Tuesday December 20th


Stock futures are flat as Wall Street’s struggles continue

U.S. stock index futures wavered Tuesday, whipsawing after an announcement from the Bank of Japan as traders fear a year-end rally may not come to fruition. Futures tied to the Dow Jones Industrial Average slipped 5 points, or 0.02%, having earlier been down more than 200 points. S&P 500 futures and Nasdaq 100 futures fell 0.17% and 0.42%, respectively. The Dow on Monday shed more than 162 points, or about 0.5%. The S&P 500 fell 0.9%, and the Nasdaq Composite lost nearly 1.5%. Stocks are on track to end the month and the year in the red, and investors’ hopes for a Santa Claus rally are fading fast. “There’s still no Santa sighting. Buckle up,” said Louis Navellier, founder of growth investing firm Navellier & Associates. “One would like to think all the bad news is in. There are no more Fed moves until February at the earliest. We’re not gapping down but certainly not clawing back last week’s losses.” Fears that the Federal Reserve could tip the economy into a recession plagued investors. Last week, the central bank raised its benchmark interest rate by 50 basis points and policymakers indicated the terminal rate could rise as high as 5.1%. Other central banks in hawkish mode put further pressure on traders, with the European Central Bank raising rates and its outlook for further hikes last week. Overnight on Tuesday, the Bank of Japan moved to widen its cap on the 10-year Japanese government bond yield, catching traders around the world off guard. “Over 90% of central banks have hiked interest rates this year, making the (mostly) global coordinated effort unprecedented” said Lawrence Gillum, fixed income strategist at LPL Financial. “The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year.” A handful of big companies will report their quarterly results this week ahead of the Christmas holiday. General Mills will report before the bell Tuesday. Nike and FedEx are set to report after the bell. In economic data, housing starts data for November are due Tuesday morning. This week promises lots of insight into the housing industry. Sales data for existing homes and new homes will be released Wednesday and Friday, respectively. November’s personal consumption expenditures report, a preferred measure of inflation for the Fed, is due on Friday. Markets in the Asia-Pacific fell as the Bank of Japan modified its yield curve control tolerance range while holding its ultra-low benchmark interest rates steady. The Nikkei 225 fell 2.46% to 26,568.03, leading losses in the region, and the Topix fell 1.54% to 1,905.59. The Japanese yen strengthened by more than 3% against the U.S. dollar to 132.56, marking its strongest levels in over three months. In South Korea, the Kospi fell 0.8% to 2,333.29 and the S&P/ASX 200 in Australia also traded 1.54% lower to close at 7,024.3. Hong Kong’s Hang Seng index fell 1.3% in its final hour of trade, with technology and property stocks dragging down the wider index. In mainland China, the Shenzhen Component fell 1.58% to 10,949.12 and the Shanghai Composite fell 1.07% to 3,073.77 as the People’s Bank of China kept its key lending rates steady. Oil prices rose on Tuesday, supported by a softer dollar and a U.S. plan to restock petroleum reserves, but gains were capped by uncertainty over the impact of rising Covid-19 cases in top oil importer China. Brent crude futures were up 50 cents, or 0.65%, at $80.30 a barrel by 1035 GMT, adding to a 76 cent gain in the previous session. U.S. West Texas Intermediate (WTI) crude futures rose $1, or 1.31%, to $76.19 after climbing 90 cents on Monday. Gold prices jumped 1% to above the key $1,800 level on Tuesday as the dollar dropped after the Bank of Japan’s surprise policy tweak, while markets also weighed the outlook for the U.S. Federal Reserve’s interest rate strategy. Spot gold rose 1.1% to $1,806.69 per ounce. U.S. gold futures gained 1% to $1,816.20.