ADVFN Newdesk 8.14.19

The major U.S. index futures are currently pointing to a sharply lower opening on Wednesday as traders keep a close eye on developments in the bond markets.

Concerns about a potential recession may weigh on Wall Street after the yield on the benchmark ten-year note dropped below the yield on the two-year note earlier this morning.

The inversion is widely seen as an indicator of a recession, although data from Credit Suisse shows the economic downturn typically does not occur until almost two years later.

The yield on the closely watched thirty-year bond has also shown a notable decrease, tumbling to a new record intraday low.

Negative sentiment may also be generated in reaction to a disappointing batch of Chinese economic data, which may add to concerns about the global demand outlook.

Overall trading activity may be somewhat subdued, however, as traders look ahead to an avalanche of U.S. economic data on Thursday.

Traders are likely to keep a close eye on the latest reports on weekly jobless claims, retail sales, and industrial production.

However, traders will also be presented with data on regional manufacturing activity, labor productivity and costs, business inventories, and homebuilder confidence.

Stocks moved sharply higher in morning trading on Tuesday and remained firmly positive for the remainder of the session. With the jump on the day, the major averages offset the steep losses posted on Monday.

The major averages pulled back off their best levels of the day but remained firmly positive. The Dow jumped 372.54 points or 1.4 percent to 26,279.91, the Nasdaq soared 152.95 points or 2 percent to 8,016.36 and the S&P 500 surged up 43.23 points or 1.5 percent to 2,926.32.

The rally on Wall Street came after U.S. Trade Representative Robert Lighthizer offered a temporary reprieve from concerns about the U.S.-China trade war by announcing a delay in imposing new tariffs on certain Chinese products.

Lighthizer said the 10 percent tariff set to take effect on September 1st should be delayed until December 15th for certain products.

The products benefiting from the delay include cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.

Additionally, the USTR announced certain unidentified products will be removed from the tariff list entirely based on health, safety, national security and other factors.

Lighthizer said the delay is part of the USTR’s public comment and hearing process and noted it intends to conduct an exclusion process for products subject to the additional tariffs.

The announcement comes less than two weeks after President Donald Trump announced plans to impose a 10 percent tariff on the remaining $300 billion worth of Chinese imports, sparking a sell-off on Wall Street.

Trump told reporters the delay comes amid concerns the tariffs could impact U.S. customers during the holiday shopping season even though he has repeatedly claimed the trade dispute has not hurt Americans.

In U.S. economic news, the Labor Department released a report showing consumer prices rose in line with economist estimates in the month of July, although the report also showed another bigger than expected increase in core consumer prices.

The Labor Department said its consumer price index climbed by 0.3 percent in July after inching up by 0.1 percent in both May and June. Economists had expected prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices also rose by 0.3 percent for the second consecutive month, while economists had expected a 0.2 percent uptick.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the bigger than expected increase in core prices “suggests that underlying inflationary pressures may not be as subdued as is widely assumed.”

“Provided that the incoming activity data continue to deteriorate, however, the Fed still looks likely to cut interest rates again next month,” Hunter said.

The report showed the annual rate growth in both consumer prices and core consumer prices accelerated to 1.8 percent and 2.2 percent, respectively.

Steel stocks showed a substantial rebound after falling sharply over the two previous sessions, with the NYSE Arca Steel Index spiking by 2.9 percent. The index ended Monday’s trading at a nearly three-year closing low.

Considerable strength also emerged among semiconductor stocks, as reflected by the 3 percent jump by the Philadelphia Semiconductor Index.

Computer hardware stocks also turned in a particularly strong performance on the news of the delayed tariffs, driving the NYSE Arca Computer Hardware Index up by 2.2 percent.

Software, retail, and networking stocks also moved notably higher, while gold stocks bucked the uptrend amid a decrease by the price of the precious metal.

US Economics Reports

Import prices in the U.S. unexpectedly showed a modest increase in the month of July, according to a report released by the Labor Department.

The Labor Department said import prices rose by 0.2 percent in July after plunging by a revised 1.1 percent in June.

Economists had expected import prices to come in unchanged compared to the 0.9 percent slump originally reported for the previous month.

The report also showed an unexpected uptick in export prices, which crept up by 0.2 percent in July after falling by a revised 0.6 percent in June.

Export prices had also been expected to come in unchanged compared to the 0.7 percent decrease originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended August 9th.

Crude oil inventories are expected to drop by 2.8 million barrels after rising by 2.4 million barrels in the previous week.

Stocks in Focus

Shares of Macy’s (M) are moving sharply lower in pre-market trading after the department store chain reported weaker than expected second quarter earnings and cuts its full-year guidance.

Myriad Genetics (MYGN) is also seeing substantial pre-market weakness after the molecular diagnostic company reported fiscal fourth quarter results that missed analyst estimates on both the top and bottom lines.

Shares of Tilray (TLRY) may also come under pressure after the Canadian cannabis company reported a wider than expected second quarter loss.