Tuesday February 20th

20-02-2018

Dow futures drop 200 points as rates rise; Walmart falls after earnings

U.S. stock index futures fell sharply on Tuesday as interest rates climbed back toward multi-year levels. At around 6:50 a.m. ET, Dow futures were down 200 points, indicating a fall of 173 points at the open. Dow futures were also pressured by a 2.2 percent premarket decline in Walmart shares. The Nasdaq and S&P 500 futures also pointed to a negative open for their respective markets. The benchmark 10-year note yield rose to 2.908 percent, after hitting its highest level since 2014 last week. The short-term two-year note yield, meanwhile, traded around a nine-year high. The recent rise in interest rates has kept Wall Street on edge as investors fear higher inflation could lead the Federal Reserve to tighten monetary policy faster than expected. U.S. markets are reopening Tuesday, after a long holiday weekend, in light of President's Day. In the previous session, U.S. stocks finished in the black, but off their highs, as developments in the U.S. political space unfolded. On Friday, the office of U.S. Special Counsel Robert Mueller indicted 13 Russian nations and three entities from Russia for alleged illegal interference in the 2016 presidential election. The defendants allegedly conducted "information warfare" against the U.S. to "sow discord" into its political system through the use of fictitious personas and online platforms such as social media. The Kremlin has since said here was no significant evidence of meddlingfrom Russia in the 2016 presidential election but provided no further information. Investors will continue to keep an eye on the bond market, as the prospect of higher interest rates  continues to rattle sentiment. In earnings, Walmart reported weaker-than-expected earnings, pressuring the stock before the bell. Home Depot released quarterly results that surpassed analyst expectations, but the Dow component slipped 0.2 percent. In economic news, the Philadelphia Fed's non-manufacturing business outlook survey is scheduled to come out at 8:30 a.m. ET. No speeches by members of the U.S. Federal Reserve are set to take place. Asian shares closed lower on Tuesday after a relatively quiet overnight session, due to U.S. markets being closed for a holiday on Monday. Japan's Nikkei 225 lost 1.01 percent, or 224.11 points, to close at 21,925.1 as financials, manufacturing and energy-related names traded in negative territory, while technology stocks finished the day mixed. Over in South Korea, the Kospi slid 1.13 percent to end at 2,415.12, with losses seen in heavyweight technology names. Hong Kong's Hang Seng Index ended the session down 0.78 percent, or 241.8 points, at 30,873.63 as markets resumed trade after a long Lunar New Year weekend. Markets in China, Taiwan and Vietnam remained closed on Tuesday for the Lunar New Year holiday. Brent crude oil prices fell on Tuesday, pulled down by a stronger dollar and a bout of profit-taking, while U.S. futures gained, bringing the discount between the two key futures contracts to a six-month low. Brent crude futures fell 73 cents from Monday's close to $64.94 a barrel by 1017 GMT, while U.S. West Texas Intermediate (WTI) crude futureswere up 20 cents from their last close on Friday at $61.88 a barrel. Reduced supply from Canada to the United States caused by pipeline reductions were supporting WTI, traders said. Brent is trading at a premium of less than $3 a barrel to WTI, down from over $$7 at the start of the year. Gold prices were weighed down by a stronger dollar on Tuesday, dropping for the third session, but were underpinned by geopolitical worries and uncertainty about this week's huge U.S. bond auctions. The dollar continued its rebound from three-year lows as investors believed the currency was due an upward correction after a brutal sell-off in recent weeks. A buoyant dollar makes commodities priced in the greenback more expensive for buyers using other currencies. Spot gold was down 0.7 percent, its biggest one-day percentage fall in two weeks, at $1,337.41 an ounce by 1110 GMT. U.S. gold futures shed 1.2 percent to $1,339.80 an ounce, posting their biggest one-day percentage fall since November 2017. Spot gold is expected to fall to the next support level at $1,326, according to Reuters technical analyst Wang Tao.