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Futures Climb Well Off Lows After Consumer Price Data

RTTNews 2018-10-11 09:02:00

The major U.S. index futures have climbed well off their worst levels of the morning and are currently pointing to a roughly flat opening on Thursday.

The futures were pointing to a sharply lower open earlier in the day but rebounded as treasury yields tumbled following the release of the Labor Department's report on consumer prices in the month of September.

The Labor Department report showed consumer prices inched up by less than expected in September, while the annual rate of consumer price growth slowed to 2.3 percent in September from 2.7 percent in August.

Treasury yields have moved notably lower following the release of the data, with the yield on the benchmark ten-year note sliding by 5.6 basis points to 3.169 percent.

The pullback by treasury yields may offset some of the recent concerns about the outlook for interest rates that contributed to the sell-off on Wednesday.

Stocks saw substantial weakness during trading on Wednesday following the mixed performances seen in the two previous sessions. The tech-heavy Nasdaq showed a particularly steep drop, falling to its lowest closing level in over three months.

The major averages saw further downside going into the close, ending the day just off their lows of the session. The Dow plunged 831.83 points or 3.2 percent to 25,598.74, the Nasdaq plummeted 315.97 points or 4.1 percent to 7,422.05 and the S&P 500 tumbled 94.66 points or 3.3 percent to 2,785.68.

Technology stocks helped to lead the way lower on Wall Street, with Netflix (NFLX), Amazon (AMZN), Apple (AAPL) and Facebook (FB) all posting significant losses on the day.

The sell-off came amid lingering concerns about the outlook for interest rates following a recent increase in treasury yields.

Treasury yields moved higher on the day following the release of a Labor Department report showing a rebound in producer prices in the month of September.

The Labor Department said its producer price index for final demand increased by 0.2 percent in September after edging down by 0.1 percent in August. Economists had expected prices to rise by 0.2 percent.

Excluding decreases in prices for food and energy, core producer prices still rose by 0.2 percent in September after slipping by 0.1 percent in August. The uptick in core prices also matched economist estimates.

The report also said the annual rate of producer price growth slowed to 2.6 percent in September from 2.8 percent in August, although the annual rate of core producer price growth accelerated to 2.5 percent from 2.3 percent.

In comments to reporters on Tuesday, President Donald Trump said he does not like the pace at which the Federal Reserve is raising interest rates.

"I like to see low interest rates," Trump told reporters as he prepared to depart for a campaign rally in Iowa. "The Fed is doing what they think is necessary, but I don't like what they're doing."

"I will say this: We're normalizing money, and that's good," he added. "But I think we don't have to go as fast."

The comments from Trump come after the Fed raised interest rates by a quarter point to 2 to 2.25 percent last month, marking the third rate hike this year.

The Fed's projections for future rates also pointed to one more increase in rates this year and three rate hikes next year.

Arguing that inflation has been held in check, Trump said he does not want to see Fed policy lead to a slowdown in recent economic growth.

CME Group's FedWatch tool currently indicates an 81.4 percent chance the Fed will raise rates by another quarter point to 2.25 to 2.5 percent at its December meeting.

Energy stocks moved sharply lower over the course of the session, with a steep drop by the price of crude oil weighing on the sector.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 5.6 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index both slumped by 3.8 percent.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 4.5 percent plunge by the Philadelphia Semiconductor Index. The index fell to its lowest closing level in over five months.

Transportation stocks also saw significant weakness, dragging the Dow Jones Transportation Average down by 4.1 percent to a nearly three-month closing low.

Networking, retail, computer hardware, and biotechnology stocks also moved notably lower, reflecting broad based weakness on Wall Street.

Meanwhile, gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are sliding $0.87 to $72.30 a barrel after plunging $1.79 to $73.17 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,212.80, up $19.40 compared to the previous session's close of $1,193.40. On Wednesday, gold rose $1.90.

On the currency front, the U.S. dollar is trading at 112.21 yen compared to the 112.27 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1585 compared to yesterday's $1.1520.

Asia

Asian stocks plunged on Thursday, mirroring an overnight sell-off on Wall Street as renewed trade tensions between Washington and Beijing dampened the outlook for economic growth and corporate profits.

Chinese stocks joined a global rout to hit multi-year lows. The benchmark Shanghai Composite Index plunged over 6 percent before recouping some loss to end the session down 142.38 points or 5.2 percent at 2,583.46, the worst single-day loss since February of 2016. Hong Kong's Hang Seng Index tumbled 926.70 points or 3.5 percent to 25,266.37.

Japanese shares hit a one-month low as a profit forecast cut by industrial equipment maker Yaskawa Electric added to investor worries over global growth. The Nikkei 225 Index plummeted 915.18 points or 3.9 percent to 22,590.86, marking its biggest daily decline since March. The broader Topix Index closed 3.5 percent lower at 1,701.86.

Yaskawa Electric fell over 6 percent and Mitsubishi Electric gave up 5.1 percent, while industrial robot maker Fanuc lost 6.8 percent. Chip equipment maker Tokyo Electron slumped 3.9 percent and Advantest dropped 4.5 percent.

Banks Sumitomo Mitsui Financial and Mitsubishi UFJ Financial plummeted 4-5 percent. Exporters Canon, Panasonic, Honda Motor and Toyota Motor also fell 2-4 percent as the yen strengthened against the dollar on safe-haven demand.

Australian markets fell sharply after the bloodbath on Wall Street overnight. The benchmark S&P/ASX 200 Index tumbled 166 points or 2.7 percent to slip below the 6,000-point mark for the first time since early June. The broader All Ordinaries Index lost 170.30 points or 2.8 percent to end at 5,993.50.


The big four banks fell between 2.6 percent and 3.2 percent while investment bank Macquarie Group plummeted 6 percent and insurer Suncorp declined 2 percent.

Telecom firm Telstra gave up 3.1 percent after its chairman John Mullen defended multi-million dollar executive bonuses.

Mining heavyweights BHP Billiton and Rio Tinto plunged 3-4 percent after base metal prices saw a meltdown. In the retail sector, Wesfarmers dropped 3.1 percent and Woolworths retreated 1.1 percent.

Energy stocks Origin Energy, Oil Search, Woodside Petroleum, Santos and Beach Energy plummeted 3-7 percent as oil extended big losses from the previous session.

Meanwhile, gold miner Evolution Mining soared 6.3 percent and Northern Star Resources gained 2 percent after gold prices rose for a second straight session overnight.

Europe

European stocks are extending losses to drop near 20-month lows on Thursday as concerns about slowing global growth as well as worries over the impact of rising interest rates has dented investors' appetite for riskier assets.

While the German DAX Index is down by 0.6 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are down by 1.1 percent and 1.2 percent, respectively.

Miners Anglo American, Antofagasta and Glencore have moved to the downside as base metal prices tumbled in Shanghai and London.

Oil giant BP Plc and Tullow Oil have also fallen sharply amid a continued drop by the price of crude oil.

Recruitment firm Hays Plc has plummeted as its first-quarter gross profit missed analyst estimates, hurt by a relatively stronger pound against rivals.

Financial services company Hargreaves Lansdown is also posting a steep loss after warning of an industry-wide slowdown.

Meanwhile, Ingenico shares have bucked the downtrend to rise more than 9 percent in Paris after Natixis said it is exploring a merger of its payments business with the French financial and payments firm.

Packaging and paper group Mondi has also advanced after it reported a 30 percent jump in third quarter underlying profits.

Dialog Semiconductor has soared on news the company has reached an agreement with Apple (AAPL) to license certain of its power management technologies and transfer certain of its assets and over 300 employees to Apple to support chip research and development.

In economic news, French consumer price inflation eased in September, the latest figures revealed, confirming the initial estimates.

The consumer price index rose 2.2 percent year-on-year following a 2.3 percent increase in August, statistical office INSEE said.

On a month-on-month basis, the consumer price index dropped 0.2 percent after a 0.5 percent rebound in August.

U.S. Economic Reports

Consumer prices in the U.S. showed a slight uptick in the month of September, according to a report released by the Labor Department.

The Labor Department said its consumer price index inched up by 0.1 percent in September after rising by 0.2 percent in August. Economists had expected prices to increase by another 0.2 percent.

Excluding food and energy prices, core consumer prices also crept up by 0.1 percent in September, matching the uptick seen in the previous month. Core prices had been expected to rise by 0.2 percent.

The report said the annual rate of consumer price growth slowed to 2.3 percent in September from 2.7 percent in August, while the annual rate of core consumer price growth was unchanged at 2.2 percent.

A separate report released by the Labor Department unexpectedly showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended October 6th.

The report said initial jobless claims rose to 214,000, an increase of 7,000 from the previous week's unrevised level of 207,000. Economists had expected jobless claims to edge down to 206,000.

At 11 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 5th.

Crude oil inventories are expected to rise by 2.6 million barrels after jumped by 8.0 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of its auction of $15 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of Fluor (FLR) are moving sharply lower in pre-market trading after the construction and engineering company forecast third quarter revenues below analyst estimates.

Financial technology company Square (SQ) is also likely to come under pressure after announcing its CFO Sarah Friar is stepping down to become CEO of neighborhood social network Nextdoor.

Shares of Walgreens Boots Alliance (WBA) are also seeing pre-market weakness after the drugstore chain reported better than expected fiscal fourth quarter earnings but on revenues that came in slightly below estimates.

On the other hand, shares of CRISPR Therapeutics (CRSP) are jumping in pre-market trading after the FDA lifted a clinical hold and accepted an application for the biopharmaceutical company's treatment of sickle cell disease.

Delta Air Lines (DAL) is also likely to see early strength after reporting third quarter results that exceeded expectations on both the top and bottom lines and raising its full-year revenue guidance.

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