Futures Pointing To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks poised to regain ground after moving sharply lower over the three previous sessions.

Traders may once again look to pick up stocks at reduced levels after the recent weakness dragged the major averages down to their lowest levels in a month.

Early bargain hunting faltered in Tuesday’s session, however, leading to a sharp pullback by stocks amid lingering concerns about higher interest rates and the economic outlook.

In remarks earlier this morning, Cleveland Federal Reserve President Loretta Mester said she expects interest rates to be raised above 4 percent by early next year.

Mester also said she does not anticipate the Federal Reserve cutting interest rates in 2023, with the Fed likely to keep rates at an elevated level in an effort to combat inflation.

On the U.S. economic front, payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of August.

ADP said private sector employment rose by 132,000 jobs in August after jumping by nearly 270,000 jobs in July. Economists had expected employment to surge by 288,000 jobs.

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy‘s conflicting signals,” said ADP chief economist Nela Richardson. “We could be at an inflection point, from super-charged job gains to something more normal.”

ADP suspended its jobs report for June and July as the firm revamped its methodology and entered into a partnership with the Stanford Digital Economy Lab.

After extending last Friday’s sell-off to start the week, stocks showed another significant move to the downside during trading on Tuesday. The major averages all moved notably lower, ending the session at their worst levels in a month.

The major averages climbed off their lows of the session in late-day trading but remained firmly negative. The Dow slumped 308.12 points or 1 percent to 31,790.87, the Nasdaq plunged 134.53 points or 1.1 percent to 11,883.14 and the S&P 500 tumbled 44.45 points or 1.1 percent to 3,986.16.

The extended sell-off by stocks reflected lingering concerns about the outlook for interest rates and the impact further rate hikes will have on the economy.

Stocks have been under pressure since Federal Reserve Chair Jerome Powell indicated the central bank plans to continue aggressively raising interest rates during a speech last Friday.

Powell suggested that even after the Fed finishes tightening monetary policy, rates will remain at higher levels to ensure inflation remains contained.

“Stocks turned negative after confidence and job opening data supported the argument for the Fed to stick to an aggressive stance with fighting inflation,” said Edward Moya, senior market analysts and OANDA.

“It seems like traders are leaning towards a 75 bp hike in September, a half-point in November and a 25bp increase in December,” he added. “Over the next few months, if the labor market doesn’t break and the consumer remains resilient, Wall Street might start pricing in rate hikes for February and March.”

The Conference Board released a report this morning showing consumer confidence rebounded by more than expected in the month of August.

The Conference Board said its consumer confidence index jumped to 103.2 in August from a downwardly revised 95.3 in July.

Economists had expected the consumer confidence index to climb to 97.4 from the 95.7 originally reported for the previous month.

A separate report from the Labor Department showed the number of job openings was little changed at 11.2 million on the last business day of July.

Energy stocks saw substantial weakness after bucking the downtrend in the previous session, with a steep drop by the price of crude oil weighing on the sector.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 4.8 percent, the NYSE Arca Oil Index dove by 3.6 percent and the NYSE Arca Natural Gas Index slumped by 3.4 percent.

Substantial weakness was also visible among steel stocks, as reflected by the 3.8 percent nosedive by the NYSE Arca Steel Index.

Gold, computer hardware and transportation stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are tumbling $2.49 to $89.15 a barrel after plummeting $5.37 to $91.64 barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,723.90, down $12.40 compared to the previous session’s close of $1,736.30. On Tuesday, gold fell $13.40.

On the currency front, the U.S. dollar is trading at 138.70 yen compared to the 138.79 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $0.9997 compared to yesterday’s $1.0015.

Asia

Asian stocks finished mostly lower on Wednesday amidst fresh concerns over economic growth in China as well as the renewed Covid curbs in the region. The fears added to the concerns of tight monetary policy emanating from the U.S.

China’s Shanghai Composite Index dropped 25.08 points or 0.8 percent to finish at 3,202.14. The day’s trading ranged between 3,184.39 and 3,232.02. The Shenzhen Component Index lost 1.3 percent to close at 11,815.79.

The manufacturing PMI in China remained below 50 in August, while the services PMI dropped to 52.6 in August from 53.8 in July.

The Japanese benchmark Nikkei 225 Index shed 104.05 points or 0.4 percent to end trading at 28,091.53. The day’s trading range was between 27,906.17 and 28,104.80.

Keisei Electric Railway Co. was the biggest gainer with a 3.7 percent jump. Isetan Mitsukoshi Holdings, Mitsubishi Motors Corp, T&D Holdings, and Hino Motors also gained more than 2 percent.

Inpex Corp. was the biggest loser with a decline of more than 3.5 percent. Shares of Eneos Holdings, Unitika, Japan Steel Works and SKY Perfect JSAT Holdings also lost close to 3 percent in the trading session.

The Hang Seng Index of the Hong Kong Stock Exchange added 5.36 points from the previous close to finish trading at 19,954.39. The day’s trading range was between 20,173.02 and 19,564.84.

The Korean Stock Exchange’s Kospi Index advanced 21.12 points or 0.9 percent to close trading at 2,472.05. The day’s trading range was between 2,426.14 and 2,473.75.

Australia’s S&P/ASX200 Index closed trading at 6,986.80 after losing 11.50 points or 0.2 percent. The day’s trading was between 6,937.50 and 6,998.30.

Clinuvel Pharmaceuticals topped the gainers charts with a 16.2 percent rally after it reported upbeat results. ‘Buy now pay later’ provider Zip Co. surged 11.7 percent.

While biotechnology business Mesoblast and travel services company Webjet both added more than 8 percent, engineering and construction business NRW Holdings gained close to 7 percent.

Sports betting company PointsBet Holdings declined more than 11 percent. Mineral Resources shed 5.8 percent. Gambling business Tabcorp Holdings and energy business Woodside Energy both lost more than 4 percent, whereas packaged foods business Bega Cheese decreased 3.9 percent.

Europe

European stocks have moved to the downside on Wednesday as renewed anxiety surrounding inflation weighs on the world markets.

The major European benchmarks capitulated amidst economic data that highlighted persisting inflation and the challenges to growth.

While the U.K.’s FTSE 100 Index has slumped by 1.2 percent, the French CAC 40 Index is down by 0.5 percent and the German DAX Index is down by 0.1 percent.

The weakness in the markets comes after a report from Eurostat showed Eurozone inflation hit a new record in August, reflecting the intensifying cost of living crisis.

Inflation rose to 9.1 percent in August from 8.9 percent in July. The pace was also above economists’ forecast of 9.0 percent.

Core inflation, which excludes energy, food, alcohol and tobacco, advanced to 4.3 percent in August from 4.0 percent in July, while the rate was expected to remain steady at 4.0 percent.

The data added further pressure on the European Central Bank to tighten policy more aggressively as soon as next week.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by much less than expected in the month of August.

ADP said private sector employment rose by 132,000 jobs in August after jumping by nearly 270,000 jobs in July. Economists had expected employment to surge by 288,000 jobs.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of August.

The Chicago business barometer is expected to edge down to 52.0 in August from 52.1 in July, with a reading above 50 indicating growth.

The Energy Information Administration is due to release its report on oil inventories in the week ended August 26th at 10:30 am ET.

Crude oil inventories are expected to decrease by 1.5 million barrels after slumping by 3.3 million barrels in the previous week.

At 6 pm ET, Dallas Federal Reserve President Lorie Logan is scheduled to participate in a virtual event, Introducing Dallas Fed President Lorie Logan, sponsored by the Federal Reserve Bank of Dallas.

Atlanta Federal Reserve President Raphael Bostic is due to make remarks and participate in a moderated conversation at Georgia Fintech Academy at 6:30 pm ET.

Stocks In Focus

Shares of HP Inc. (HPQ) are moving sharply lower in pre-market trading after the PC and printer maker reported fiscal third quarter earnings that met analyst estimates but weaker than expected sales. HP also reduced its annual profit forecast.

Online pet supplies retailer Chewy (CHWY) is also likely to see significant weakness after reporting better than expected fiscal second quarter results but lowering its full-year guidance.

Shares of Snap (SNAP) may also come under pressure after the Snapchat parent lost two key advertising executives to streaming giant Netflix (NFLX).

On the other hand, shares of Designer Brands (DBI) may move to the upside after the footwear and accessories retailer reported fiscal second quarter results that exceeded estimates and raised its full-year forecast.