Risk Aversion Rules Roost As Rate Hike Worries Linger

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Monday,  although they have trimmed much of their early losses. The steep-sell off seen last Friday could lead to some bargain hunting, although much of it could depend on what a few Fed officials have to say in their public appearances later today. Atlantic Federal Reserve Bank President, who spoke a short while ago, was non-committal on the timing of a rate hike. Risk aversion is lending support to the safe haven dollar and the yen and in turn impacting commodity prices. European stocks are seeing a steep sell-off.   U.S. stocks retreated in the abbreviated week ended September 9th, with the major averages sliding to 2-month lows, as Fed rhetoric about the strength of the economy and the pitfalls of extended period of monetary policy accommodation pounded stocks.     Last Tuesday, when the markets opened after Monday's Labor Day holiday, the major averages advanced modestly to moderately, as the odds of rate hike reduced in the wake of a weak service sector reading. The major averages went about in a lackluster manner on Wednesday amid very little clarity from the Beige Book and a rise in oil prices and ended mixed.    Despite oil rallying on Thursday, the averages ended lower, as a lack of action from the European Central Bank and positive jobless claims data sapped risk appetite. The averages slumped on Friday, losing over 2 percent, after a Fed speech hinting at a hike before year-end spooked investors.    For the week ended September 9th, the Dow Industrials fell 406.51 points or 2.20 percent to 18,086, its lowest level since July 7th, the S&P 500 Index closed 52.17 points or 2.39 percent lower at 2,128 and the Nasdaq Composite ended at a 1-1/2 month low of 5,126, down 123.99 points or 2.36 percent. 

Among the sectors, the Philadelphia Housing Sector Index and the Philadelphia Semiconductor Index all declined over 4 percent each. Additionally, the Dow Jones U.S. Basic Materials Average and the NYSE Arca Gold Bugs Index lost over 3 percent each. The Dow Jones Utility Average ended down over 2 percent. On the other hand, NYSE Arca Airline Index and the NYSE Arca Biotechnology Index gained over 2 percent each.    Currency, Commodity Markets    Crude oil futures are slipping $0.60 to $45.28 a barrel after rising $1.44 or 3.24 percent to $45.88 a barrel in the week ended September 9th. Oil gained as the dollar's weakness, worries concerning potential production cuts by OPEC members and the weekly petroleum status report, which showed a steep draw down in inventories proved bearish for the commodity.    Gold futures, which rose $7.80 or 0.59 percent to $1,334.50 an ounce in the previous week, are currently moving down $1.80 to $1,332.70 an ounce.    Among currencies, the U.S. dollar ended the week ended September 9th lower, with the dollar slipping 0.72 percent against the fellow safe haven, the yen before ending the week at 102.69. The dollar rose fell 0.77 percent against the euro to $1.1233 a euro.    The greenback is currently valued at 102.30 yen and is worth $1.1248 a euro.    Asia    The Asian markets sold off, as panic following last Friday's plunge by U.S. stocks drove traders away from equities.     The strengthening of the safe haven yen and the general risk off mood sent Japanese stocks lower. The Nikkei 225 average opened notably lower and moved roughly sideways before ending down 292.84 points or 1.73 percent at a 2-week low of 16,673.    Most sectors retreated, with export and financial stocks leading the slide. On the other hand, some defensive food, housing, utility and insurance stocks gained ground.    Australia's All Ordinaries opened lower and fell steeply in early trading before moving sideways. At the close of trading, the index was down 121.40 points or 2.23 percent at a 2-month low of 5,319.    The market witnessed broad based weakness, with utility, real estate, material, industrial and energy stocks being the worst hit.    Hong Kong's Hang Seng Index closed at 23,291, down 809.10 points or 3.36 percent, and China's Shanghai Composite lost 56.88 points or 1.85 percent before ending at 3,022.    On the economic front, a report released by Japan's Cabinet Office showed that core machinery orders rose 4.9 percent month-over-month in July, belying expectations for a 2.9 percent drop. Annually, core machinery orders soared 5.2 percent, ahead of the 0.3 percent increase expected by economists.    The corporate goods prices in Japan fell 0.3 percent month-over-month in August, according to data released by the Bank of Japan. Economists expected a more modest 0.1 percent drop. Annually, corporate goods prices fell 3.6 percent compared to consensus estimate for a 3.4 percent drop.    Europe    European stocks are also witnessing a steep pullback, extending their losses from last Friday.     In major corporate news, industrial gas maker Linde and Praxair called off their merger talks. U.K.'s AB Foods raised its earnings guidance for the year, helped by solid second-half trading and favorable currency impact. Frankfurt airport operator Fraport reported a decline in traffic in August.    U.S. Economic Reports    The unfolding week's economic calendar is back-end loaded, with several market moving economic reports lined up for release on Thursday and Friday.     The Commerce Department's retail sales report for August due on Thursday, the results of the New York Federal Reserve's and Philadelphia Federal Reserve's manufacturing surveys for September, both due on Thursday, the Federal Reserve's industrial production report for August, also due on Thursday, the routinely scheduled jobless claims data, the Labor Department's consumer prices data for August and the University of Michigan's preliminary consumer sentiment index for September are among the market moving reports of the week.    Given the worries over interest rate hike, Fed speeches scheduled for Monday could also be in the spotlight. The Labor Department's data on export and import prices and producer prices for final demand, both for August, the Commerce Department's business inventories report for July, the Treasury Department's monthly budgetary report for August and the results of the auctions of 3-year and 10-year notes and 30-year bonds round up the economic events of the week. 

Lockhart in a speech at a NABE conference in Atlanta, steered clear of giving the likelihood of a rate hike this year, citing market sensitivity to this information. However, Lockhart did suggest the domestic economy is vibrant.

At 1 am ET, Minneapolis Federal Reserve President Neel Kashkari will speak at St. Paul BOMA's Thought Leader Seminar and St. Paul Port Authority's Expert's Forum with audience Q&A in Saint Paul, Minnesota. The speech is due at 1 pm ET. Also at 1 pm ET, Federal Reserve Governor Lael Brainard is set to discuss the U.S. economic outlook and monetary policy implications at The Chicago Council on Global Affairs in Chicago. 

The Treasury will release the results of the Treasury auctions of 3-year and 10-year notes at 1 pm ET.    Stocks in Focus 

HP (HPQ) announced a definitive agreement to acquire Samsung Electronics Co., Ltd.'s printer business in a deal valued at $1.05 billion.

Agrium (AGU) and Potash Corporation of Saskatchewan (POT) announced they have agreed to combine in a merger of equals.  Following the close of the transaction, PotashCorp shareholders will own approximately 52 percent of the new company, and Agrium shareholders will own approximately 48 percent on a fully diluted basis.   Reacting to SEC's enforcement action relating to its previously issued restatement of results for the first, second and third quarters of 2013, RPM International (RPM) said it believes there was no intentional misconduct on the part of any of its officers and that it would defend itself. 

Starboard Value LP has taken a 4.6% stake in drug maker Perrigo Co. (PRGO), worth nearly $600 million, Wall Street Journal reported, citing a letter sent by the activist investor on Sunday.   SkyWest (SKYW) said its load factor for August fell 1 percentage point year-over-year to 82.7 percent, as capacity and traffic were down 6.5 percent and 7.7 percent, respectively. United Airlines' (UAL) August load factor declined 1.1 points, with traffic rising 0.6 percent and capacity increasing 1.9 percent.