Wednesday February 7th

7-02-2018

Dow is headed for a more than 100-point drop at the open, following Tuesday's wild ride

U.S. stock index futures dropped deep into the red ahead of Wednesday's open, pulling back from the roller coaster ride seen on Wall Street in the previous session. Around 8:15 a.m. ET, Dow futures suggested the industrial average would open down roughly 130 points. Nasdaq and S&P 500 futures also pointed to a weak open. The movements seen in U.S. futures come on the back of a wild trading session Tuesday. After two major sell-offs, leading U.S. indexes saw sharp swings yesterday, with the Dow Jones industrial average starting Tuesday significantly lower, before rallying and closing up 567.02 points at 24,912.77. The index traded in a range of 1,167.49 points through the course of Tuesday's session. Some of the reasons that investors gave for yesterday's sharp swings included fears over interest rates, obscure volatility funds that use leverage, and computer-driven trading. The positive sentiment seen on Wall Street yesterday provided a boost for international markets, with Asia-Pacific markets closing mixed to higher Wednesday, while trade in Europe was relatively positive, after posting major declines on Tuesday. The rebound in Asian markets stalled on Wednesday as several indexes in the region gave up early gains to finish the session in negative territory, after major U.S. indexes finished their Tuesday session higher. Japan's Nikkei 225 closed barely in positive territory after rising more than 3 percent earlier in the day. The benchmark closed higher by 0.16 percent, or 35.13 points, at 21,645.37 as investors stayed defensive following last session's tumble. South Korea's Kospi reversed early gains to finish the session lower by 2.31 percent at 2,396.56. Hong Kong's Hang Seng Index erased early gains to track lower by 0.76 percent at 3:04 p.m. HK/SIN. Meanwhile, mainland markets extended losses after last session's sell-off. The Shanghai composite declined 1.81 percent to close at 3,309.58 and the Shenzhen composite shed 0.68 percent to end at 1,714.39. The blue chip CSI 300 index finished lower by 2.38 percent. While the volatility seen in markets is set to keep markets on edge Wednesday, investors will also pay close attention to data and earnings. Earnings season continued in full swing Wednesday with Hasbro and Michael Kors reporting before the bell. Hasbro posted mixed results, with sales missing expectations. The stock declined more than 4 percent in the premarket. 21st Century Fox, Tesla Motors, IAC/InterActive, Yum China and Yelp are expected to publish updates after the bell. Investors are also likely to be digesting the latest coming out of the political sphere. Late Tuesday, the U.S. House of Representatives managed to pass a short-term spending bill, which not only would provide support to defense spending for 2018 but also fund the government for another six weeks. Oil held mostly steady on Wednesday, as the boost from a report showing a drop in U.S. crude inventories last week was offset by evidence of soaring U.S. output. Brent crude futures edged down 11 cents to $66.75 a barrel by 0951 GMT, while U.S. West Texas Intermediate (WTI) crude futures eased 12 cents to $63.27 a barrel. Gold rose on Wednesday as investors overlooked the precious metal's failure to capitalise on this week's global stock market rout and held onto the view that the dollar's bear run remains in place despite rate hike expectations. "The general scenario for gold is still positive. What we are seeing now (on the stock markets) is just a correction, and the dollar is still weakening," said Carlo Alberto De Casa, chief analyst at Activtrades. "I'm expecting gold to remain above $1,300 in the next few months. The problem for gold would be four (U.S.) rate hikes, but I don't believe (that will happen). At this stage inflation is still under control," he added. Spot gold was up 0.2 percent at $1,328.13 per ounce, as of 1105 GMT. Prices fell over 1 percent to hit their lowest since Jan. 11 at $1,319.96 on Tuesday. U.S. gold futures for April delivery rose 0.1 percent to $1,330.70 per ounce.