Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to see initial strength following the lackluster performance seen in the previous session.

Traders may once again look to pick up stocks at relatively reduced levels following recent weakness in the markets.

While the Dow managed to snap a six-day losing streak on Tuesday, the Nasdaq and the S&P 500 closed lower for the third straight session, falling to their lowest closing levels in almost two months.

However, recent bargain hunting efforts have been thwarted by ongoing concerns the Federal Reserve will hold off on cutting interest rates until later in the year.

A lack of major U.S. economic data may also keep some traders on the sidelines, although the Fed’s Beige Book may attract some attention later in the day.

Stocks showed a lack of direction over the course of the trading day on Tuesday, as traders took a breather following the sell-off seen over the two previous sessions. The major averages bounced back and forth across the unchanged line before eventually closing narrowly mixed.

While the Dow rose 63.86 points or 0.2 percent to 37,798.97, snapping a six-session losing streak, the Nasdaq edged down 19.77 points or 0.1 percent to 15,865.25 and the S&P 500 slipped 10.41 points or 0.2 percent to 5,051.41.

The modest gain by the Dow came amid a surge by shares of UnitedHealth (UNH), with the health insurance giant spiking by 5.2 percent.

UnitedHealth rallied after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, a 2.1 percent slump by shares of Johnson & Johnson (JNJ) limited the upside for the blue chip index even though the healthcare giant reported first quarter earnings that beat expectations.

The lack of direction shown by the broader markets came as traders weighed the idea of picking up stocks at relatively reduced levels against concerns about the outlook for interest rates.

The yield on the benchmark ten-year note reached its highest intraday levels in almost six months after the Federal Reserve released a report showing a continued increase in U.S. industrial production in the month of March.

The Fed said industrial production climbed by 0.4 percent in March, matching the upwardly revised advance in February as well as economist estimates.

Adding to the rate worries, Fed Chair Jerome Powell indicated in afternoon remarks that rates are likely to remain higher for longer amid a “lack of progress” toward reaching the central bank’s inflation goal.

“Recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2 percent inflation goal,” Powell said during a moderated discussion with Bank of Canada Governor Tiff Macklem.

Fed officials, including Powell, have repeatedly stated they need “greater confidence” inflation is slowing before they consider cutting interest rates.

“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said. “That said, we think policy is well positioned to handle the risks that we face.”

Banking stocks considerable weakness on the day, with the KBW Bank Index falling by 1.6 percent to its lowest closing level in well over a month.

Bank of America (BAC) helped lead the sector lower, tumbling by 3.5 percent after reporting first quarter earnings that beat analyst estimates but decreased year-over-year.

Interest rate-sensitive utilities, telecom, housing and commercial real estate stocks also showed significant moves to the downside.

Gold, airline and oil service stocks also saw notable weakness, while strength was visible among computer hardware and semiconductor stocks.

Commodity, Currency Markets

Crude oil futures are falling $0.64 to $84.72 a barrel after edging down $0.05 to $85.36 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,400.60, down $7.20 compared to the previous session’s close of $2,407.80. On Tuesday, gold jumped $24.80.

On the currency front, the U.S. dollar is trading at 154.64 yen compared to the 154.72 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0633 compared to yesterday’s $1.0619.

Asia

Asian stocks ended mixed on Wednesday, with mainland Chinese stocks posting strong gains after GDP data for the first quarter beat expectations.

Japanese markets led losses to end lower for a third straight day due to concerns over rising bond yields and heightened tensions in the Middle East.

Uncertainty around rate cuts grew after Fed Chair Jerome Powell and Vice Chair Philip N. Jefferson indicated rates are likely to remain higher for longer.

Meanwhile, media reports suggested that Israel’s response to Tehran could come “as soon as Monday.”

The dollar held steady in Asian trading, keeping the yen near 34-year lows, as traders recalibrated their rate cut expectations to September from June.

Gold retained its allure as a safe haven asset, trading above $2,380 per ounce. Oil prices slipped around half a percent on demand concerns as industry data showed U.S. crude stockpiles jumped more than expected last week.

China’s Shanghai Composite Index soared 2.1 percent to 3,071.38 as the country’s top securities regulator said there won’t be a surge in de-listings as a result of new stock exchange rules. Hong Kong’s Hang Seng Index finished marginally higher at 16,251.84.

Japanese markets fell for a third straight session due to uncertainty around the situation in the Middle East. Investors ignored data showed that Japanese exports grew more than expected in March.

The Nikkei 225 Index slumped 1.3 percent to 37,961.80, marking its lowest closing level since February 14. The broader Topix Index settled 1.3 percent lower at 2,663.15.

Chip-testing equipment maker Advantest plunged 4.5 percent ahead of its earnings results due next week. Chemical firm Resonac Holdings surged 12 percent after raising its revenue forecast for 2024.

Seoul stocks fell sharply despite warnings from officials against extreme volatility in the won. The Kospi dropped 1.0 percent to 2,584.18.

Australian markets ended marginally lower after Rio Tinto reported a 5 percent decrease in its first-quarter iron ore shipments, missing estimates. Shares of the mining giant ended little changed, while peer BHP gave up 1.2 percent ahead of its quarterly production figures due on Thursday.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index rose 0.6 percent to 11,875.35 after data showed headline inflation slowed to its weakest in almost three years.

Europe

European stocks are trading higher on Wednesday after falling sharply the previous day on concerns about escalating geopolitical tensions and uncertainty about the outlook for U.S. interest rates.

In economic news, data showed U.K. consumer price inflation slowed to 3.2 percent in March from 3.4 percent in February, making it likely the Bank of England will lower its key interest rate later this year.

Final data from Eurostat revealed that inflation in the 20 nations sharing the euro currency slowed across the board last month, raising expectations for an ECB rate cut in June.

Euro zone inflation slowed to 2.4 percent from 2.6 percent in February, matching the preliminary estimate released earlier this month.

While the French CAC 40 Index has jumped by 1.4 percent, the U.K.’s FTSE 100 Index and the German DAX Index are up by 0.7 percent and 0.6 percent, respectively.

In corporate news, Swedish commercial vehicle major AB Volvo has jumped after its first quarter adjusted operating profit beat forecasts.

Mining giants Antofagasta, Glencore, Rio Tinto and Anglo American have also rallied after iron ore futures climbed to their highest levels in more than five weeks.

Fast-fashion retailer ASOS has also moved to the upside after backing its guidance for the fiscal year and naming a new CFO.

Gambling group Entain has also surged after delivering first quarter online gaming revenue ahead of expectation.

Meanwhile, Dutch semiconductor equipment maker ASML Holding N.V. has slumped after reporting weaker-than-expected new bookings in its first-quarter results.

Food delivery company Just Eat Takeaway.com has also moved sharply lower after orders slipped in the first quarter.

Saga, a specialist in products and services for people over 50, has also declined after it posted a loss before tax of 129.0 million pounds for the year ended 31 January 2024.

U.S. Economic Reports

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 12th at 10:30 am ET.

Crude oil inventories are expected to increase by 1.6 million barrels after jumping by 5.8 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of this month’s auction of $13 billion worth of twenty-year bonds at 1 pm ET.

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

Cleveland Federal Reserve President Loretta Mester is scheduled to provide “An Update From the Federal Reserve” before the South Franklin Circle Dialogues Series at 5:30 pm ET.

At 7:15 pm ET, Federal Reserve Board Governor Michelle Bowman is due to participate in a fireside chat before the Institute for International Finance Global Outlook Forum.

Stocks In Focus

Shares of United Airlines (UAL) are moving sharply higher in pre-market trading after the airline reported a much narrower than expected first quarter loss.

Media company Omnicom (OMC) may also see initial strength after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Travelers (TRV) may come under pressure after the insurance giant reported weaker than expected first quarter results.

Transportation and logistics company J.B. Hunt (JBHT) is also seeing significant pre-market weakness after reporting first quarter results that missed analyst estimates.