Nasdaq, S&P 500 Futures Point To Lackluster Start As Traders Mull BoJ's Policy Move: Tesla, Nike, BlackBerry, Housing Starts Data In Focus

Zinger Key Points
  • Stocks continue to trade around depressed levels as uncertainties weigh down.
  • Data points, including those from the housing market, portend to at least a mild recession in the first half.

US stocks look set for a modestly lower opening on Tuesday, as bargain hunting following four straight sessions of losses could mitigate the impact of an unexpected policy move by the Bank of Japan, or BoJ.

BoJ, led by Haruhiko Kuroda, said it will allow yields on the 10-year government bonds to move up or down within 50 basis points around its 0% rate target, up from the previous 25-basis-point band. Economists, meanwhile, had called for an unchanged stance.

BoJ reasoned that the decision was to modify the conduct of yield curve control to improve market functioning and a smoother formation of the entire yield curve.

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The fact that the only central bank among developed nations, which has had ultra-loose monetary policy thus long, is embarking on monetary policy normalization is likely to stir worries about central banks elsewhere going in for more aggressive rate hikes.

On Monday, the major U.S. averages ended with steep losses as a housing market reading came in below expectations. The National Association of Home Builders’ housing market index unexpectedly fell, reigniting concerns about a potential recession.

The indices opened slightly higher and saw some volatility in early trading. Following the release of the data, stocks fell sharply till early afternoon trading. After a consolidation move that lasted till late afternoon, the averages took another leg down to end the session markedly weaker.

With Monday’s retreat, the averages are now at their lowest level in about a month and a half.

U.S. Indices' Performance On Monday
Index Performance (+/-)   Value
Nasdaq Composite -1.49%   10,546.03
S&P 500 Index -0.90%   3,817.66
Dow Industrials -0.49%   32,757.54

Most sectors, with the exception of energy stocks, moved to the downside. Tech, communication, material, consumer discretionary and real estate stocks were the worst performers of the session.

Commenting on the housing market data, Comerica chief economist Bill Adams said he foresees a mild recession in the first half of 2023, as businesses pull back on residential and non-residential construction spending as well as add inventories cautiously.

The economy is likely to return to growth in the second half of 2023 as construction stabilizes and inflation eases, he adds.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Tuesday During Premarket Session
Index Performance (+/-)  
Nasdaq 100 Futures -0.31%  
S&P 500 Futures -0.17%  
Dow Futures -0.04%  
R2K Futures -0.21%  

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY edged down 0.02%, to $379.95, and the Invesco QQQ Trust QQQ retreated 0.17%, to $269.30, according to Benzinga Pro data.

On the economic front, the Commerce Department is scheduled to release its housing starts and building permits data at 8:30 a.m. EST. Economists, on average, expect housing starts to dip from 1.425 million units in October to 1.4 million units, while building permits may have eased from 1.512 million units to 1.485 million units.

Stocks In Focus:

  • Tesla Inc. TSLA edged down in premarket trading, retreating further below the $150 level.
  • Lucid Group, Inc. LCID rose over 6% after it announced a $1.52 billion capital raise.
  • Pinduoduo, Inc. PDD fell about 1.90% and Alibaba Group Holding Limited BABA moved down over 1%.
  • Mitsubishi UFJ Financial Group Inc. MUFG rallied over 12%, reacting to the BoJ move.
  • FactSet Research Systems Inc. FDS, FuelCell Energy Inc. FCEL and General Mills Inc. GIS are among the noteworthy companies due to report ahead of the market open.
  • Those reporting after the close include BlackBerry Ltd. BB and Nike Inc. NKE.

Commodities, Global Equity Markets:

Crude oil futures have erased the Asian session's losses and were adding onto the 1.9%+ rally on Monday. A barrel of WTI-grade crude oil was up 0.94, at $76.09.

The yield on the 10-year U.S. Treasury note was edging up 0.086 points, to 3.669%.

BoJ’s rate decision has sent the yen spiraling higher, as it traded more than 3% higher against the U.S. dollar and the euro. The dollar has also weakened slightly against most other major currencies.

The Asia-Pacific markets closed Tuesday’s session lower, as traders digested the BoJ’s rate move and the negative close on Wall Street overnight. Japan’s Nikkei 225 average led the declines in the region with a 2.64% plunge.

European stocks opened sharply lower, reacting to the BoJ move, but have cut their losses since then.

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Posted In: EarningsNewsPenny StocksFuturesPreviewsSmall CapTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasBank of JapanNational Association of Home BuildersRecession
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