The US Stock Market Futures have been struggling to rise with so much bad news on the horizon. Firstly, political tension created by North Korea’s nuclear testing this weekend which has the whole world on tenterhooks. Secondly, the impending doom in the form of Hurricane Irma. Thirdly the lack of clarity about interest rates going up in the fourth quarter. There is a lot going on right now. And it’s reflecting in the volatile reactions of the stocks.
Tuesday was the first market day after Labour Day celebrations concluded on Monday. Markets closed low as expected. The S&P 500 ended lower by 0.8%, which broke their previous week’s six day gains run. The Dow Jones Industrial Average (DJIA) also dropped at close of day by 1.1%. The Nasdaq Composite Index (COMP) also closed on a low, going down by 0.9%.
With North Korea flexing its nuclear muscles, and South Korean media issuing reports of further tests to be conducted by its neighbor, investors are nervous and have more or less adopted a wait and watch approach.
The approach of Hurricane Irma is another thing that has impacted the futures markets for the worse, with the agricultural sector taking a huge dive. Irma is now considered the worst storm on record in the Atlantic north of the Caribbean and East of the Gulf of Mexico. Currently, as a Category 5 hurricane, it has already barreled through St. Martin and Bermuda, and is headed towards Puerto Rico next. The data shows that Florida, especially the Key West area may also be in the path of Irma, causing a state of emergency to be declared in the state. Experts are now worried that the hurricane may even increase to a Category 6 storm, which could possibly destroy Florida.
Cruise ships have had to either cancel their operations or divert their ship’s courses due to Hurricane Irma. This has led to a drop in their share prices too, with share prices going down 0.5%.
The wait and watch attitude continued into Wednesday, as the markets opened flat. The S&P 500 barely fell 1 point at the start of trading. DJIA futures were up by 3 points early this morning. And the Nasdaq Composite Index gained 5 points in early trading.
Later in the day, the markets tried to pick up despite further bad news of Federal Reserve Vice Chairman Stanley Fisher resigning. It didn’t help that hopes of an interest rate hike have now fallen to 35%.
Fresh data released on services activity did provide some relief, with ISM non- manufacturing index data coming in at 55.3 in August vis-à-vis 53.9 in the previous month. Also, oil prices were finally up as the refineries were recovering from Hurricane Harvey’s impact and production was powering up. US Traded Crude Oil (CLV7) was up to $50/barrel. The DJIA got a little boost of 69 points (0.2%) thanks to Exxon Mobil going up 2%. The S&P 500 also good a little boost of 5 points (0.2%) as the financials rebounded by 0.4% and the energy sector (oil again) went up by 1.5%. The Nasdaq didn’t do so well, losing its early morning gains and flattened back to 6,371.
Signs of nervousness still lingered on Wednesday, and this could be seen in the really poor yields of the benchmark Treasury notes TMUBMUSD10Y at barely 2.07%, which marked the lowest levels of the year for the notes.
Despite the string of bad news in the last few weeks, the markets, while nervous, are plunging into a free-fall panic. Which is also good news.