U.S. Stocks May Give Back Ground On Disappointing Earnings, Economic Data

Following the rally seen in the previous session, stocks are likely to move back to the downside in early trading on Wednesday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 530 points.

Traders have recently expressed considerable optimism about the flattening of the coronavirus curve, but the latest earnings and economic news is likely to remind investors of the devastating economic impact of the pandemic.

Financial giants Bank of America (BAC), Goldman Sachs (GS) and Citigroup (C) are all seeing notable pre-market weakness after reporting sharply lower first quarter earnings.

The steep drop in earnings comes as the major banks set aside billions of dollars to prepare for a flood of defaults on loans due to the coronavirus-induced economic shutdown.

Adding to the negative sentiment, the Commerce Department released a report showing a sharp decline in U.S. retail sales in the month of March.

The Commerce Department said retail sales plummeted by 8.7 percent in March after falling by a revised 0.4 percent in February.

Economists had expected retail sales to plunge by 8.0 percent compared to the 0.5 percent drop originally reported for the previous month.

Excluding a nosedive in sales by motor vehicle and parts dealers, retail sales still tumbled by 4.5 percent in March following a 0.4 percent decrease in February. Ex-auto sales were expected to slump by 4.8 percent.

A separate report from the New York Federal Reserve showed New York manufacturing activity contracted at the fastest rate on record in the month of April.

The New York Fed said its general business conditions index plummeted to a negative 78.2 in April from a negative 21.5 in March, with a negative reading indicating a contraction in regional manufacturing activity. The index was expected to slump to a negative 35.0.

With the much bigger than expected nosedive, the general business conditions index plunged to its lowest level in the history of the survey—by a wide margin.

The Federal Reserve is scheduled to release its report on industrial production in the month of March just before the start of trading. Industrial production is expected to plunge by 4.0 percent in March after rising by 0.6 percent in February.

Shortly after the start of trading, the National Association of Home Builders is due to release its report on homebuilder confidence in the month of April. The housing market index is expected to nosedive to 55 in April after dipping to 72 in March.

The Commerce Department is also scheduled to release its report on business inventories in the month of February. Economists expect business inventories to decrease by 0.4 percent.

Later in the trading day, the Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

Following the mixed performance seen on Monday, stocks moved sharply higher over the course of the trading day on Tuesday. With the strong upward move on the day, the major averages reached their best closing levels in over a month.

The major averages all closed firmly positive, although the tech-heavy Nasdaq outperformed its counterparts. The Nasdaq spiked 323.32 points or 4 percent to 8,515.74, while the Dow jumped 558.99 points or 2.4 percent to 23,949.76 and the S&P 500 surged up 84.43 points or 3.1 percent to 2,846.06.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.5 percent, while China’s Shanghai Composite Index slid by 0.6 percent.

The major European markets have also shown significant moves to the downside on the day. While the German DAX Index has plummeted by 2.9 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 2.7 percent.

In commodities trading, crude oil futures are falling $0.39 to $19.72 a barrel after plunging $2.30 to $20.11 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,745.10, down $23.80 compared to the previous session’s close of 1,768.90. On Tuesday, gold climbed $7.50.

On the currency front, the U.S. dollar is trading at 107.56 yen compared to the 107.22 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0862 compared to yesterday’s $1.0980.

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