Daytrading September 25 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

A flat open looks likely as overnight gains in key commodities and market heavyweights BHP and Rio Tinto partly offset Wall Street's fifth loss in six sessions.

The December SPI200 futures contract ended the night session two points or less than 0.1% higher at 5060 as US stocks touched a three-week low before paring falls ahead of a speech this morning from Federal Reserve Chair Janet Yellen.

The S&P 500 declined as much as 1.5% before a rally in energy stocks helped the index reduce its loss to seven points or 0.34% at the close. The Dow shed 79 points or 0.48% and the Nasdaq 18 points or 0.38%.

The indexes were initially dragged lower by weakness in Europe, where the unfolding Volkswagen emissions scandal helped pull the Stoxx Europe 600 to its lowest close in eight months. The benchmark index slid 2.12% with BMW and Volkswagen among the biggest losers. Miners Glencore and Anglo American also came under pressure after mining equipment maker Caterpillar announced it will cut 10,000 jobs by the end of 2018. Germany's DAX gave up 1.92%, France's CAC 1.93% and Britain's FTSE 1.17%.

Analysts attributed some of the mid-session US recovery to short-covering before a speech by Janet Yellen following the close of regular US trade. The Fed Chair is expected to use the speech to clarify comments last week that were interpreted as sharply reducing the likelihood of a rate rise this year.

“The Fed backed themselves into a corner last week by talking about China and emerging markets,” Andrew Brenner, head of international fixed income for National Alliance Capital Markets in the US, told Bloomberg. “The fact that they’re adding China and emerging markets into the mix and then still thinking about raising rates between now and the end of the year is very inconsistent. It adds uncertainty to the market. That’s why equities have been performing poorly since mid-day of the Fed announcement.”

Energy stocks led the mid-session recovery as crude oil rebounded to its first gain in three sessions. The energy ETF put on 0.44%. West Texas Intermediate crude oil for November delivery settled 43 cents or 1% higher at US$44.91 a barrel as the US dollar index eased for a second day.

"After being down five out of six days, I think you see some bargain hunters come in," Paul Nolte, portfolio manager at Kingsview Asset Management in the US, told CNBC. "The volume numbers are still pretty weak. You can't say we may be done with the selling either. Valuations are still on the high side."

Traders also digested a mixed round of economic data. Orders for US-made durable goods declined 2% last month, reversing the July rise of 1.9% and dampening hopes that demand was weathering a stronger US dollar and signs of a slowdown in overseas markets. Sales of new homes jumped 5.2% in August to their strongest level since 2008. First-time claims for unemployment benefits edged up 3,000 to 267,000 last week, remaining at a level that indicates a strong labour market.

Australian mining heavyweights BHP and Rio Tinto avoided the fall-out from the Caterpillar announcement, rising
0.44% and 1.43%, respectively, in US trade.

Gold stocks surged higher after the precious metal sprung to its highest level in five weeks. The NYSE Arca Gold Bugs index rallied 7.8% to break a three-session losing run. Gold for December delivery settled $22.30 or 2% ahead at US$1,153.80 an ounce as traders anticipated this morning's speech by Janet Yellen.

A round of short-covering helped base metals recoup some of the week's losses, analysts claimed. In London, aluminium advanced 0.2%, nickel 2.2%, tin 1.8% and zinc 1.6%. Copper and lead dipped 0.1%. US copper for December delivery was recently up 0.3% at US$2.30 a pound.

The dollar was this morning buying 70.3 US cents.

TRADING THEMES TODAY

FED WATCHING: It's likely to be all about Janet Yellen today. The SPI200 ended the night session in neutral, but by the time the market opens we'll be able to see the reaction to a speech the Fed chair was due to deliver from 7am Australian EST. If Wall Street likes what it hears, we may be in for a better day than our futures currently indicate. If not... Given that Wall Street slid overnight and we had a good rally yesterday, the SPI likely contains some sort of 'Yellen speech premium' which will quickly unwind if she doesn't reassure the market that it is strong enough to withstand a rate hike before the year is out. Gold stocks had a strong session in the US, again partly due to anticipation of what Yellen may or may not say. Biotechs remained under pressure, losing another 1.98%. Back home, there is plenty of life in the spec market this week but the scale of the pullbacks makes swing trading much harder than usual.

ECONOMIC NEWS: No significant domestic news scheduled today. Tonight's US highlights include final Q2 GDP and GDP price index, revised consumer sentiment and inflation expectations, and flash services PMI.

Good luck to all.