Futures Pointing To Initial Weakness On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move to the downside as trading resumes following the long Labor Day weekend.

The downward momentum on Wall Street comes amid a sharp increase by the price of crude oil due to the continued escalation of the conflict in the Middle East.

U.S. crude oil futures are jumping by nearly 2 percent after the U.S. struck three Iranian crude oil carriers over the weekend after Iran launched ballistic missiles toward two U.S. Navy warships patrolling regional waters.

Iran has threatened to retaliate against any new U.S. attacks on its assets and Saudi-led coalition forces vowed a resolute response to a wave of attacks from Houthi rebels.

Amid escalating tensions with the U.S., Teheran said a deal with Oman to manage shipping through the Strait of Hormuz was imminent.

However, overall trading activity may be somewhat subdued ahead of the release of the key U.S. inflation data later in the week.

The reports on consumer and producer price inflation could have a significant impact on the outlook for interest rates ahead of the Federal Reserve's next monetary policy meeting later this month.

Stocks moved mostly lower during trading on Friday, giving back ground after moving notably higher over the two previous sessions. The major averages all moved to the downside, although selling pressure was somewhat subdued.

The major averages finished the day off their lows of the session but still in the red. The Dow slid 271.86 points or 0.5 percent to 53,414.25, the Nasdaq fell 77.07 points or 0.3 percent to 26,506.99 and the S&P 500 fell 29.11 points or 0.4 percent to 7,7718.60.

For the week, the major averages turned in a mixed performance. While the Dow dipped by 0.3 percent, the S&P 500 inched up by 0.1 percent and the Nasdaq rose by 0.4 percent.

The pullback on Wall Street came amid renewed concerns about the outlook for interest rates following the release of much stronger-than-expected U.S. jobs data.

The Labor Department released a closely watched report this morning showing employment increased by much more than expected in the month of August.

The report said non-farm payroll employment surged by 162,000 jobs in August are rising by an upwardly revised 21,000 jobs in July.

Economists had expected employment to climb by 55,000 jobs compared to the loss of 23,000 jobs originally reported for the previous month.

Treasury yields jumped in reaction to the report, as the strong data could make the Federal Reserve more comfortable about raising interest rates later this month in an effort to fight sticky inflation.

According to CME Group's FedWatch Tool, the chances the Fed will raise rates by a quarter point have bounced back to 58.4 percent after falling below 50 percent on Thursday.

Selling pressure waned over the course of the session, however, as several analysts indicated the data does not make a rate hike a foregone conclusion.

"While today's labor report shifted September hike expectations sharply, the outcome is not a sure bet and additional signals that confirm inflation has peaked will make the Fed's decision to hike even tougher at the September meeting," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.

Traders are subsequently likely to pay particularly close attention to next week's reports on consumer and production price inflation in the month of August.

Software stocks pulled back sharply after rallying during Thursday's session, dragging the Dow Jones U.S. Software Index down by 2.2 percent.

Considerable weakness was also visible among gold stocks amid a steep drop by the price of the precious metal, with the NYSE Arca Gold Bugs Index falling by 1.8 percent.

Pharmaceutical and biotechnology stocks also saw notable weakness, while semiconductor stocks surged, driving the Philadelphia Semiconductor Index up by 3.4 percent.

Computer hardware and airline stocks also turned in strong performances on the day, helping limit the downside for the broader markets.

Commodity, Currency Markets

Crude oil futures are jumping $1.82 to $93.30 a barrel after rising $0.18 to $91.48 a barrel on Friday. Meanwhile, after slumping $63.30 to $4,476.60 an ounce in the previous session, gold futures are falling $34.10 to $4,442.50 an ounce.

On the currency front, the U.S. dollar is trading at 153.85 yen compared to the 154.35 yen it fetched on Monday. Against the euro, the dollar is valued at $1.1617 compared to yesterday's $1.1621.

Asia

Asian stocks ended mostly lower on Tuesday as investors looked ahead to the release of crucial U.S. inflation data this week for additional clues on the Federal Reserve's rate trajectory.

Investors also kept a close watch on the conflict in the Middle East after Iran threatened to retaliate against any new U.S. attacks on its assets and Saudi-led coalition forces vowed a resolute response to a wave of attacks from Houthi rebels.

Amid escalating tensions with the U.S., Teheran said a deal with Oman to manage shipping through the Strait of Hormuz was imminent.

Gold prices slipped toward $4,400 an ounce in choppy trade and the U.S. dollar index was subdued on fiscal concerns, while Brent crude futures rose toward $99 a barrel, hitting a six-week high on growing risks of a prolonged conflict in the Middle East.

China's Shanghai Composite Index edged up 0.2 percent to 3,940.55 after customs data showed Chinese exports and imports logged double-digit growth in August, fueling tensions ahead of a crucial meeting in Washington this month between Xi Jinping and Donald Trump.

Data showed China's exports increased 25.0 percent year-on-year in August, faster than the 23.9 percent growth in July. Likewise, growth in imports accelerated to 28.2 percent from 27.5 percent in July.

Hong Kong's Hang Seng Index dropped 0.4 percent to 25,317.18, extending losses from the previous session.

Japanese markets fell sharply as the yen strengthened to its highest level since February on growing expectations that the Bank of Japan will shift to a more hawkish posture.

The Nikkei 225 Inex tumbled 1.7 percent to 65,269.33 as investors priced in a rate hike by the central bank next week. The broader Topix Index settled 1.8 percent lower at 4,050.33. Tech stocks ended on a mixed note, with Kioxia Holdings falling 3.6 percent while SoftBank Group shares surged 5.5 percent.

Seoul stocks reversed course to end lower, snapping a three-day winning streak as higher energy prices added to inflation concerns.

The Kospi Index fell 0.6 percent to 6,954.52. Automaker Hyundai Motor lost 2 percent and defense giant Hanwha Aerospace fell 1.2 percent while state-run utility Korea Electric Power advanced 4.1 percent.

Australian markets slumped on concerns about stubborn oil prices and a dim business outlook for banks. The benchmark S&P/ASX 200 Index slid 1.0 percent to 8,920.80 in its worst session since early June, with banks, property developers and retailers pacing the declines. The broader All Ordinaries Index dropped 0.9 percent to 9,114.30.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index ended 1.1 percent lower at 13,792.90, extending losses for the second straight session.

Europe

European stocks traded lower on Tuesday, with elevated energy prices, political uncertainty in Germany and caution ahead of U.S. CPI data weighing on markets.

Thursday's ECB meeting remains on the radar, where a rate hike is expected. In economic releases, Germany's exports decreased for the first time in six months in July, but the trade surplus increased more than expected due to the sharp fall in imports, official data showed today.

Exports decreased 0.8 percent on a monthly basis in July, in contrast to the 0.9 percent increase in June, Destatis said.

This was the first decrease since January. Similarly, imports declined 5.7 percent, reversing June's 4.5 percent increase.

The pan European Stoxx 600 dropped 0.4 percent to 647.12 after ending little changed on Monday.

The German DAX fell 0.6 percent amid increased political uncertainty after the far-right AfD achieved a historic win in a state election.

Chancellor Friedrich Merz said he is "deeply shocked" by the overwhelming AfD election win. "Not only did something change in Saxony-Anhalt yesterday but throughout all Germany. It will have repercussions, including on the international stage."

France's CAC 40 dipped half a percent and the U.K.'s FTSE 100 was down 0.3 percent. Shares of James Fisher and Sons fell 1.5 percent after the British marine services company reported modest first-half revenue growth.

Homewares retailer Dunelm Group plunged 12 percent after stating that unusually hot weather and weak consumer confidence had knocked trading at the start of its new financial year.

Sandoz rallied 3 percent. The Swiss drug maker said it plans to invest around $300 million to build a new biosimilar manufacturing facility in Ljubljana, Slovenia.

U.S. Economic News

The Treasury Department is scheduled to announce the results of this month's auction of $58 billion worth of three-year notes at 1 pm ET.

At 3 pm ET, the Federal Reserve is due to release its report on consumer credit in the month of July. Consumer credit is expected to increase by $11.7 billion.