The major U.S. index futures are currently pointing to a higher opening on Wednesday, with stocks likely to move back to the upside following the pullback seen in the previous session.
Early buying interest is likely to be generated in reaction to upbeat earnings news from retail giants Target (TGT) and Lowe?s (LOW), which are both moving sharply higher in pre-market trading.
Target and Lowe?s both reported quarterly results that exceeded analyst estimates on both the top and bottom lines, with Target also raising its full-year earnings guidance.
The better than expected results from the retailers may add to optimism that strength in consumer spending will continue to support the U.S. economy despite early indicators of a looming recession.
Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of the minutes of the Federal Reserve?s latest monetary policy announcement this afternoon.
Stocks fluctuated over the course of morning trading on Tuesday before coming under pressure in the afternoon. The major averages slid more firmly into negative territory, partly offsetting the strong upward move seen over the two previous sessions.
The major averages accelerated to the downside going into the close, ending the session at their worst levels of the day. The Dow slid 173.35 points or 0.7 percent to 25,962.44, the Nasdaq fell 54.25 points or 0.7 percent to 7,948.56 and the S&P 500 slumped 23.14 points or 0.8 percent to 2,900.51.
The weakness on Wall Street came amid a pullback by bond yields, which moved back to the downside following the rebound seen on Monday and Friday.
Traders also expressed some uncertainty ahead of the release of the minutes of the Federal Reserve’s late-July meeting on Wednesday.
The minutes, along with Fed Chairman Jerome Powell’s speech on Friday, may shed additional light on the outlook for interest rates.
The Fed cut interest rates by 25 basis points last month and CME Group’s FedWatch tool currently indicates a 95 percent chance of another 25 basis point rate cut in September.
Powell suggested that the July rate cut should not be seen as “the beginning of a lengthy cutting cycle,” but President Donald Trump has been putting intense pressure on the Fed to continue cutting rates.
Trump claimed in a post on Twitter on Monday that the U.S. economy is very strong in spite of Powell’s “horrendous lack of vision.”
“The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well,” Trump tweeted.
He added, “If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!”
Negative sentiment was also generated by comments from Trump once again threatening to impose tariffs on European auto imports.
Banking stocks showed a significant move to the downside over the course of the trading session, dragging the KBW Bank Index down by 1.7 percent. The index pulled back after moving sharply higher over the two previous sessions.
Considerable weakness was also visible among chemical stocks, as reflected by the 1.4 percent loss posted by the S&P Chemical Sector Index.
Biotechnology, natural gas and oil service stocks also saw notable weakness, moving lower along with most of the other major sectors.
On the other hand, gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 3 percent. The rally by gold stocks came amid an increase by the price of the precious metal.
US Economic Reports
The National Association of Realtors is scheduled to release its report on existing home sales in the month of July at 10 am ET.
Existing home sales are expected to jump by 2.3 percent to an annual rate of 5.39 million in July after slumping by 1.7 percent to a rate of 5.27 million in June.
At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended August 16th.
Crude oil inventories are expected to drop by 1.9 million barrels after rising by 1.6 million barrels in the previous week.
The Federal Reserve is schedule to release the minutes of late-July monetary policy meeting at 2 pm ET. The Fed voted to lower interest rates by 25 basis points at the meeting.
Stocks in Focus
Shares of Children’s Place (PLCE) are moving sharply lower in pre-market trading after the children?s appeal retailer reported second quarter revenues that missed analyst estimates and cut its full-year forecast.
Lighting solutions company Cree (CREE) may also see initial weakness after reporting better than expected fiscal fourth quarter results but providing disappointing guidance for the current quarter.
On the other hand, shares of La-Z-Boy (LZB) are likely to move to the upside after the furniture maker reported fiscal first quarter earnings that beat analyst estimates.
