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Top 5 Things to Know in the Market on Wednesday

Investing.com - Here are the top five things you need to know in financial markets on Wednesday, May 29:

1. Risk aversion rises on reports China to restrict rare earths exports

Global stocks traded lower and bonds rallied on Wednesday on fears of possible Chinese countermeasures in the ongoing trade war with the U.S.

China’s state-run media suggested that the country could limit its exports to the U.S. of rare earths, used in everything from high-tech consumer electronics to military equipment, in a move to exert pressure on Washington.

U.S. futures pointed to a lower open. Dow futures fell 197 points, or 0.8%, by 5:28 AM ET (9:28 GMT), S&P 500 futures lost 22 points, or 0.8%, while Nasdaq 100 futures traded down 73 points, or 1.0%.

The flight from risk also impacted the bond market as investors pivoted to safety. The yield on the yield on the U.S. 10-year Treasury (which moves inversely to prices) fell to its lowest level since September 2017. German yields fell deeper into negative territory and inched toward record lows around minus 0.2%

Asian stocks closed mostly lower although China’s Shanghai Composite eked out gains of 0.2% as rare earth mining stocks surged.

European shares were off more than 1% across the board as trade concerns added to negative sentiment from Italy’s dispute with the European Commission over its budget. Further dampening spirits, Germany, the euro zone’s largest economy, saw unemployment increase for the first time in two years in May.

2. Huawei challenges legality of U.S. defense bill

China's Huawei Technologies Co Ltd filed a motion for summary judgment in its lawsuit against the U.S. government, in the telecoms equipment maker's latest bid to fight sanctions from Washington that threaten to push it out of global markets.

Huawei is asking to declare the 2019 National Defense Authorization Act (NDAA) unconstitutional. The NDAA placed a broad ban on federal agencies and their contractors from using Huawei equipment on national security grounds, citing the company's ties with the Chinese government.

The motion comes amid an escalating trade dispute between the world's two biggest economies, exacerbated by separate accusations of bank fraud and corporate theft that the U.S. made against Huawei and its chief financial officer.

3. Boeing’s 737 MAX may not return to service until August

The International Air Transport Association (IATA) suggested that the Boeing (NYSE:BA) 737 MAX may not be cleared to return to service until August.

The 737 MAX was grounded globally in March after a crash in Ethiopia killed all 157 people on board, the model's second deadly crash in five months.

“We do not expect something before 10 to 12 weeks in re-entry into service,” IATA Director General Alexandre de Juniac told reporters in Seoul. “But it is not our hands. That is in the hands of regulators.”

IATA plans to organize a summit with airlines, regulators and the manufacturer in five to seven weeks to discuss what is needed for the 737 MAX to return to service, he said.

Read more: Boeing's 737 MAX Woes Aren't Over Yet; Wait Before Buying Stock - Haris Anwar

4. Oil prices dive on global demand worries, U.S. inventories on tap

Oil prices registered a sharp decline on Wednesday as President Donald Trump's more conciliatory tone towards Iran eased fears of a supply crunch and focused minds on the demand consequences of the U.S.-China trade war.

U.S. crude oil futures lost $1.37, or 2.3%, to $57.77 by 5:31 AM ET (9:31 GMT), while Brent oil traded down $1.50, or 2.2%, to $67.17.

Ahead on the economic calendar, weekly data on U.S. crude inventories was delayed one day this week due to Monday’s holiday. The American Petroleum Institute will release its figures late Wednesday, after five straight builds, while the Energy Information Administration’s official report is due Thursday amid expectations for a draw of 0.8 million barrels.

5. Retail earnings set ahead of the open

With no major U.S. macro data scheduled for Wednesday, retail earnings will be in focus ahead of the opening bell.

Dick’s Sporting Goods (NYSE:DKS) is expected to report a profit of 59 cents per share on sales of about $1.9 billion, according to analysts’ forecasts compiled by Investing.com.

Analysts also expect the retailer, which is vulnerable to tariffs on Chinese-manufactured goods, to register a decline of 1.3% in comparable sales, according to Briefing.com.

Abercrombie & Fitch (NYSE:ANF) is expected to post a loss of 43 cents per share, with sales coming in at about $733.4 million.

And Canada Goose (NYSE:GOOS), the maker of outerwear, is forecast to earn 3 cents per share for its latest quarter on sales of $119.4 million.

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