S&P 500 Looks To Join Nasdaq At New Record High

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to extend the notable upward move seen over the two previous sessions.

After the tech-heavy Nasdaq reached a new record high yesterday, traders may be looking for the S&P 500 to follow suit this morning.

The S&P 500 ended Tuesday’s trading just a little more than 10 points or 0.3 percent below the record intraday high set last week.

Meanwhile, the Dow is further off its record highs after underperforming last week, although the blue chip index has bounced well off the more than two-month closing low set last Friday.

Easing concerns about the outlook for monetary policy contributed to the significant rebound by stocks early this week.

While the Federal Reserve’s latest projections call for two interest rate hikes in 2023, Fed Chair Jerome Powell told lawmakers on Tuesday that the central bank would not raise rates “preemptively” based on the “fear” of inflation.

Caution remains, but the Fed’s asset purchase program is expected to continue to support the stock markets in the near term.

After showing a lack of direction early in the session, stocks moved mostly higher over the course of the trading day on Tuesday. With the upward move on the day, the tech-heavy Nasdaq reached a new record closing high.

The major averages pulled back off their highs going into the close but remained in positive territory. The Dow rose 68.61 points or 0.2 percent to 33,945.58, the Nasdaq advanced 111.79 points or 0.8 percent to 14,253.27 and the S&P 500 climbed 21.65 points or 0.5 percent to 4,284.44.

The strength that emerged on Wall Street was partly attributed to a significant rebound by the value of bitcoin.

Bitcoin turned higher over the course of the trading day after the cryptocurrency tumbled below $30,000 earlier in the day.

The higher close by stocks also came as Powell continued to downplay the risks of inflation during testimony before the House Select Subcommittee on the Coronavirus Crisis.

Powell acknowledged inflation has increased notably in recent months but reiterated the view that the jump is due to “transitory” factors and predicted inflation would drop back toward the Fed’s longer-run goal of 2 percent price growth.

The Fed chief noted the economy has shown sustained improvement since he last appeared before the committee, citing widespread Covid-19 vaccinations as well as unprecedented monetary and fiscal policy actions.

However, he also warned the coronavirus pandemic continues to pose risks to the economic outlook, pointing to the slowing pace of vaccinations and new strains of the virus.

Powell stressed that the Fed will do “everything we can to support the economy for as long as it takes to complete the recovery.”

On the U.S. economic front, the National Association of Realtors released a report showing existing home sales extended a recent pullback in May but fell by less than economists had expected.

NAR said existing home sales slid by 0.9 percent to an annual rate of 5.80 million in May after tumbling by 2.7 percent to a rate of 5.85 million in April. Economists had expected existing home sales to slump by 2.2 percent to a rate of 5.72 million.

Existing home sales have plummeted by 12.9 percent since January but are still up by 44.6 percent compared to May of 2020.

Retail stocks showed a strong move to the upside on the day, driving the Dow Jones U.S. Retail Index up by 1.4 percent to its best closing level in almost two months.

Notable strength also emerged among software stocks, as reflected by the 1.1 percent gain posted by the Dow Jones U.S. Software Index.

Most of the other major sectors showed only modest moves on the day, although some weakness was visible among airline stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.72 to $73.57 a barrel after slipping $0.27 to $72.85 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,781.50, up $4.10 compared to the previous session’s close of $1,777.40. On Tuesday, gold fell $5.50.

On the currency front, the U.S. dollar is trading at 110.83 yen compared to the 110.65 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1947 compared to yesterday’s $1.1940.

Asia

Asian stocks ended mostly higher on Wednesday after Fed Chair Jerome Powell’s reassurance that the recent inflation rate has grown faster than expected but will likely slow down the road helped stabilize U.S. Treasury yields and triggered a tech rally on Wall Street overnight.

Chinese stocks gained ground, with healthcare companies in focus after the National Medical Products Administration said it has approved the first CAR-T cell therapy in the country.

The benchmark Shanghai Composite Index rose 8.81 points, or 0.3 percent, to 3,566.22, while Hong Kong’s Hang Seng Index surged up 507.31 points, or 1.8 percent, to 28,817.07.

Japanese shares ended on a flat note, giving up early gains after a survey showed the manufacturing sector in the country expanded at a slower pace in June.

A rise by the services PMI for the month and an upbeat assessment on the economic outlook, as revealed by minutes from the Bank of Japan’s April meeting, helped limit the downside to some extent.

The Nikkei 225 Index finished marginally lower at 28,874.89, while the broader Topix closed 0.5 percent lower at 1,949.14.

Tech shares such as Advantest, Screen Holdings and Tokyo Electron climbed 1-2 percent, while conglomerate Sony lost 2 percent. Uniqlo casual wear operator and market heavyweight Fast Retailing rallied 2 percent.

Nissan Motor dropped 0.7 percent after a report that it will adjust production at several factories next month because of a chip shortage. Honda Motor fell over 1 percent and Toyota gave up 1.8 percent.

Australian markets ended lower after posting their best session in nearly four months. The benchmark S&P/ASX 200 Index dropped 43.70 points, or 0.6 percent, to 7,298.50 after climbing 1.5 percent in the previous session.

The broader All Ordinaries Index ended down 40.60 points, or 0.5 percent, at 7,552.10, as traders digested weaker than expected local manufacturing and services data.

Woodside Petroleum and Santos dropped more than 2 percent after crude oil prices fell overnight. Ampol gave up 1.1 percent and Viva Energy shed 1.8 percent despite the Australian parliament approving plans to pay them up to A$2.3 billion ($1.8 billion) in oil refinery subsidies.

The big four banks fell 1-2 percent, while tech stocks such as Afterpay and Appen surged over 3 percent each.

Seoul stocks ended higher for the second day running as dovish Powell comments helped ease investor concerns of fast tapering. The Kospi rose 12.31 points, or 0.4 percent, to close at 3,276.19.

Pharmaceutical firm Samsung Biologics gained 1.3 percent and chipmaker SK Hynix advanced 1.6 percent, while internet portal operator Naver surged 8.3 percent to a record high.

Europe

European stocks are broadly lower on Wednesday, as inflation worries overshadow solid business activity data as well as dovish commentary from Fed officials, including Chair Jerome Powell.

The euro area private sector grew at the fastest rate in 15 years in June as the economy re-opened further from virus-fighting restrictions and vaccine progress boosted confidence, flash survey data from IHS Markit showed earlier today. At 59.2, the flash composite output index hit a 180-month high, up from 57.1 in May.

The services Purchasing Managers’ Index advanced to 58.0 in June from 55.2 in the previous month, while the manufacturing PMI held steady at 63.1 in June.

Inflation pressures continued to mount as input prices soared in the month. The manufacturing input prices index rose to 88.0 from 87.1, the highest since the survey began in June 1997.

Elsewhere, the flash composite output index for U.K. dropped to 61.7 in June from 62.9 in May. The rate of input cost inflation accelerated for the fifth month running and was the joint-fastest on record. In turn, the rate of output price inflation hit a fresh record high for the second month running.

The French CAC 40 Index is down by 0.4 percent and the German DAX Index is down by 0.3 percent, although the U.K.’s FTSE 100 Index has bucked the downtrend and risen by 0.5 percent,

Swiss Re Group has edged down slightly after announcing it has reduced its shareholding in Phoenix Group Holdings. Shares of the latter have also fallen.

British housebuilder Persimmon has also dropped. The company has agreed to a number of voluntary informal undertakings relating to its historic sale of leasehold houses with the U.K. competition watchdog.

Property developer and house builder Berkeley Group Holdings has also slid as it posted nearly 3 percent growth in its pre-tax profit for the full year, reflecting sales of new homes in London and the South East.

Luxury-goods group LVMH Moët Hennessy Louis Vuitton has also fallen on the back of a ratings downgrade from HSBC.

German chemical distribution company Brenntag AG is also moving lower. The company has announced the acquisition of U.S.-based Storm Chaser Holding Corp., called as JM Swank, from Platinum Equity.

Meanwhile, Pernod Ricard shares have risen after the French drinks group raised its annual profit guidance, citing a stronger-than-expected recovery with the removal of COVID-19 curbs.

U.S. Economic Reports

Federal Reserve Governor Michelle Bowman is due to give remarks at a virtual “Policy Summit 2021: Pathways to Economic Resilience in Our Communities” hosted by the Federal Reserve Bank of Cleveland at 9:10 am ET.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of May.

Economists expect new home sales to climb by 0.8 percent to an annual rate of 870,000 in May after plunging by 5.9 percent to a rate of 863,000 in April.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended June 18th.

Crude oil inventories are expected to decrease by 3.6 million barrels after tumbled by 7.4 million barrels in the previous week.

Atlanta Federal Reserve President Raphael Bostic is scheduled to speak in a webinar on the “impact of systemic racism on entrepreneurship” to the Russell Innovation Center for Entrepreneurs at 11 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $61 billion worth of five-year notes.

Boston Federal Reserve President Eric Rosengren is due to participate in a virtual fireside chat on the economy before the National Association of Corporate Directors, New England Chapter at 4:30 pm ET.

Stocks In Focus

Shares of GlaxoSmithKline (GSK) are moving notably higher in pre-market trading after the drugmaker’s CEO Emma Walmsley detailed plans to spin off its consumer healthcare business into a separate company. Walmsley also said the company is targeting more than £33 billion in sales by 2031.

Recreational vehicle maker Winnebago (WGO) is also likely to see initial strength after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Xpeng (XPEV) may also move to the upside after the China-based electric car maker received approval for an initial public offering in Hong Kong.

On the other hand, shares of Patterson Companies (PDCO) are likely to come under pressure after the medical supplies conglomerate reported weaker than expected fiscal fourth quarter earnings and provided disappointing guidance.