Tuesday February 26th

26-02-2019

Dow futures drop following Caterpillar downgrade, Home Depot miss

U.S. stock index futures were lower Tuesday morning, as investors reacted to a downgrade of Caterpillar shares and a miss on Home Depot earnings. At around 7:15 a.m. ET, Dow Jones Industrial Average futures indicated a negative open of nearly 100 points, indicating a loss of 82 points at the open. Futures on the S&P 500 and Nasdaq 100 were both seen relatively downbeat. Home Depot surprised investors in premarket trading, posting quarterly earnings and revenue that fell short of expectations. Investors were also rattled by a rare "sell" rating issued by UBS on shares of Caterpillar, citing concerns about 2020 revenue and margins. UBS also cited slowing global construction demand for its Caterpillar downgrade. Home Depot shares fell 2.4 percent before the bell while Caterpillar dropped 3.7 percent. Market focus was also attuned to global trade developments, after President Donald Trump said on Sunday he would delay a tariff hike of $200 billion of Chinese imports. The announcement marked the clearest sign yet that Washington and Beijing were making progress in their protracted dispute. However, Trump also sounded a note of caution, saying a deal "could happen fairly soon, or it might not happen at all." Market participants are also awaiting testimony from Federal Reserve Chairman Jerome Powell to a U.S. Senate committee on Tuesday. It comes after the U.S. central bank adopted a more cautious stance on future interest rate hikes last month. Powell's testimony comes after Fed Vice Chair Richard Clarida said late Monday that the U.S. economy is "in a good place right now. He added: "Its a good situation to be in, and we really want to do whatever we can to help support and maintain the economy." However, Clarida acknowledged that other central banks around the world are "stuck" with interest rates at levels from when they were in full-crisis mode. "That obviously, on balance, makes the global economy more fragile," Clarida said. On the data front, investors are likely to monitor housing starts and building permits for December at around 8:30 a.m. ET. Philadelphia Fed manufacturing figures for February is expected to be released at the same time, with consumer confidence data for February due later in the session.

Major Asian stock markets closed lower on Tuesday, as investors sought clarity on the U.S.-China trade front a day after President Donald Trump postponed a closely watched tariff deadline in early March. In a volatile session Tuesday, mainland Chinese stocks slipped on the day after registering strong gains on Monday. The Shanghai composite fell 0.67 percent to around 2,941.52 while the Shenzhen component declined 0.499 percent to about 9,089.04. The Shenzhen composite shed 0.486 percent to approximately 1,549.71. Hong Kong's Hang Seng index fell 0.65 percent, as of its final hour of trade. Elsewhere in Asia, Japan's Nikkei 225 fell 0.37 percent to close at 21,449.39 while the Topix declined 0.23 percent to finish its trading day at 1,617.20. In South Korea, the Kospi fell 0.27 percent to close at 2,226.60. Brent oil edged up to $65 a barrel on Tuesday as Saudi Arabia and the rest of OPEC were expected to stick to their policy of cutting production, despite renewed pressure from U.S. President Donald Trump. Crude had slid on Monday, when many traders were out of the office attending IP Week, a series of industry events in London, after Trump called on OPEC to ease its efforts to boost the oil market. Prices were "getting too high", he said. "Yesterday was a typical price action you see during IP Week when you have a headline," said Olivier Jakob, oil analyst at Petromatrix. "But I don't think it will change anything in current OPEC supply policy." Brent crude, the global benchmark, rose 24 cents to $65.00 by 0939 GMT, after losing 3.5 percent on Monday. U.S. West Texas Intermediate crude eased 15 cents to $55.33. Palladium retreated on Tuesday as investors took profits after the autocatalyst metal breached $1,550 for the first time due to a worsening supply scenario, while gold held a tight range ahead of U.S. Federal Reserve chairman Jerome Powell's testimony. Spot gold was down 0.05 percent at $1,326.35 per ounce and U.S. gold futures were down 0.09 percent at $1,328.40 as the dollar remained subdued.