U.S. Stocks May Give Back Ground In Early Trading

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to give back ground after moving notably higher in the previous session.

Traders may look to cash in on some of yesterday’s gains, which came amid a positive reaction to comments by Federal Reserve Chair Jerome Powell.

Powell acknowledged recent indications of easing inflation but noted that the disinflationary process has a long way to go and cautioned further interest rate hikes could be needed.

Overall trading activity may be somewhat subdued, however, with a relatively light economic calendar keeping some traders on the sidelines.

Reports on initial jobless claims and consumer sentiment are likely to attract attention in the coming days, with the consumer sentiment report including readings on inflation expectations.

Despite staying weak until noon and suffering a setback after a subsequent recovery, U.S. stocks closed on a buoyant note on Tuesday thanks to strong buying at several counters.

The major averages all ended with impressive gains. The Dow ended higher by 265.67 points or 0.8 percent at 34,156.69. The S&P 500 closed up 52.92 points or 1.3 percent at 4,164.00, and the Nasdaq surged 226.34 points or 1.9 percent to 12,113.79.

A positive reaction to Federal Reserve Chair Jerome Powell’s remarks at the Economic Club of Washington lifted the market.

In a Q&A session at the Economic Club of Washington, Powell told Carlyle Group co-founder David Rubenstein that he expects 2023 to be a year of “significant declines in inflation.”

Powell said inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets expect if the economic data doesn’t cooperate.

“The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” Powell said. “But it has a long way to go. These are the very early stages.”

Microsoft shares gained nearly 4 percent. Boeing surged 3.8 percent, and Chevron climbed 2.6 percent.

Walt Disney, Merck, Travelers Companies, Apple, Intel, Salesforce.com, JP Morgan Chase, American Express, Goldman Sachs and Walgreens Boots Alliance also posted impressive gains.

Hertz climbed 7.5 percent, and DuPont shares surged 7.8 percent on stronger than expected results.

Verizon, Home Depot, P&G and Caterpillar ended weak. Chegg plunged more than 17 percent after the company came out disappointing guidance.

In economic news, data showed U.S. trade deficit widened to $67.4 billion in December 2022 from a downwardly revised $61.0 billion in November.

Commodity, Currency Markets

Crude oil futures are climbing $0.82 to $77.96 a barrel after soaring $3.03 to $77.14 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,886.50, up $1.70 compared to the previous session’s close of $1,884.80. On Tuesday, gold rose $5.30.

On the currency front, the U.S. dollar is trading at 131.23 yen compared to the 131.07 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0728 compared to yesterday’s $1.0726.

Asia

Asian stocks ended mixed on Wednesday amid signs of rising tensions between Washington and Beijing in recent days.

U.S. Senate Democratic leader Chuck Schumer described the state of bilateral relations as “tense,” adding the Biden administration is looking at other actions it can take after shooting down what it called a Chinese surveillance balloon over the weekend.

In addition, it was reported that China has declined a U.S. request for a phone call between defense chiefs.

The dollar wobbled after Fed Chair Jerome Powell said that disinflation “has begun” but additional rate increases will be needed. Gold held steady in Asian trading, while oil prices slipped after two days of gains.

China’s Shanghai Composite Index fell 0.5 percent to 3,232.11, while Hong Kong’s Hang Seng Index ended marginally lower at 21,283.52.

Food delivery giant Meituan slumped 6.4 percent on reports that a rival Bytedance unit is considering expanding services in China.

Japanese stocks ended a tad lower as the yen steadied after rallying more than 1 percent in the previous session.

The Nikkei 225 Index shed 0.3 percent to close at 27,606.46 following weak earnings reports from Softbank Group, Nintendo and Sharp Electronics. Shares of the companies plunged 5-13 percent. The broader Topix ended marginally higher at 1,983.97.

Japan’s current account surplus nearly halved in 2022 from last year to hit its lowest level in eight years, data showed earlier today.

Seoul stocks advanced, with the Kospi climbing 1.3 percent to 2,483.64 on foreign buying. SK Hynix topped the gainers list to close 4.5 percent higher, while Korea Electric Power, Hyundai Motor and Samsung Electronics gained 1-2 percent.

Australian markets eked out modest gains, led by financials. The benchmark S&P/ASX 200 Index rose 0.4 percent to 7,530.10, while the broader All Ordinaries Index closed 0.4 percent higher at 7,740.50.

Suncorp jumped 4.6 percent after the general insurer reported strong first-half results, boosted by higher insurance pricing. Likewise, investment bank Macquarie Group rallied 2.6 percent after reporting bumper third-quarter results.

Miner Fortescue Metals Group added 2 percent after signing a Mining Convention for the Belinga iron ore project in Gabon.

Europe

European stocks are mostly higher on Wednesday after Federal Reserve Chair Jerome Powell struck a less hawkish tone than feared in a question-and-answer session at the Economic Club of Washington, D.C. Powell said that the disinflationary process has begun but it has a long way to go.

While the French CAC 40 Index has risen by 0.5 percent, the U.K.’s FTSE 100 Index is up by 0.7 percent and the German DAX Index is up by 0.8 percent.

Dutch lender ABN AMRO has shown a substantial move to the upside on share buyback news.

Housebuilder Barratt Developments has also moved notably higher after raising its home completion guidance.

Transport operator FirstGroup has also soared after it agreed to buy Ensign Bus Company Ltd. for an undisclosed sum.

German utility E. ON has also advanced after saying it likely exceeded its own profit outlook in 2022.

Meanwhile, TotalEnergies SE, a French energy and petroleum firm, has fallen after reporting a decline in earnings for the fourth quarter.

Societe Generale shares have also dropped. The lender reported that its fourth-quarter Group net income fell 35.1 percent to 1.16 billion euros from last year’s 1.79 billion euros.

Smurfit Kappahas has also tumbled. The British packaging giant reported a rise in profit in 2022, but box volumes were down around 2 percent against a strong prior year.

U.S. Economic Reports

New York Federal Reserve President John Williams is due to participate in a moderated discussion before the Wall Street Journal CFO Network Summit at 9:20 am ET.

At 9:30 am ET, Federal Reserve Board Governor Lisa Cook is scheduled to participate in a conversation before the Joint Center for Political and Economic Studies: Voice at the Table Policy Forum.

The Commerce Department is due to release its report on wholesale inventories in the month of December at 10 am ET. Wholesale inventories are expected to inch up by 0.1 percent.

Also at 10 am ET, Atlanta Federal Reserve President Raphael Bostic and Federal Reserve Board Vice Chair for Supervision Michael Barr are scheduled to participate in an Economic Mobility student conversation hosted by Tougaloo College.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 3rd at 10:30 am ET.

Crude oil inventories are expected to increase by 2.5 million barrels after climbing by 4.1 million barrels in the previous week.

At 12:30 pm ET, Minneapolis Federal Reserve President Neel Kashkari is due to answer questions in a town-hall style hybrid Boston Economic Club luncheon.

The Treasury Department is scheduled to announce the results of this month’s auction of $35 billion worth of ten-year notes at 1 pm ET.

At 1:45 pm ET, Federal Reserve Board Governor Christopher Waller is due to speak on the economic outlook before the 2023 Arkansas State University Agribusiness Conference.

Stocks In Focus

Shares of Uber Technologies (UBER) are moving sharply higher in pre-market trading after the ride-hailing company reported better than expected fourth quarter revenues and provided upbeat guidance.

Healthcare company CVS Health (CVS) is also likely to see initial strength after reporting fourth quarter earnings that exceeded estimates and announcing an agreement to acquire Oak Street Health (OSH) for approximately $10.6 billion.

On the other hand, shares of Chipotle Mexican Grill (CMG) may come under pressure after the restaurant chain reported weaker than expected fourth quarter results.