Bargain Hunting May Contribute To Initial Rebound On Wall Street

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

Traders may make another attempt at bargain hunting, picking up stocks at reduced levels following the steep losses posted on Tuesday.

The sharp decline in yesterday’s trading dragged the major averages down to their lowest closing levels in over three months amid ongoing concerns about the outlook for interest rates.

Positive sentiment may also be generated in reaction to a Commerce Department report unexpectedly showing a modest rebound in new orders for U.S. manufactured durable goods in the month of August.

The Commerce Department said durable goods orders crept up by 0.2 percent in August after plunging by a revised 5.6 percent in July.

The uptick surprised economists, who had expected durable goods orders to fall by 0.5 percent compared to the 5.2 percent nosedive that had been reported for the previous month.

Excluding a modest decrease in orders for transportation equipment, durable goods orders rose by 0.4 percent in August after inching up by a downwardly revised 0.1 percent in July.

Economists had expected ex-transportation orders to edge up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month.

Stocks moved sharply lower over the course of the trading day on Tuesday, more than offsetting the moderate rebound seen during Monday’s session. The major averages all showed significant moves to the downside, falling to their lowest closing levels in over three months.

The major averages climbed off their worst levels going into the close but still posted steep losses. The Dow slumped 388.00 points or 1.1 percent to 33,618.88, the Nasdaq plunged 207.71 points or 1.6 percent to 13,063.61 and the S&P 500 tumbled 63.91 points or 1.5 percent to 4,273.53.

The sell-off on Wall Street came amid ongoing concerns about the outlook for interest rates, with JPMorgan Chase (JPM) CEO Jamie Dimon warning in an interview with The Times of India that rates could go as high as 7 percent.

“I am not sure if the world is prepared for 7%,” Dimon said. “I ask people in business, ‘Are you prepared for something like 7%?’ The worst case is 7% with stagflation.”

“If they are going to have lower volumes and higher rates, there will be stress in the system,” he added. “We urge our clients to be prepared for that kind of stress.”

Minneapolis Federal Reserve President Neel Kashkari also wrote in an essay posted on Tuesday that there is a 40 percent chance the Federal Reserve will have to push rates “meaningfully higher” to combat stubborn services inflation.

Last week, the Fed left interest rates unchanged as widely expected but forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

Worries about the economic outlook also weighed on Wall Street following the release of separate reports showing a sharp pullback in new home sales and a significant deterioration in consumer confidence.

The Commerce Department released a report showing new home sales plummeted by 8.7 percent to an annual rate of 675,000 in August after soaring by 8.0 percent to an upwardly revised rate of 739,000 in July.

Economists had expected new home sales to decrease to an annual rate of 700,000 from the 714,000 originally reported for the previous month.

With the upward revision, the annual rate of new home sales in July was the highest since hitting 773,000 in February 2022.

A separate report released by the Conference Board showed its consumer confidence index tumbled to 103.0 in September from an upwardly revised 108.7 in August.

Economists had expected the consumer confidence index to edge down to 105.8 from the 106.1 originally reported for the previous month.

“Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, Chief Economist at The Conference Board. “Consumers also expressed concerns about the political situation and higher interest rates.”

Gold stocks moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 3.0 percent to its lowest closing level in over six months.

The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery falling $16.80 to $1,919.80 an ounce.

Significant weakness was also visible among interest rate-sensitive utilities stocks, resulting in a 2.9 percent nosedive by the Dow Jones Utility Average.

Retail stocks also saw considerable weakness on the day, as reflected by the 2.3 percent drop by the Dow Jones U.S. Retail Index. The index fell to a new three-month closing low.

Networking, transportation and commercial real estate stocks also showed notable moves to the downside amid broad based selling pressure on Wall Street.

Commodity, Currency Markets

Crude oil futures are surging $92.16 to $1.77 a barrel after climbing $0.71 to $90.39 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,908.80, down $11 compared to the previous session’s close of $1,919.80. On Tuesday, gold fell $16.80.

On the currency front, the U.S. dollar is trading at 149.18 yen compared to the 149.07 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0542 compared to yesterday’s $1.0572.

Asia

Asian stocks ended mixed on Wednesday as investors grappled with the impact of higher interest rates on economic growth.

Profits at Chinese industrial firms posted a surprise surge of 17.2 percent in August from a year earlier, pointing to signs of economic recovery in the world’s second-largest economy.

Gains in Australian inflation for August matched expectations, adding to the case for a pause in rate hikes next month.

The dollar index steadied near 10-month highs and the yen held weak at 149 per dollar after reports that the Japanese government is putting together a stimulus package to cushion inflation’s rise and boost growth.

Gold hit over a one-month low on interest rate worries, while oil prices rose on worries about tight supply.

China’s Shanghai Composite Index edged up 0.2 percent to 3,107.32 as signs that the economy is stabilizing lifted sentiment ahead of the long holiday weekend.

Hong Kong’s Hang Seng Index climbed 0.8 percent to 17,611.87. Mainland Chinese markets will be closed from September 29 to October 6.

China Evergrande Group plummeted 19 percent in Hong Kong following an unconfirmed report that its chairman was placed under police surveillance.

Shares of Country Garden Holdings, another debt-encumbered developer, fell 2.2 percent.

Japanese markets eked out modest gains after the government retained its economic view of a modest recovery in the world’s third-largest economy.

The Nikkei 225 Index recouped early losses to settle 0.2 percent higher at 32,371.90, while the broader Topix Index closed up 0.3 percent at 2,379.53.

Pharma stocks such as Chugai Pharmaceutical and Daiichi Sankyo surged around 4 percent each, while tech stocks such as Advantest, Tokyo Electron and Screen Holdings rose 1-2 percent. Heavyweight Fast Retailing declined 1.5 percent.

Seoul stocks ended little changed, with the Kospi recovering from an early slide to finish marginally higher at 2,465.07 ahead of a long holiday weekend.

South Korea’s stock, ETF, derivatives and commodity markets will be closed during the extended Chuseok holiday from Thursday through October 3.

Australian markets slipped after data showed inflation accelerated in August, driven by a surge in fuel prices.

The annual rate of consumer price inflation picked up to 5.2 percent from 4.9 percent, coming in line with expectations.

The benchmark S&P/ASX 200 Index dipped 0.1 percent to 7,030.30, while the broader All Ordinaries Index ended down 0.1 percent at 7,229.80.

Star Entertainment Group shares plummeted 16 percent as trading resumed after a discounted A$750 million ($479.63 million) equity raising.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.2 percent to 11,316.81.

Europe

After moving to the upside earlier in the session, European stocks have moved modestly lower over the course of the trading day on Wednesday.

Negative sentiment may have been generated in reaction to the results of a GfK institute survey showing that German consumer confidence is unlikely to recover in 2023 amid persistently high inflation.

The forward-looking consumer climate index fell to -26.5 in October, from a revised lower -25.6 the prior month.

While the U.K.’s FTSE 100 Index has dipped by 0.2 percent, the German DAX Index and the French CAC 40 Index are both down by 0.1 percent.

Netherlands’ largest insurer NN Group has moved sharply lower. The company said that there could be “substantial” financial consequences for the company after an unfavorable court ruling.

Meanwhile, H&M Group shares have jumped. The Swedish retailer said it would buy back the company’s own B shares for 3 billion kronor starting September 27.

U.S. Economic Reports

A report released by the Commerce Department on Wednesday unexpectedly showed a modest rebound in new orders for U.S. manufactured durable goods in the month of August.

The Commerce Department said durable goods orders crept up by 0.2 percent in August after plunging by a revised 5.6 percent in July.

The uptick surprised economists, who had expected durable goods orders to fall by 0.5 percent compared to the 5.2 percent nosedive that had been reported for the previous month.

Excluding a modest decrease in orders for transportation equipment, durable goods orders rose by 0.4 percent in August after inching up by a downwardly revised 0.1 percent in July.

Economists had expected ex-transportation orders to edge up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month.

At 10 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended September 22nd.

Crude oil inventories are expected to edge down by 0.3 million barrels after falling by 2.1 million barrels in the previous week.

The Treasury Department is due to announce the results of this month’s auction of $49 billion worth of five-year notes at 1 pm ET.

Stocks In Focus

Shares of ChargePoint (CHPT) are seeing significant pre-market strength after UBS initiated coverage of the electric vehicle charging station operator’s stock with a Buy rating.

Toy maker Mattel (MAT) may also move to the upside after Morgan Stanley initiated coverage of the company’s stock with an Overweight rating.

On the other hand, shares of Costco (COST) are seeing pre-market weakness even though the retailer reported fiscal fourth quarter results that exceeded analyst estimates.