Wednesday September 25th

25-09-2019

Stock futures cut earlier losses from impeachment fears, Dow now set to open higher

U.S. stock index futures recovered most of the earlier losses from House Speaker Nancy Pelosi saying she will launch a formal impeachment inquiry on President Donald Trump. As of 8:39 a.m. ET Wednesday, Dow Jones Industrial Average futures implied a gain of more than 20 points at the open. S&P 500 futures also pointed to a small gain while Nasdaq 100 futures indicated a flat open. On Tuesday, the S&P 500 and Nasdaq Composite posted their biggest one-day declines in a month in anticipation of the impeachment inquiry. The Dow Jones Industrial Average also dropped 142 points, or 0.5%. “I think we kind of baked in the front end of the announcement during the course of the afternoon, but we’ve got a lot more to learn,” said Art Hogan, chief market strategist at National Securities. “This is going to be news that spills out over time but I can’t imaging the start of this process improves the tone of the U.S.-China trade talks.” Both countries have been engaged in trade negotiations since last year. The back and forth between China and the U.S. has sent ripples through global financial markets as investors assess the trade war’s impact on the global economy. “If I’m China, I feel empowered,” Hogan said. “The president must be held accountable. No one is above the law,” Pelosi said. “He will have to whether to break the law or honor his responsibility to the constitution.” Pelosi’s announcement follows a call in which Trump allegedly pressured Ukrainian President Volodymyr Zelensky to investigate former Vice President Joe Biden’s family. Trump has admitted to bringing up Biden on the call — tweeting he will release a transcript of it — but denies pressuring Zelensky. “It came at an unfortunate point when everyone was positioned long hoping the trade war was going to be OK,” said Ilya Feygin, senior strategist at WallachBeth Capital. However, Feygin thinks the market should rebound since impeachment is unlikely to pass the Republican-led Senate. The call is believed to be part of an intelligence community whistleblower complaint Democrats have asked the administration to release. They say the complaint would hold details not available in the call’s transcript. Stocks have surged since Trump was elected as the administration has implemented policies such as tax cuts and decreased regulation. The Dow has surged more than 46% since Trump’s election. Stocks have previously struggled when a president faces the possibility of impeachment. The S&P 500 was down about 20% at one point from its high in 1998 as independent counsel Kenneth Starr ramped up his investigation of President Bill Clinton for perjury and obstruction of justice, according to CFRA. The market bottomed as the House began impeachment proceedings and later recovered all losses to reach a then-record high. Washington policy analyst Chris Krueger said in a note that his “base case” scenario is “the House impeaches Trump, though the Senate does not convict, e.g. Bill Clinton 2.0.” A surge in Nike shares helped cap the losses as the shoe maker reported better-than-expected quarterly results. CEO Mark Parker said a stronger e-commerce business and products such as the new Joyride running shoe lifted the Nike’s results. Nike shares jumped 5.7%. Asia markets slipped on Wednesday as investors watched for developments in the United States after lawmakers launched an impeachment inquiry into President Donald Trump. Mainland Chinese stocks slipped on the day, with the Shanghai composite down 1% to about 2,955.43 and Shenzhen component declining 1.43% to 9,671.06. The Shenzhen composite shed 1.608% to around 1,638.77. Hong Kong’s Hang Seng index also fell 1.27%, as of its final hour of trading. In Japan, the Nikkei 225 closed 0.36% lower at 22,020.15. The Topix index also declined 0.18% to finish its trading day at 1,620.08. Over in South Korea, the Kospi shed 1.32% to close at 2,073.39. Oil prices fell for a second day on worries that fuel demand could fall after U.S. President Donald Trump doused recent optimism over China-U.S. trade talks, at a time of rising U.S. crude oil stockpiles. Brent crude futures were down $1.03 cents to $62.07 a barrel on Wednesday, erasing all gains made after an attack on Saudi oil facilities sent the benchmark up around 20% last week. Nevertheless, the benchmark remains on track for its first monthly gain since June. U.S. West Texas Intermediate crude dropped to $56.49 a barrel, down 80 cents. Gold prices inched lower on Wednesday as some investors booked profit, but the metal remained supported below a three-week peak hit in the prior session as the launch of a formal impeachment inquiry into President Donald Trump stoked political worries. Democrats in the U.S. House of Representatives on Tuesday launched a formal impeachment inquiry into Trump, accusing him of seeking foreign help to smear Democratic rival Joe Biden ahead of next year’s election. Spot gold was down 0.1% at $1,529.62 per ounce, as of 0429 GMT, after having risen to its highest level since Sept. 5 at $1,535.60 on Tuesday. U.S. gold futures fell 0.2% to $1,537.00 per ounce.