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Overseas weakness weighs on stocks

David Russell (david.russell@optionmonster.com)

Stocks are poised to open lower today amid weakness overseas.

S&P 500 futures are down about one-third of a percent, while European indexes have declined more than a full percentage point. Japan's Nikkei, which had led global markets higher through mid-May, shed almost 4 percent and is now back to levels from early April.

Sentiment has been turning more cautious in the last two weeks on concerns that a better economy will prompt the Federal Reserve to reduce monetary stimulus. Investors will get more data at 8:15 a.m. ET as ADP releases its monthly non-farm payrolls report, followed by the Institute of Supply Management's service-sector index at 10 a.m. ET.

Both headlines could trigger complex reactions because of the Fed, with strong numbers potentially driving stocks lower and vice versa. The Central Bank's Beige Book survey of economic conditions at 2 p.m. ET could also affect sentiment.

Today's selling overseas follows a weak economic report in Australia and comments by Japanese Prime Minister Shinzo Abe about new stimulus measures. European services-sector data was mixed.

Currencies are mostly bearish, with the euro lower against the U.S. dollar and the Japanese yen higher across the board. The yen, however, is continuing to hold a potentially key level from April, suggesting that its downtrend remains intact.

Commodities paint a more optimistic picture, with oil and copper fractionally higher. Precious metals and most agricultural foodstuffs are also posting small gains.

Despite recent declines in the broader market, price action in various industry groups has yet to show any panic. Just yesterday for example, with the S&P 500 down more than half a percent, cyclical stocks such as materials and semiconductors gained, according to our researchLAB market scanner.

In company-specific news, chip maker Ambarella is likely to climb after its profit and revenue beat expectations. Casino-game maker SHFL entertainment and bedding retailer Mattress Firm also climbed on strong results.

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