Outlook for the day: Mildly negative after the Dow posted its longest losing streak since 1978 and commodity markets traded mixed. The ASX 200 rallied 0.78% yesterday, breaking a five-session losing run.
ASX futures: down 14 points or 0.17%
Overnight themes:
US stocks fell after strong retail sales data added to signs that tonight's broadly-anticipated US interest rate cut might be the last for some time.
The S&P 500 dropped 0.39% as a broad sell-down lowered ten of eleven sectors.
The Dow Jones Industrial Average extended its losing run into a ninth session with a loss of 0.61%. The blue-chip average's current streak of losses is its worst since February 1978. The average has fallen every session since it closed above 45,000 for the first time.
The Nasdaq Composite gave up 0.32% as Nvidia entered a technical correction. The AI chip-maker was added to the Dow in November, which explains some of the Industrial Average's recent struggles.
Also weighing on the Dow is a rotation out of value stocks back into the megacap tech stocks that have much greater weighting on the Nasdaq and S&P 500. Value stocks jumped during the post-election "Trump bump" as investors bet that the president-elect's pro-growth protectionist policies would benefit domestic companies. Some of that optimism has since dissipated.
“Wall Street is waking up to the fact that a Trump presidency might not be as great for stocks as some people hoped. Financials and industrials jumped on his win but now may have to face higher rates and trade uncertainties, and healthcare faces its greatest political risks in recent memory" - David Russell, global head of market strategy at TradeStation (per CNBC).
The outlook for further interest rate cuts next year was further dented by news that retail sales jumped 0.7% last month, above market expectations and confirming that the economy has good momentum.
"The market is still discounting a 25-basis-points rate cut [tonight], but if consumers are still buying interest-sensitive goods like autos, a rational markets observer would have to wonder why would a central bank add fuel to the fire with a president-elect coming in at the end of January with one of the most pro-growth agendas of any president in history" - Christopher Rupkey, chief economist at FWDBONDS (per Reuters).
The night's worst-performing sectors were industrials -0.9%, energy -0.76% and financials -0.69%. Materials gave up 0.48%. Consumer discretionary was the only gainer, up 0.28%.
European stocks fell to a two-week low ahead of central bank decisions this week in Britain, Sweden and Norway, as well as Japan and the US. The Stoxx 600 shed 0.42%.
Copper and other industrial metals fell as the US dollar rose and the UK economy unexpectedly contracted for a second month. Copper declined 0.62% to US$9,006.50 a metric ton. Nickel gave up 0.93%, aluminium 0.99% and zinc 1.09%.
Gold fell for a fourth session as investors priced in a likely pause in US interest rate cuts next year and beyond following a widely-expected third-straight cut tonight. The greenback and treasury yields both lifted overnight as the Federal Reserve commenced its final two-day policy meeting of the year. The odds on a January cut were just 16%, versus 95% for tonight's meeting, according to CME's FedWatch tool.
"So the question is, is the Fed going to be more hawkish or more dovish than what the markets are expecting right now? Because of Trump's agenda, people are expecting the Fed to be more cautious in terms of being open to further rate cuts at this stage" - Fawad Razaqzada, market analyst at Forex.com (per Reuters).
Oil posted back-to-back losses in the wake of soft Chinese economic data earlier in the week. Brent crude dropped almost 1% to US$73.19 a barrel. Weak Chinese retail spending and fixed-asset investment numbers released on Monday reaffirmed the challenge facing Beijing in reaching economic growth targets.
Key events today:
US interest rate decision and press conference - tonight
S&P 500: down 24 points or 0.39%
Dow: down 268 points or 0.61%
Nasdaq: down 65 points or 0.32%
Dollar: down 0.67% to 63.33 US cents
Iron ore (Dalian): up 0.06% to US$109.34
Brent crude: down 72 US cents or 0.97% to US$73.19
Gold (futures): down US$8 or 0.3% to US$2,662
Gold (spot): down US$6.10 or 0.23% to US$2,645.52
Silver (spot): down 3 US cents or 0.1% to US$30.48
NYSE Arca Gold Bugs: down 1.1%
Bitcoin: up 0.66% to US$106,615
Copper (LME): down 0.62% to US$9,006.50
Nickel (LME): down 0.93% to US$15,525
Lithium carbonate (China): down 0.13% to 75,900 yuan
Global X Lithium & Battery Tech ETF: down 0.25%
Uranium (spot): down 0.67% to US$74.38
Global X Uranium ETF(URA): down 0.69%
BHP: down 0.22% (US); down 1.03% (UK)
