The Thursday Market Minute
- Wall Street futures point to a heavy opening bell decline Thursday, with the Dow set for a 150 point slump following the biggest single-day decline for U.S. Stocks in at least eight months.
- Softer-than-expected September CPI reading helped U.S. stocks pare pre-market declines, with annual inflation now measured at a 2.3% clip.
- European and Asia markets sold off sharply overnight, with tech stocks leading the decline, as China's Shanghai Composite fell more than 5.2% and the Stoxx 600 benchmark slipped past a 20-month low.
- U.S. Treasury bond yields, which sparked yesterday's accelerated sell-off, eased overnight and ahead of today's 30-year auction, but sharp Fed criticism from President Donald Trump has pressured rate hike bets for 2019.
- Oil extended declines for a third consecutive session, taking WTI crude below $72 a barrel, following a bigger-than-expected API inventory build and renewed questions over global demand.
Wall Street is bracing for another session of heavy selling Thursday, as global markets reacted to the biggest single-day decline for U.S. stocks in eight months, amid concerns over slowing world economic growth, rising domestic interest rates and the near-term impact of the ongoing trade war between Washington and Beijing.
However, a softer-than-expected reading for September inflation, which showed U.S. consumer prices rose only 0.1% on the month and 2.3% on the year, has helped U.S. equity futures pare some of their pre-market declines, with contracts tied to the Dow Jones Industrial Average (^DJI) set for a 156 point opening bell decline, piling losses on top of last night's 831 point plunge that has taken the average to its August levels. S&P 500 (^GSPC) futures were seen at last 10.7 points lower while those linked to the tech-focused Nasdaq Composite (^IXIC) , which had its biggest single-day slump in at least two years last night, were marked 36 points in the red.
Stocks in Asia were routed Thursday following last night's accelerated sell-off for major U.S. indices, as investors hived more than 5.2% from the Shanghai Composite in China and 3.8% from the Nikkei 225 in Japan. European stocks were also weaker across the board, and although the losses pushed the regional Stoxx 600 benchmark 1.67% lower and past a 20-month low, investors appeared to contain the decline heading into the mid-days session in London and Frankfurt, with the FTSE 100 marked 1.7% to the downside and the DAX performance index nursing a 1.1% slide.
"The U.S. equity bloodbath is taking no prisoners in Asia as a sea of red greets investors at the open as equity deleveraging and liquidation intensifies," said Oanda's head of trading Stephen Innes in Singapore. "If the Feds are 'crazy', this market reaction is bordering on insanity, as so many negative crosscurrents collide that is merely impossible to find a glint of optimism and trust me the markets are leaving no stone unturned as all hell breaks loose across the global capital markets."
Tech stocks remained under pressure in pre-market trading, as well, following yesterday's moves which pushed online retailing giant Amazon Inc. (AMZN) - Get Report into correction territory and pulled the NYSE's FANG+ index 17.86% lower from its June 20 peak. The S&P 500 Technology Sector index, as well, had its biggest single-day decline in seven years.
Apple Inc. (AAPL) - Get Report shares were marked 1.55% lower, indicating an opening bell price of $213 each, despite cutting a $600 million deal to buy power management technology from Dialog Semiconductor (DLGNF) , a U.K. based chip designer listed in Frankfurt that has been at the heart of the tech giant's European supply chain.
The CBOE's key volatility index, known by its nickname 'VIX', extended its sharp spike yesterday, which saw a 30% increase, to reach a six-month high of 24.1 points in overnight trading while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was seen 0.4% lower at 95.17 in late morning European trading, pulled lower by a slide in Treasury bond yields, which eased to 3.157% on the 10-year notes amid safe-have flows in global trading.
Last night's sale of 10-year paper, in fact, was a big trigger for the accelerated market sell-off, with the Treasury paying the most for the auction since 2011 and demand slipping to a multi-month low amid concerns over rising Federal Reserve interest rates.
Bond markets are likely to dictate at least part of today's trading, as well, following comments on the sell-off last night from President Donald Trump, who told reporters that the Fed is "making a mistake ... They are so tight. I think the Fed has gone crazy."
The CME Group's FedWatch tool, which assigns future rate hike probabilities, is still pricing in a 78.1% chance of a December move that would take the Fed's base rate to 2.5% to 2.75%, but the March rate hike bets have slipped below 50% -- to 48.5% -- for the first time in two weeks
Global oil prices were also under pressure in overnight trading, falling for a third consecutive session amid concerns over demand following this week's IMF report which trimmed world growth forecasts and data from the American Petroleum Institute which showed domestic inventories rose by 9.7 million barrels last week to 410.7 million.
Brent crude contracts for December delivery, the global benchmark, were seen $1.92 lower from their Wednesday close in New York and changing hands at $81.17 per barrel while WTI contracts for November delivery, which are more tightly liked to U.S gas prices, were seen $1.46 lower at $71.71 per barrel.