US open: Shares down on 'hawkish' Fedspeak and after J&J asbestos recall

By Sharecast News

Sharecast News | 18 Oct, 2019

21:27 27/12/24

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Wall Street was moving lower at the end of the week on the back of hawkish remarks from two top US central bank officials and amid a bout of selling in shares of Johnson&Johnson.

Not to lose sight of, traders were also waiting on a key vote in the UK Parliament at the weekend and digesting mixed economic data out of China overnight.

But the market spotlight was expected to shine brightest on a speech from Federal Reserve vice chairman, Richard Clarida, at 1630 BST, that analysts said could push debt yields higher.

Ahead of Clarida's speech, Dallas Fed chair Robert Kaplan reportedly told he was anticipating one more interest rate cut before the year was out, but added that he did not expect the central bank to enter into a fully-fledged easing cycle and that it is "not my job" to do whatever financial markets expect on interest rates.

Kaplan added that he was "agnostic" going into the October meeting of the Federal Open Market Committee.

Also speaking on Friday, his counterpart at the Kansas City Fed, Esther George, a policy hawk, said the economy did not require further interest rate cuts.

As of 1538 BST, the Dow Jones Industrials was trading down by 85.10 points at 26,942.35, while the S&P 500 was off by 9.65 points to 2,988.41 and the Nasdaq Composite by 43.27 points to 8,144.19.

And against that backdrop, the yield on the benchmark two-year US Treasury note was slipping by three basis points to 1.57%.

Data released overnight showed economic growth in China slowing to a year-on-year pace of 6.0% in the third quarter, which was a smidgen below forecasts and the slowest clip since the early 1990s.

Despite that, December copper on COMEX was adding 1.37% to $2.6330/oz..

In economic news, the Conference Board's index of leading economic indicators dipped by 0.1% on the month in September (consensus: 0.1%), but the think-tank said it pointed to slower but continued growth.

Federal Reserve vice-chairman, Richard Clarida, was set to take to the podium at 1630 BST.

"Markets will focus on remarks from Fed's Clarida ahead of the Fed blackout period, which begins late on Friday. With the market 80% priced for an October rate cut, any signal from Clarida that the Fed is finished with rate cuts could push yields higher," analysts at TD Securities said in a research note sent to clients ahead of his speech.

"However, we expect the Vice-Chair to avoid committing to any course of action as the Fed remains data-dependent."

On the corporate front meanwhile, fashion retailers including Gap, L Brands, and Macy's were all lower on the back of recommendation downgrades out of Credit Suisse, alongside a drop in stock of Victoria's Secret after its head of stores stepped down.

Weighing on the Dow Industrials, shares of Johnson&Johnson were getting hammered after the consumer goods giant said it would recall a single lot of its iconic baby powder after detecting traces of chrysotile asbestos.

American Express shares were also unwanted despite news of a better than expected third quarter performance out of the credit card outfit, which posted quarterly earnings per share of $2.08 (consensus: $2.03) on the back of $11.0bn in sales (consensus: $10.94bn), although they remained within striking distance of their 52-week highs.

Coca Cola on the other hand only managed to meet analysts' estimates for third quarter adjusted EPS of $0.56, although on the top line it did manage a beat with revenues of $9.5bn (consensus: $9.45bn).

Dow Jones - Risers

Coca-Cola Co. (KO) $54.87 2.00%
Verizon Communications Inc. (VZ) $61.03 1.03%
McDonald's Corp. (MCD) $208.37 0.73%
Merck & Co. Inc. (MRK) $84.40 0.72%
Procter & Gamble Co. (PG) $117.17 0.46%
Home Depot Inc. (HD) $237.68 0.38%
3M Co. (MMM) $164.12 0.35%
Walmart Inc. (WMT) $120.18 0.28%
Walt Disney Co. (DIS) $132.70 0.25%
Travelers Company Inc. (TRV) $140.80 0.23%