The major U.S. index futures are pointing to a lower opening on Tuesday, with sentiment suggesting nervousness following the gains of the recent sessions. Earlier today Asian stocks closed higher amid the Australian central bank's decision to hold interest rate unchanged. European stocks are also higher following a jittery start. A domestic economic report released short while ago showed that the trade deficit widened roughly in line with expectations. PepsiCo.'s better than expected results could set a positive tempo to the unfolding third quarter reporting season. Against this backdrop, some moderation in momentum is likely.
U.S. stocks advanced notably on Monday on tempered rate hike expectations. The major averages started the day higher and advanced steadily throughout the remainder of the session before ending sharply higher. The Dow Industrials added 304.06 points or 1.85 percent before ending at 16,776, its highest closing level since August 20th, the S&P 500 Index closed 35.69 points or 1.83 percent higher at 1,987 and the Nasdaq Composite ended at a nearly 2-week high of 4,781, up 73.49 points or 1.56 percent.
All but one of the thirty Dow components ended the session higher, with American Express (AXP), Caterpillar (CAT), Cisco Systems (CSCO), Chevron (CVX), DuPont (DD), General Electric (GE) and IBM (IBM) advancing notably.
On the economic front, the results of the Institute for Supply Management's service sector survey showed that service sector growth slowed in September. The non-manufacturing index slipped 2.1 points to 56.9. The business activity index declined 3.7 points to 60.2, the new orders index slid 6.7 points to 56.7 and the order backlogs index moved down 2 points to 54.5. Meanwhile, the employment index rose 2.3 points to 58.3. Thirteen non-manufacturing industries reported growth in September.
Markit's survey showed that the U.S. service sector activity slowed more than expected in September. The service sector PMI fell to 55.1 in September from 56.1 in August, while economists expected a more modest drop to 55.8.
Currency, Commodity Markets
Crude oil futures are rising $ 0.06 to $ 46.32 a barrel after advancing $ 0.72 to $ 46.26 a barrel on Monday. Meanwhile, an ounce of gold is currently trading at $ 1,138, up $ 0.40 from the previous session's close of $ 1,137.60. On Monday, gold rose $ 1.
On the currency front, the U.S. dollar is trading at 120.46 yen compared to the 120.46 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $ 1.1187 compared to yesterday's $ 1.1188.
Asia
Most Asian markets advanced, tracking the positive lead from Wall Street overnight. The Chinese market remained closed for National Day holidays.
The Japanese market ended higher for the fifth straight session, supported by the weakness of the yen, which suffered due to rising risk appetite. The Nikkei 225 Index opened higher but gave back some of the gains over the course of the morning. The index moved roughly sideways in the afternoon before ending up 180.61 points or 1 percent at a 2-week high of 18,186.
Paper, resource, export, financial, utility and telecom stocks gained ground. Meanwhile, some food, construction, retail and chemical stocks came under selling pressure.
Australia's All Ordinaries Index opened higher and moved roughly sideways in the morning. Following the Reserve Bank of Australia's decision to maintain interest rates unchanged for the fifth straight month, the index gave back some of its gains yet closed 14.90 points or 0.29 percent higher at 5,199.
Material, energy, financial and consumer stocks moved to the upside, while IT, industrial, real estate, telecom and utility stocks lost ground.
Meanwhile, Hong Kong's Hang Seng Index ended at 21,832, down 22.88 points or 0.10 percent.
On the economic front, the Reserve Bank of Australia kept interest rates at a record low 2 percent, citing moderating growth in China, its key trading partner. The bank is expected to revisit its growth and inflation targets at its next policy meeting in November. Economists feel if the economic outlook for the next year weakens, rate cuts may be back on the agenda.
Australia's trade deficit widened to A$ 3.095 billion in August from A$ 2.792 billion in July, according to a report released by the Australian Bureau of Statistics. Economists expected a deficit of A$ 2.40 billion for the month. Exports were roughly flat, while imports rose 1 percent.
Europe
European stocks opened lower and traded on a lackluster note following strings of gains in recent sessions. However, since late morning the averages cut their losses and are currently moderately higher.
In corporate news, Air Berlin reported a 7.2 percent year-over-year drop in traffic in September. Capacity fell 6.8 percent. EasyJet reported a 0.9 percentage point increase in its load factor for September to 93.1 percent.
Philips announced plans to expand its health care consulting services in the U.S. with the acquisition of Blue Jay Consulting. Financial terms of the deal were not disclosed.
Brewer SABMiller reported a 9 percent drop in its second quarter net producer revenue, dragged lower by continued depreciation of is key operating currencies.
On the economic front, German factory orders declined 1.8 percent month-over-month in August, as both domestic and foreign demand deteriorated from July, data from Destatis revealed. The drop belied expectations for a 0.5 percent increase.
A report released by Markit showed that construction activity in Germany accelerated in September, with a PMI score of 52.4 compared to 50.3 in August.
The Halifax division of the Lloyds Banking Division reported that U.K. house prices fell 0.9 percent month-over-month in September, reversing the 2.7 percent increase in August. Economists expected a 0.1 percent increase in house prices.
U.S. Economic Reports
A Commerce Department report showed that the nation's trade deficit widened to $ 48.3 billion in August from the upwardly revised deficit of $ 41.8 billion in July. Economists expected the trade deficit to have widened to $ 48.6 billion from the originally estimates deficit of $ 41.9 billion for July.
Exports fell $ 3.7 billion month-over-month to $ 185.1 billion, while imports rose $ 2.8 billion to $ 233.4 billion. In real terms, the deficit rose $ 7.3 billion to $ 63.4 billion.
Kansas City Federal Reserve Bank President Esther George is due to speak on the payments system in Chicago at 9:15 am ET. Additionally, San Francisco Federal Reserve Bank John Williams will deliver an outlook speech in San Francisco at 3:30 pm ET.
The Treasury Department is set to announce the results of the auction of 3-year notes at 1 pm ET.
Stocks in Focus
PepsiCo. (PEP) reported better than expected third quarter results and raised its earnings outlook for the full year.
Sony (SNE) said that it will establish Sony Semiconductor Solutions Corporation to further reinforce its semiconductor business, where image sensors are a primary area of focus.
Skyworks Solutions (SWKS) announced a deal to buy PMC-Sierra (PMCS) for $ 10.50 per share in cash or about $ 2 billion in total. Skyworks also announced preliminary fourth quarter results, expecting revenues of $ 880 million and non-GAAP earnings per share of $ 1.52 per share. The results were above the consensus estimates.
Standard & Poor's announced Cyberonics (CYBX) will replace Home Properties (HME) in the S&P MidCap 400 Index and Ruckus Wireless (RKUS) will replace Cyberonics in the S&P SmallCap 600 Index after the close of trading on October 7th.
CSC (CSC) announced that it has entered into exclusive negotiations to buy the shares of UXC for A$ 428 million, subject to due diligence, board approvals and other requirements.
ITT Corp. (ITT) announced the completion of its previously announced acquisition of Wolverine Automotive Holdings.
Haemonetics (HAE) lowered its 2016 guidance, citing deterioration in the market for its products in Russia, challenges in the pace of implementation of a contracted market share gain in Japan and re-assessment of the timeline for penetration of recently introduced software products. The company's second quarter earnings guidance is above estimates, while its revenue outlook trailed expectations.
Apollo Education (APOL) announced the promotion of Gregory Iverson as its CFO, effective October 26th, replacing Joseph D'Amico, who was serving as interim CFO.
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