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Market Analysis 06 Oct 2021

Dow Jones industrial average

General Market

U.S. stocks are seen opening sharply lower Wednesday, handing back most of the previous session’s gains, with investors fretting that elevated inflation levels will prompt the Federal Reserve to tighten monetary policy faster than already expected.

At 7 AM ET (1100 GMT), the Dow Futures contract was down 360 points, or 1%, S&P 500 Futures traded 54 points, or 1.3%, lower, while Nasdaq 100 Futures dropped 215 points, or 1.5%.

The major indices posted solid gains on Tuesday, with the blue chip Dow Jones Industrial Average gaining over 300 points, or 0.9%, the broad-based S&P 500 rising 1.1% while the tech-heavy Nasdaq Composite rallied 1.3%.

However, the tone has weakened Wednesday after the Reserve Bank of New Zealand hiked its benchmark interest rate for the first time in seven years, citing the need to get on top of inflationary pressures and adding that further removal of monetary policy stimulus was to be expected.

While this move had been expected, it intensified the focus on the Federal Reserve, especially given high energy prices and bond yields at their highest in three-months. The 10-year benchmark Treasury yield rose as high as 1.57% overnight before stabilizing a little lower at 1.54%.

Also weighing on sentiment is the lack of action over the country’s debt ceiling. Treasury Secretary Janet Yellen has warned that the government could run out of cash by Oct. 18 if the debt ceiling is not raised or suspended, potentially resulting in the U.S.’s first-ever default.

For Wednesday, the focus is on the U.S. labor market, with the payroll processing company ADP set to release its estimate of the month-on-month change in nonfarm employment at 8:15 AM ET (1215 GMT), usually closely studied as a guide to Friday’s official employment report.

Private companies in the U.S. are expected to add 428,000 jobs in September, more than August’s 374,000, according to estimates compiled by Investing.com.

In corporate news, clothes retailer Levi Strauss (NYSE:LEVI) and drinks giant Constellation Brands (NYSE:STZ) are scheduled to report quarterly earnings Wednesday, while social media giant Facebook (NASDAQ:FB) will remain in the spotlight after Monday’s outage and Tuesday’s testimony by whistleblower Frances Haugen to Congress.

Oil prices remained near multi-year highs Wednesday, although the WTI contract slipped after U.S. inventories increased by 951,000 barrels for the week ended Oct. 1, according to data from the American Petroleum Institute.

Investors now await official crude oil supply data from the U.S. Energy Information Administration later in the session for confirmation of this increase of stocks.

By 7 AM ET, U.S. crude futures traded 0.4% lower at $78.61 a barrel, having earlier climbed to its highest level since November 2014. The Brent contract rose 1.2% to $82.23, after rising to a three-year high in the previous session.

Additionally, gold futures fell 0.4% to $1,753.15/oz, while EUR/USD traded 0.3% lower at 1.1557.

 

Written by Editor

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