U.S. Stocks May Move Back To The Upside In Early Trading

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside after moving notably lower over the two previous sessions.

The futures remained positive as the Federal Reserve released Fed Chair Jerome Powell’s prepared remarks before the House Financial Services Committee.

Powell will tell members of Congress that it will likely be appropriate for the central bank to begin lowering interest rates at “some point this year” but reiterate officials need “greater confidence” inflation is moving sustainably toward 2 percent.

The Fed Chief described the economic outlook as “uncertain” and said progress towards the Fed’s 2 percent inflation objective is “not assured.”

“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2 percent,” Powell said.

He added, “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

Powell said future interest rate decisions will be based on careful assessment of the incoming data, the evolving outlook, and the balance of risks.

Meanwhile, a report released by payroll processor ADP showed private sector employment in the U.S. increased by slightly less than expected in the month of February.

Following the modest pullback seen during Monday’s session, stocks showed a more substantial move to the downside during trading on Tuesday. The major averages all moved notably lower, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Nasdaq plunged 267.92 points or 1.7 percent to 15,939.59, the S&P 500 tumbled 52.30 points or 1.0 percent to 5,078.65 and the Dow slumped 404.64 points or 1.0 percent to 38,585.19.

The weakness on Wall Street came as traders continued to cash in on recent strength in the markets, which lifted the S&P 500 and the Nasdaq to record closing highs last Friday.

Uncertainty about the outlook for interest rates also weighed on the markets ahead of congressional testimony by Federal Reserve Chair Jerome Powell.

Powell is due to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.

The Fed chief is likely to reiterate recent comments stressing the central bank needs greater confidence inflation is slowing before cutting interest rates.

The next monetary policy meeting is scheduled for March 19-20, with the Fed widely expected to leave interest rates unchanged.

In U.S. economic news, a report released by the Institute for Supply Management showed U.S. service sector growth slowed by slightly more than expected in the month of February.

The ISM said its services PMI fell to 52.6 in February after climbing to 53.4 in January. While a reading above 50 still indicates growth, economists had expected the index to show a more modest decrease to 53.0.

The Commerce Department also released a report showing a steep drop in new orders for U.S. manufactured goods in the month of January.

Software stocks showed a substantial move to the downside on the day, resulting in a 3.4 percent nosedive by the Dow Jones U.S. Software Index down.

Among software stocks, GitLab (GTLB) plummeted by 21.0 percent after the company reported better than expected fourth quarter results but provided disappointing guidance.

Significant weakness was also visible among semiconductor stocks, as reflected by the 2.1 percent slump by the Philadelphia Semiconductor Index.

Commercial real estate, housing and transportation stocks also saw notable weakness, while banking stocks showed a strong move to the upside.

Commodity, Currency Markets

Crude oil futures are jumping $0.97 to $79.12 a barrel after falling $0.59 to $78.15 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,142.60, up $0.70 compared to the previous session’s close of $2,141.90. On Tuesday, gold climbed $15.60.

On the currency front, the U.S. dollar is trading at 149.60 yen compared to the 150.05 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0876 compared to yesterday’s $1.0857.

Asia

Asian stocks ended mixed on Wednesday, with Hong Kong markets leading regional gains on hopes of support measures from Beijing during its weeklong annual session of parliament.

The dollar held steady ahead of testimony from Federal Reserve Chair Jerome Powell later in the day and the European Central Bank’s interest rate decision on Thursday.

Gold was unchanged after hitting record highs on rising bets for a June U.S. interest rate cut. Oil edged up slightly in Asian trading after a two-session drop on Chinese demand concerns.

China’s Shanghai Composite Index dropped 0.3 percent to 3,039.93, while Hong Kong’s Hang Seng Index rallied 1.7 percent to 16,438.09 after China said it would strive to achieve self-sufficiency in technology.

Japanese markets recovered from an early slide to end on a flat note. The Nikkei 225 Index finished marginally lower at 40,090.78 as investors booked profits after recent strong gains. The broader Topix Index settled 0.4 percent higher at 2,730.67.

Seoul stocks fell as data showed consumer inflation in the country accelerated in February. The Kospi dipped 0.3 percent to 2,641.49, dragged down by chemical and technology stocks.

Australian markets ended slightly higher, led by banks. The benchmark S&P/ASX 200 Index ended a choppy session up 0.1 percent at 7,733.50, while the broader All Ordinaries Index finished marginally higher at 7,990.30.

Investors shrugged off the latest GDP figures showing that the economy barely expanded in the final three months of the year as a result of higher borrowing costs.

ANZ rose about 1 percent as the lender agreed to sell a 16.5 percent interest in Malaysian lender AMMB Holdings for about 2.10 billion ringgit ($443.69 million).

Commonwealth Bank of Australia, Westpac and NB all rose about 1 percent as traders priced for the first RBA rate cut in September.

Magellan Financial Group soared 7.9 percent after a February FUM update. Online luxury retailer Cettire, which is facing scrutiny over custom practices, plummeted 14.4 percent.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index rose 0.4 percent to 11,795.90.

Europe

European stocks have edged higher on Wednesday as traders react to U.K. Chancellor Jeremy Hunt delivery of his spring budget in the parliament.

Meanwhile, investors cheered data showing that Germany’s exports rebounded at a faster-than-expected pace in January.

Exports posted a monthly surge of 6.3 percent in January after tumbling 4.5 percent in the previous month. This was also far better than economists’ forecast for a 1.5 percent increase.

Imports advanced 3.6 percent on the month, in contrast to the 6.7 percent decrease in December.

Separately, survey results from S&P Global revealed that Germany’s construction sector shrank sharply in February, but the pace of decline slowed from the previous month.

Eurozone retail sales rose marginally in January on food and auto fuel turnover, official data revealed on Wednesday.

Retail sales inched up 0.1 percent in January, reversing a 0.6 percent decrease in December, Eurostat reported. The rate of growth matched economists’ expectations.

Fed Chair Jerome Powell is due to testify before the House Financial Services Committee later today and the Senate Banking Committee on Thursday.

Eurozone bond yields edged up heading into Thursday’s ECB meeting. With no change in interest rates expected, traders are likely to keep a close eye on growth and inflation forecasts.

While the U.K.’s FTSE 100 Index is up by 0.3 percent, the French CAC 40 Index is up by 0.1 percent and the German DAX Index is just above the unchanged line.

In corporate news, Ricardo, a sustainable energy company, has moved notably higher after narrowing its first-half loss.

Symrise AG, a maker of flavors and fragrances, has also shown a strong move to the upside after its 2023 core profit beat estimates.

Paperboard and packing producer DS Smith has also risen after it showcased a resilient Q3 with a positive outlook and strategic focus on pricing, efficiency, and sustainable solutions.

On the other hand, British life insurer Legal & General has tumbled 3.3 percent after posting flat operating profit for 2023.

Tullow Oil has also shown a significant move to the downside after its pretax profit slumped on lower oil prices and impairments.

DHL owner Deutsche Post has also moved sharply lower after a warning that earnings could remain relatively flat this year.

U.S. Economic Reports

A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by slightly less than expected in the month of February.

ADP said private sector employment rose by 140,000 jobs in February after climbing by an upwardly revised 111,000 jobs in January.

Economists had expected private sector employment to grow by 150,000 jobs compared to the addition of 107,000 jobs originally reported for the previous month.

“Job gains remain solid. Pay gains are trending lower but are still above inflation,” said ADP chief economist Nela Richardson. “In short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”

Federal Reserve Chair Jerome Powell is scheduled to deliver his semiannual monetary policy testimony before the House Financial Services Committee at 10 am ET.

Also at 10 am ET, the Labor Department is due to release its report on job openings in the month of January. Job openings are expected to dip to 8.9 million in January from 9.0 million in December.

The Commerce Department is also scheduled to release its report on wholesale inventories in the month of January at 10 am ET. Wholesale inventories are expected to edge down by 0.1 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 1st.

Crude oil inventories are expected to increase by 2.6 million barrels after jumping by 4.2 million barrels in the previous week.

San Francisco Federal Reserve President Mary Daly is due to speak before the 2024 National Interagency Community Reinvestment Conference at 12 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.

Minneapolis Federal Reserve President Neel Kashkari is due to participate in a Q&A session hosted before the Wall Street Journal CFO Network Summit at 4:15 pm ET.