Tuesday May 15th

15-05-2018

US stock futures point to triple digit losses after Home Depot sales disappoint, higher rates

U.S. stock index futures pointed to a sharply lower open on Tuesday morning after Home Depot reported quarterly sales that fell short of Wall Street's expectations and interest rates breached new highs for the year. At around 8:42 a.m. ET, Dow futures fell 126 points, indicating a lower implied open of 116 points. The Nasdaq and the S&P 500 futures also indicated a lower start to the session for their respective markets. Monday's positive close in equities extended the Dow's win streak to eight days. The slip in U.S. equity futures came after Home Depot reported first-quarter earnings that beat Wall Street's expectations, but missed estimates on the top line thanks to what the company categorized as a "slow start" to spring sales. Spring is an especially important season for the home improvement retailer as shoppers traditionally stock up on gardening supplies and renovation materials. Customer transactions, however, fell 1.3 percent during the quarter. Shares fell 2.5 percent in premarket trading following the report. Futures also slipped after the Commerce Department reported retail sales increased 0.3 percent in April, down from a 0.8 percent gain in March, which was revised higher. "After a robust September through November stretch of retail sales helped by the holiday's and the rebuild from the late summer storms, sales have moderated," wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. "The question for consumers is where will the higher after-tax paychecks go and will higher wages encourage more spending." Overseas, the Stoxx Europe 600 was largely unchanged after data revealed a deceleration in euro-area economic growth to 0.4 percent in the first quarter, down from 0.7 percent in the fourth quarter of last year. Germany, the eurozone's largest economy, cooled to 0.3 percent growth in the first quarter, down from 0.6 percent in the prior quarter. The benchmark U.S. 10-year Treasury yield, which moves inversely to its price, climbed back above 3.02 percent on Tuesday, edging closer to 2018 highs. The dollar index, which tracks the dollar against a basket of other currencies, was up nearly 0.4 percent at 92.93. Slight gains seen during the U.S. session failed to translate into an advance in Asian stocks on Tuesday, with major markets in the region finishing the day in negative territory. The Nikkei 225 hovered around the flat line, before closing lower by 0.21 percent, or 47.84 points, at 22,818.02. Over in Seoul, the benchmark Kospi declined 0.71 percent to 2,458.54 as technology stocks weighed. In Hong Kong, the Hang Seng Index lost 0.88 percent by 3:22 p.m. Mainland markets closed higher following the release of mixed China data, which showed industrial output topped expectations while retail sales missed forecasts. Also in focus was MSCI's Tuesday announcement that 234 China A shares will be added to its indexes on June 1. The Shanghai composite advanced 0.58 percent to end at 3,192.58 and the Shenzhen composite rose 0.91 percent to 1,839.88. Oil prices hit a 3½-year high on Tuesday, supported by tight supply and planned U.S. sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East. Brent crude oil reached $79.22 a barrel, its highest since November 2014. By 7:58 a.m. ET (1158 GMT), Brent was up 79 cents at $79.02. U.S. light crude was 53 cents higher at $71.49 a barrel, also close to its highest since November 2014. Gold dipped on Tuesday, heading for a third straight day of losses as a rise in U.S. borrowing
costs supported the dollar and overshadowed the impact of strife in Gaza. Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday when the high-profile opening of the U.S. embassy to Israel in Jerusalem by the Trump administration raised tension to boiling point. Spot gold had dipped 0.45 percent to $1,306.56 per ounce by 8:23 a.m. ET. U.S. gold futures for June delivery fell 0.88 percent to $1,306.20. But gold investors were fixated on the dollar, which rose versus a currency basket as 10-year U.S. bond yields shot above 3 percent, sending borrowing costs higher in a number of other countries.