscriber growth.

Negative sentiment may also be generated by the release of a report from the Commerce Department showing a much bigger than expected pullback in housing starts in the month of September.

The Commerce Department said housing starts tumbled by 5.3 percent to an annual rate of 1.201 million in September from the revised August estimate of 1.268 million.

Economists had expected housing starts to pull back by about 3.5 percent to a rate of 1.237 million from the 1.282 million originally reported for the previous month.

The report also showed a continued decrease in building permits, which fell by 0.6 percent to an annual rate of 1.241 million in September from a revised 1.249 million in August.

Building permits, an indicator of future housing demand, had been expected to jump by about 4.1 percent to a rate of 1.280 million from the 1.229 million originally reported for the previous month.

Overall trading activity may be somewhat subdued, however, as traders look ahead to this afternoon's release of the minutes of the Federal Reserve's latest monetary policy meeting.

Traders are likely to closely scrutinize the minutes of the Fed's September meeting, looking for additional clues about the outlook for interest rates.

During the meeting, the Fed decided to raise rates by a quarter point to 2 to 2.25 percent and forecast another rate hike before the end of the year.

Following the pullback seen on Monday, stocks moved sharply higher over the course of the trading day on Tuesday. The major averages more than offset Monday's losses, extending the rebound seen last Friday.

The major averages ended the session just off their best levels of the day. The Dow surged up 547.87 points or 2.2 percent to 25,798.42, the Nasdaq soared 214.75 points or 2.9 percent to 7,645.49 and the S&P 500 jumped 59.13 points or 2.2 percent to 2,809.92.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index shot up by 1.3 percent, while China's Shanghai Composite Index climbed by 0.6 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.'s FTSE 100 Index is up by 0.1 percent, the French CAC 40 Index is down by 0.3 percent and the German DAX Index is down by 0.5 percent.

In commodities trading, crude oil futures are sliding $0.63 to $71.29 a barrel after edging up $0.14 to $71.92 a barrel on Tuesday. Meanwhile, after inching up $0.70 to $1,231 an ounce in the previous session, gold futures are slipping $1.40 to $1,229.60 an ounce.

On the currency front, the U.S. dollar is trading at 112.24 yen compared to the 112.25 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1533 compared to yesterday's $1.1574.
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