Rate Fears Perk Up As Fed Meets Amid Vibrant Economic Evidence

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Tuesday, with rate fears expected to return in full force, as a 2-day FOMC meeting gets underway later today. The retail sales report for May released a short while ago showed that sales rose solidly, with the increase broad based. The data vouched for a strong consumer spending environment, which is key for overall growth. The dollar is higher in reaction to the data and commodities are mostly lower. Another report released by the Labor Department showed a pick up in both import and export price inflation. Against the backdrop, it would be very tough for the markets to snap the 3-session losing streak unless bargain hunting offers a lift.

U.S. stocks declined notably on Monday, extending their losing streak to three straight sessions amid a drop in oil prices and worries concerning a potential Brexit.     The major averages opened lower on a quiet on day on Main Street but managed to recoup their losses by late morning trading. However, the averages declined steadily until the mid-session and then began to move roughly sideways until late trading. After a steady drop thereafter, the indexes ended notably lower for the session.    The Dow Industrials ended down 132.86 points or 0.74 percent at a 2-week low of 17,733, the S&P 500 Index lost 17.01 points or 0.81 percent before ending at 2,079 and the Nasdaq Composite closed at 4,848, down 46.11 points or 0.94 percent.    Twenty-five of the thirty Dow components closed lower for the session, while the remaining 5 stocks advanced. Visa (V), American Express (AXP), Apple (AAPL), Microsoft (MSFT) and Pfizer (PFE) were among the worst performers of the session.    Among the sectors, transportation, biotechnology, resource, financial, housing and computer hardware stocks came under selling pressure. 

Currency, Commodity Markets

Crude oil futures for July delivery are slipping $0.64 to $48.24 a barrel after moving down $0.19 to $48.88 a barrel in the previous session. Meanwhile, an ounce of gold is currently trading at $1,288.70, up $1.80 from the previous session's close of $1,286.90. On Monday, gold rose $11. 

On the currency front, the U.S. dollar is trading at 105.92 yen compared to the 106.26 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1291 compared to yesterday's $1.1292.    Asia    Most Asian markets retreated, led by the Australian, Japanese and New Zealand markets. Rate fears and    Brexit worries continued to drive up risk aversion, impacting the buying of equities. However, the Chinese and Taiwanese markets bucked the downtrend.    The Japanese market retreated as the yen remained elevated. After a nervous early session, the Nikkei 225 Index pulled back steadily till early afternoon trading. Thereafter, the average moved roughly sideways before ending down 160.18 points or 1 percent at a 2-month low of 15,859.    A majority of stocks moved to the downside, led by export stocks. On the other hand, some construction, telecom, utility and resource stocks saw strength on the day.    The Australian market, which opened after Monday's public holiday, declined notably. The All Ordinaries Index opened lower fell sharply in early trading and steadily thereafter until the mid-session. After a consolidation move in the afternoon, the index ended down 109.10 points or 2.02 percent at 5,283, the lowest close since April 27th.    The market witnessed broad based weakness. Energy stocks tumbled and financial, IT, healthcare and telecom stocks also saw notable weakness.    Hong Kong's Hang Seng Index ended at a nearly 3-week low of 20,388, down 125.46 points or 0.61 percent. However, China's Shanghai Composite Index ended at 2,842, up 9.12 points or 0.32 percent.    On the economic front, revised data released by Japan's Ministry of Finance showed that industrial production in Japan rose 0.5 percent month-over-month in April, ahead of the 0.3 percent growth estimated initially. In March, industrial output was up 3.8 percent. The growth in shipments was also upwardly revised to 1.6 percent from 1.5 percent.     The results of a survey by National Australia Bank showed that confidence among businesses in Australia receded in May. The index fell to 3 from 5 in April. However, the business conditions index was unchanged at 10.    Europe   European stocks opened lower and have seen continued weakness in what could be their fifth straight session of losses.  Brexit worries are strangulating whatever risk appetite that is remnant in the markets.    On the economic front, the U.K. Office for National Statistics reported that annual inflation in the U.K. held steady at 0.3 percent in May, while economists expected a 0.4 percent rate. The monthly inflation rate was 0.2 percent compared to expectations for 0.3 percent.     Another report showed that output prices fell 0.7 percent year-over-year in May, the same rate as in April. Economists expected a 0.5 percent drop. Since July 2014, output prices have been declining. On a monthly basis, output prices fell 0.1 percent compared to a 0.3 percent drop in April. The year-over-year drop in input prices slowed to 3.9 percent in May from 7 percent in April, while economists expected a 5.1 percent decline.  

Industrial production in the eurozone rose 2 percent year-over-year in April, according to a report released by Eurostat. This compares to expectations for a 1.4 percent increase. The monthly comparison showed a 1.1 percent rise compared to the 0.8 percent increase expected by economists.    Quarterly employment data released by Eurostat showed that employment rose 0.3 percent sequentially in the first quarter and 1.4 percent year-over-year.     U.S. Economic Reports   The 2-day FOMC meeting gets underway later today, although the policy statement, Fed Chair Janet Yellen's press briefing and updated FOMC forecasts are not due until Wednesday.     The Commerce Department reported that retail sales rose 0.5 percent month-over-month in May, more than the 0.3 percent increase expected by economists. Retail sales, excluding autos, climbed 0.4 percent, in line with estimates.        Auto sales climbed 0.5 percent, smaller than the upwardly revised 3.1 percent increase in the previous month. Electronic store sales rose almost at a steady pace, rising 0.3 percent. Food and beverage store sales climbed 0.5 percent. Sporting goods store sales climbed 1.2 percent.

However, furniture and home appliance stores sales edged down 0.1 percent. Gasoline sales growth slowed to 2.1 percent from 2.5 percent. Non-store retailers saw also saw their sales increase at a slower pace than in the previous month.    A Labor Department report showed that import prices climbed 1.4 percent month-over-month in May, double the pace of increase as in the previous month. export and import prices for May.  The consensus estimate had called for a 0.8 percent jump, However, year-over-year import prices were down 5 percent. Fuel import prices surged 16.2 percent and non-fuel import prices also increased at a faster pace of 0.3 percent.        Export prices rose 1.1 percent, faster than the 0.5 percent increase in April and the 0.2 percent increase expected by economists. Agricultural export prices climbed 2.9 percent compared to the 1 percent increase in non-agricultural exports. On a year-over-year basis, export prices were down 4.5 percent.

The Commerce Department will also release its business inventories report for April at 10 am ET. Economists expect a 0.2 percent month-over-month increase in business inventories for the month.         Business inventories at the end of March were up 0.4 percent month-over-month and business sales rose 0.3 percent. The inventories to sales ratio remained unchanged at 1.41. 

Stocks in Focus   Baidu (BIDU) lowered its second quarter revenue guidance to $2.807 billion to $2.823 billion from its previous guidance of $3.119 billion to $3192 billion. The company attributed the action to a time delay in implementing new regulations and a reduction in the number of sponsored links across the platform.    Sonus (SONS) announced that its CEO Mark Greenquist has resigned effective June 15th, 2016 to take over a similar position at another company. The company appointed Susan Villare, VP of Financial Planning and Analysis, as its interim CFO. The company also reconfirmed its second quarter and full year guidance issued on April 27th.