Commodity weakness set to weigh on Wall Street
U.S. stock index futures pointed to lower open on Tuesday after a sharp decline in oil and iron ore prices weighed on sentiment ahead of next week’s Federal Reserve meeting.
U.S. bond auctions are also being closely watched by markets, as yields move ahead of the Fed’s plans to liftoff from zero interest rates. The Treasury auctions one- and 12-month T-bills as well as three-year notes (US3Y) Tuesday.
Crude prices edged up from nearly seven-year lows on Tuesday as China reported strong commodity imports despite economic weakness but, overall, the market remained weak due to global oversupply compounded by the Organization of Petroleum Exporting Countries’ decision to keep output high.
Benchmark Brent and WTI futures both fell over 6 percent the previous session to reach 2015 lows, and they are closing in on levels last seen during the credit crunch of 2008/2009. Should they break through 2008/2009 lows, the next downward target would be levels not seen since the early 2000s.
Internationally traded Brent futures were up 50 cents at $41.23 a barrel early on Tuesday. U.S. crude was trading at $37.89 a barrel, up 24 cents from its last settlement and close to the 2015 and seven-year lows of the previous session.
Spot iron ore also fell to a fresh decade-low below $40 a ton to a fresh decade low.
“Yesterday’s slide in oil prices, takes most of the headlines. In terms of global significance this may be a bigger deal than the slide in iron ore prices, but the latter represents a bigger percentage slide over almost any timeframe,” said global strategist at Societe Generale, Kit Juckes.
Earnings due for release on Tuesday include AutoZone (AZO), Toll Brothers (TOL) before the bell, with Costco, (COST)Dave & Buster’s (PLAY), Krispy Kreme (KKD) and Smith & Wesson (SWHC) all due after market close.