Bargain Hunting May Contribute To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks likely to regain ground following the sell-off seen in the previous session.

Traders may look to pick up stocks at relatively reduced levels on the heels of the sell-off seen during trading on Tuesday.

The sharp decline, which partly reflected ongoing concerns about the outlook for interest rates, dragged the Dow and the S&P 500 down to their lowest closing levels in a month.

Nonetheless, overall trading may be somewhat subdued, as traders await the release of the minutes of the latest Federal Reserve meeting this afternoon.

The minutes may shed additional light on the outlook for interest rates amid worries the Fed will raise rates higher than currently anticipated.

Ahead of the minutes, CME Group’s FedWatch Tool is indicating a 79.0 percent chance the Fed will raise rates by 25 basis points next month and a 21.0 percent chance of a 50 basis point rate hike.

Following the mixed performance seen last Friday, stocks moved sharply lower over the course of the trading session on Tuesday. With the steep drop on the day, the Dow and the S&P 500 ended the session at their lowest closing levels in a month.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 697.10 points or 2.1 percent to 33,129.59, the Nasdaq plunged 294.97 points or 2.5 percent to 11,492.30 and the S&P 500 dove 81.75 points or 2 percent to 3,997.34.

The sell-off on Wall Street partly reflected ongoing concerns about the outlook for interest rates amid a sharp increase in treasury yields.

The benchmark ten-year yield more than offset the dip seen last Friday, reaching its highest closing level in over three months.

Recent economic data has led to worries the Federal Reserve may raise rates higher than currently anticipated and keep rates at an elevated level for an extended period.

On Wednesday, the Fed is scheduled to release the minutes of its latest monetary policy meeting, which could shed additional light on the outlook for interest rates.

Geopolitical concerns also weighed on the markets after Russian President Vladimir Putin said he is suspending Russia’s participation in a nuclear arms treaty with the U.S.

The announcement by Putin comes after U.S. President Joe Biden made a surprise visit to Ukraine’s capital Kyiv on Monday.

Home improvement retailer Home Depot (HD) led the Dow lower after reporting fourth quarter sales that missed analyst estimates and providing a downbeat forecast.

Housing stocks turned in some of the market’s worst performances on the day, dragging the Philadelphia Housing Sector Index down by 3.7 percent to its lowest closing level in almost a month.

The sell-off by housing stocks came following the release of a report from the National Association of Realtors unexpectedly showing a continued decrease in U.S. existing home sales in the month of January.

Substantial weakness also emerged among semiconductor stocks, resulting in a 3.3 percent plunge by the Philadelphia Semiconductor Index.

Airline stocks also saw considerable weakness on the day, as reflected by 3.3 percent nosedive by the NYSE Arca Airline Index. The index tumbled to its lowest closing level in well over a month.

Telecom, computer hardware and biotechnology stocks also showed notable moves to the downside amid broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are falling $0.51 to $75.85 a barrel after slipping $0.19 to $76.36 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,848.10, up $5.60 compared to the previous session’s close of $1,842.50. On Tuesday, gold dipped $7.70.

On the currency front, the U.S. dollar is trading at 134.57 yen compared to the 135.01 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0645 compared to yesterday’s $1.0648.

Asia

Asian stocks fell on Wednesday as investors fretted about the potential for further Federal Reserve tightening and the impact it has on global growth.

The dollar gained on rising yields and gold was unchanged, while oil steadied after a recent string of losses.

Chinese shares fell amid signs that Beijing wants to play a more active role in the Ukraine conflict.

The benchmark Shanghai Composite Index dropped 0.5 percent to 3,291.15, while Hong Kong’s Hang Seng Index slid 0.5 percent to settle at 20,423.84 as Financial Secretary Paul Chan presented budget proposals for the fiscal year starting in April 2023.

Japanese shares hit a one-month low on geopolitical tensions and U.S. rate hike worries. The Nikkei 225 Index tumbled 1.3 percent to 27,104.32, while the broader Topix ended 1.1 percent lower at 1,975.25.

Heavyweight Fast Retailing gave up 1.8 percent after fourth-quarter earnings and forecasts from mega-retailers like Walmart and Home Depot raised concerns about the strength of the U.S. consumer.

Seoul stocks plunged, with the Kospi average closing down 1.7 percent at 2,417.68 ahead of the release of the Federal Reserve’s latest minutes later in the day. LG Energy Solution, LG Chem and Celltrion lost 2-4 percent.

Australian markets hit a six-week low as investors reacted to softer-than-expected wages data. The benchmark S&P/ASX 200 Index slipped 0.3 percent to 7,314.50, while the broader All Ordinaries Index closed 0.4 percent lower at 7,517.

Domino’s Pizza shares plummeted nearly 24 percent after the pizza chain operator reported a decline in its first-half profit.

Origin Energy jumped 12.7 percent as a Brookfield-led consortium trimmed its offer for the power and gas giant by 1 percent after months of due diligence.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally lower at 11,794.22 after the country’s central bank raised its benchmark interest rate by a half-percentage point to 4.75 percent and maintained a forecast peak rate of 5.5 percent.

Europe

European stocks have fallen on Wednesday, as rising geopolitical tensions and lingering concerns about the Federal Reserve’s rate-hike path has dented demand for riskier assets.

The Federal Reserve is scheduled to release the minutes of its latest monetary policy meeting later today, potentially shedding additional light on the outlook for interest rates.

In economic news, the headline German IFO Business Climate Index improved to 91.1 in February from a revised reading of 90.1 in January. Separate data showed the French business climate improved slightly in February.

While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the French CAC 40 Index and the German DAX Index are down by 0.3 percent and 0.2 percent, respectively.

Lower metal prices are weighing on the mining sector, with Anglo American, Antofagasta and Glencore posting notable losses in London.

Rio Tinto has also shown a significant move to the downside after reporting a 38 percent drop in annual profit and slashing its dividend.

Lloyds Banking Group has also moved sharply lower after reporting flat annual profit for 2022.

Primary Health Properties has also fallen after reporting a drop in its profit before taxation for the year ended December 31, 2022.

Meanwhile, Stellantis NV has rallied after the automaker delivered better-than-expected annual profit and announced a new share buyback program for 2023.

Danone has also jumped after the world’s largest yoghurt maker delivered its fastest sales growth in more than a decade in 2022.

German healthcare firm Fresenius Medical Care has also soared after reporting an increase in revenue for the fourth quarter.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of this month’s auction of $43 billion worth of five-year notes at 1 pm ET.

At 2 pm ET, the Federal Reserve is due to release the minutes of its January 31st-February 1st monetary policy meeting.

New York Federal Reserve President John Williams is due to participate in a fireside chat on Taming Inflation before Credibility of Government Policies: Conference in Honor of Guillermo Calvo at 5:30 pm ET.

Stocks In Focus

Shares of Palo Alto Networks (PANW) are moving sharply higher in pre-market trading after the cybersecurity company reported better than expected fiscal second quarter results and provided upbeat guidance.

Furniture maker La-Z-Boy (LZB) is also likely to see initial strength after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Keysight Technologies (KEYS) may come under pressure after the electronics company reported better than expected fiscal first quarter results but provided disappointing guidance for the current quarter.