China Arrests Yuan's Plunge. Will Markets Gain?
Zacks Investment Research | Aug 05, 2019 10:28PM ET
U.S. stock index futures rebounded strongly ahead of trading on Tuesday after Chinese authorities acted to arrest the yuan’s decline. The country’s central bank hinted that it wanted the yuan to trade stronger versus the dollar by fixing its reference rate higher than the psychological level of 7.
This represents a significant recovery from the losses suffered in after-hours trading on Monday. The U.S. Treasury Department had called China a currency manipulator for the first time in nearly 25 years, accelerating the reverses suffered earlier in the day. Markets have remained on tenterhooks ever since President Trump decided to impose fresh tariffs on an additional $300 billion of Chinese imports.
Among notable earnings released before the market opens are surgical systems company Becton, Dickinson (NYSE:BDX) and utilities provider Duke Energy (NYSE:DUK) . Both companies exceeded earnings and revenue expectations. Meanwhile, Disney (NYSE:DIS) is expected to release third-quarter earnings figures after the market close.
Benchmarks fell to their lowest levels for the year on Monday. The rout was triggered by China’s decision to allow the yuan to plunge to a historic low. Further, service activity in the United States slowed to its lowest level in the past three years. The three major benchmarks ended in negative territory.
The Dow Jones Industrial Average decreased 2.9%, to close at 25,717.74. The S&P 500 decreased 3% to close at 2,844.74. The tech-laden Nasdaq Composite Index closed at 7,726.04, losing 3.5%. The fear-gauge CBOE Volatility Index (VIX) increased 23.6% to close at 21.79. Decliners outnumbered advancers on the NYSE by a 7.17-to-1 ratio. On Nasdaq, a 7.42-to-1 ratio favored declining issues.
The Dow dipped 767.3 points to close in the red due to broad-based losses. At its session lows, the Dow had dropped by as much as 961.6 points. Shares of Boeing (NYSE:BA) and Caterpillar (NYSE:CAT) lost 2.5% and 2.3%, respectively and weighed on the 30-stock index. This marked the Dow’s fifth straight session in red.
The S&P 500 dropped 87.3 points to end in negative territory for the sixth session on the trot. All of the S&P 500’s 11 major sectors ended in the red, with technology stocks leading the decliners. The Technology Select Sector SPDR Fund (XLK) decreased 4.1% on Monday.
Meanwhile, the Nasdaq slid 278 points to also close in the red. This marked the tech-heavy index’s sixth consecutive close in the negative territory. Shares of Apple (NASDAQ:AAPL) declined 5.2% and weighed down the Nasdaq. The stock carries a Zacks Rank #3 (Hold). You can see Zacks Investment Research
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