Futures Pointing To Modestly Higher Open On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday after stocks ended the previous session little changed.

The markets may benefit from continued optimism about outlook for the global economy following yesterday’s upbeat manufacturing data.

Buying interest may remain somewhat subdued, however, as traders seem wary of making significant moves amid lingering concerns about inflation.

The Labor Department’s looming monthly jobs report may also keep some traders on the sidelines ahead of the release of the closely watched data on Friday.

Payroll processor ADP typically releases its report on private sector employment on the Wednesday before the Labor Department report, but the data was delayed until Thursday due to the Memorial Day holiday on Monday.

While the ADP report often shows stark differences from the Labor Department report, the data could still have given traders some idea of what to expect.

Later in the day, the Federal Reserve is scheduled to release its Beige Book, a compilation of economic evidence from the twelve Fed districts.

The Beige Book, which is typically released about two weeks before the next Fed meeting, could impact the outlook for monetary policy.

Stocks moved sharply higher at the start of trading on Tuesday but failed to sustain the upward move and spent the rest of the day showing a lack of direction. The major averages eventually ended the session near the unchanged line.

After jumping by more than 300 points in early trading, the Dow ended the day up just 45.86 points or 0.1 percent at 34,575.31. Meanwhile, the Nasdaq slipped 12.26 points or 0.1 percent to 13,736.48 and the S&P 500 edged down 2.07 points or 0.1 percent to 4,202.04.

The initial strength on Wall Street came as upbeat manufacturing data from overseas added to optimism about the outlook for the global economy.

Data showed Chinese manufacturing activity expanded at a faster pace in the month of May, while Eurozone manufacturing activity expanded at a record pace in May despite supple bottlenecks.

The Institute for Supply Management also released a report showing manufacturing activity in the U.S. expanded at a slightly faster pace in May.

The ISM said its manufacturing PMI inched up to 61.2 in May from 60.7 in April, with a reading above 50 indicating growth in the manufacturing sector. The uptick surprised economists, who had expected the index to come in unchanged.

Buying interest waned shortly after the start of trading, however, as traders continued to express uncertainty about inflation and the outlook for monetary policy.

Traders may also have been reluctant to make significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 664,000 jobs in May after climbing by 266,000 jobs in April. The unemployment rate is also expected to dip to 5.9 percent from 6.1 percent.

Despite the lackluster close by the broader markets, energy stocks saw substantial strength on the day amid a sharp increase by the price of crude oil.

Crude oil for July delivery jumped $1.40 to a more than two-year closing high of $67.72 a barrel after OPEC and its allies agreed to stick to a plan to gradually increase production.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 4.7 percent, the NYSE Arca Natural Gas Index spiked by 4.3 percent and the NYSE Arca Oil Index shot up by 4.1 percent.

Steel stocks also saw significant strength following the upbeat manufacturing data, with the NYSE Arca Steel Index surging up by 3.6 percent.

Computer hardware, airline and commercial real estate stocks also turned in strong performances on the day, while pharmaceutical stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are rising $0.54 to $68.26 a barrel after jumping $1.40 to $67.72 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,907.70, up $2.70 compared to the previous session’s close of $1,905. On Tuesday, gold edged down $0.30.

On the currency front, the U.S. dollar is trading at 109.72 yen compared to the 109.48 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2184 compared to yesterday’s $1.2213.

Asia

Major Asian stock markets tread a mixed path on Wednesday, with Australia’s S&P/ASX 200 Index recording an all-time high and Japan’s Nikkei 225 Index gaining half a percent, while weakness was visible in Hong Kong and mainland China.

China’s Shanghai Composite Index shed 27.58 points or 0.8 percent to close at 3,597.14. Hong Kong’s Hang Seng Index slid 170.38 points or 0.6 percent to 29,297.62.

Coronavirus flare-ups in certain parts of the country and likely PBoC measures to halt speculative trading in yuan offset the positive sentiment surrounding five-month high factory growth.

Meanwhile, Japan’s Nikkei 225 Index added 131.80 points or 0.5 percent to close at 28,946.14 as investors weighed economic rebound hopes against pandemic pains.

Japan Steel works led the rally with a 5.8 percent advance. Kyowa Hakko Kirin, which announced a deal with Amgen for the development of a treatment for atopic dermatitis, rose 3.6 percent. JTEKT Corporation also added more than 3 percent. Oji Paper declined by 3.23 percent.

The Australian benchmark S&P ASX 200 Index closed at an all-time high of 7,217.80, up 75.20 points or 1.1 percent, as the first quarter growth figure of 1.8 percent surpassed expectations of 1.5 percent.

The positive sentiment surrounding the status quo on the record low cash rate of 0.1 percent coupled with the assurance of low rates until 2024 also supported the rally.

Mining stock New Hope Corporation Ltd. spiked by 7.38 percent, closely followed by Syrah Resources advancing 7.35. However, Megaport Ltd. declined by 4.7 percent and both Nanosonics Ltd. and Regis Resources declined more than 3 percent, missing the advance.

South Korea’s KOSPI inched up 2.36 points or 0.1 percent to close at 3224.23 against the backdrop of the consumer price index rising to 2.6 percent, a surge in exports, and drop in new coronavirus cases. The day’s trading range was tight between 3,216 and 3,241.

Europe

European stocks are seeing modest strength on Wednesday, extending the upward move seen in the previous session to reach new record highs.

While the French CAC 40 Index has risen by 0.3 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the German DAX Index is up by 0.1 percent.

In economic news, data from Eurostat showed Eurozone producer price inflation accelerated sharply in April amid higher energy prices.

Producer price inflation rose to 7.6 percent in April from 4.3 percent in March. This was also bigger than economists’ forecast of 7.3 percent.

Excluding energy, producer prices rose 3.5 percent year-over-year following a 2.3 percent increase in March. Energy prices surged 20.4 percent.

Meanwhile, German retail sales declined more than expected in April, data released by Destatis revealed.

Retail sales declined 5.5 percent on a monthly basis, reversing March’s 7.7 percent increase. Economists had forecast sales to drop 2 percent in April.

On a yearly basis, growth in retail sales slowed to 4.4 percent from 11.6 percent in March. This was slower than the expected expansion of 10.1 percent.

U.S. Economic Reports

At 12 pm ET, Philadelphia Federal Reserve President Patrick Harker is scheduled to speak on the economic outlook before a virtual Women in Housing and Finance Public Policy Luncheon.

Harker is also due to deliver pre-taped opening remarks at a virtual “Racism and the Economy: Focus on Entrepreneurship” event presented by all twelve of the Federal Reserve’s twelve district banks at 12:05 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release its Beige Book, a compilation of economic evidence from the twelve Fed districts.

Atlanta Federal Reserve President Raphael Bostic, Chicago Federal Reserve President Charles Evans and Dallas Federal Reserve President Robert Kaplan are also due to participate on a “Reflections on the Event & Role of the Fed” panel at the “Racism and the Economy” event at 2 pm ET.

At 2:25 pm ET, Bostic is scheduled to deliver closing remarks at the “Racism and the Economy: Focus on Entrepreneurship” event.

Dallas Fed President Robert Kaplan is due to participate in a moderated conversation on national and global economic issues before a virtual Global Perspectives series at 6:05 pm ET.

Stocks In Focus

Shares of Lands’ End (LE) are likely to extend the strong upward move seen in the previous session after the apparel retailer reported an unexpected first quarter profit on revenues that exceeded analyst estimates.

Video-compression chipmaker Ambarella (AMBA) is also likely to see initial strength after reporting better than expected fiscal first quarter results and providing upbeat guidance.

On the other hand, shares of Cinemark (CNK) and Imax (IMAX) may give back ground after Goldman Sachs downgraded its rating on both companies’ stocks to Sell from Neutral.

Enterprise computing company Hewlett Packard Enterprise (HPE) may also see initial weakness after reporting better than expected fiscal second quarter earnings and revenues but a sequential decline in hardware profit margins.