Profit Taking May Contribute To Initial Weakness On Wall Street

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

Traders may look to cash in on yesterday’s gains, which lifted the Nasdaq and the S&P 500 to new record closing highs. The S&P 500 closed above 5,500 for the first time ever.

Concerns about the outlook for the economy may also weigh on the markets after payroll processor ADP released a report showing private sector employment in the U.S. increased by slightly less than expected in the month of June.

ADP said private sector employment climbed by 150,000 jobs in June after rising by an upwardly revised 157,000 jobs in May.

Economists had expected private sector employment to increase by 160,000 jobs compared to the addition of 152,000 jobs originally reported for the previous month.

“Job growth has been solid, but not broad-based,” said ADP chief economist Nela Richardson. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month.”

With the more closely watched monthly jobs report looming, the Labor Department also released a report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended June 29th.

The report said initial jobless claims rose to 238,000, an increase of 4,000 from the previous week’s revised level of 234,000.

Economists had expected jobless claims to inch up to 235,000 from the 233,000 originally reported for the previous week.

After struggling for direction until a little past noon on Tuesday, stocks began climbing higher and continued to gain in strength to eventually end the day’s session a firm note.

Concerns about the outlook for interest rates rendered the mood cautious early on in the session, with investors digesting Federal Reserve Chair Jerome Powell’s remarks at the ECB Forum and the JOLTS report that showed a slight increase in job openings in the country.

Stocks moved higher after bond yields drifted down. The major averages all ended on a firm note, with the Nasdaq outperforming the Dow and S&P 500.

The Dow ended with a gain of 162.33 points or 0.4 percent at 39,331.85. The S&P 500 settled at 5,509.01, gaining 33.92 points or 0.6 percent, while the Nasdaq advanced 149.46 points or 0.8 percent, to 18,028.76.

Data from the Labor Department showed the number of job openings rose to 8.140 million in May, up 221,000 from a month earlier.

Redbook Research said the Redbook Index in the U.S. increased by 5.8 percent in the week ending June 29, compared to the same week in the previous year.

Investors also noted Fed Chair Jerome Powell’s speech at a central banking forum in Sintra, Portugal. Powell expressed satisfaction with the progress on inflation but said he wants to see more before being confident enough to start cutting interest rates.

“We want to be more confident that inflation is moving sustainably down toward 2 percent before we start the process of reducing or loosening policy,” he said.

Investors looked ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

The report, which is expected to show a slowdown in the pace of job growth in the month of June, could impact the outlook for interest rates.

On the political front, the U.S. Supreme Court’s ruling that former President Donald Trump is entitled to immunity from federal prosecution for official actions he took while in office has stoked speculation about the possibility of another Trump presidency.

Tesla Inc. shares soared more than 10 percent, after the company reported higher than expected sales in the April-June quarter. The electric vehicle maker said it sold 436,956 vehicles in the latest quarter, down 4.8 percent compared to the year-ago quarter. But the numbers were better than what analysts had forecast.

Commodity, Currency Markets

Crude oil futures are inching up $0.16 to $82.97 a barrel after falling $0.57 to $82.81 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,362.80, up $29.40 compared to the previous session’s close of $2,333.40. On Tuesday, gold slipped $5.50.

On the currency front, the U.S. dollar is trading at 161.80 yen compared to the 161.44 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0774 compared to yesterday’s $1.0745.

Asia

Asian stocks rose broadly on Wednesday as comments from Federal Reserve Chair Jerome Powell reinforced expectations that the Fed will cut interest rates this year.

Japanese markets led regional gains as the yen stayed near 38-year lows. The dollar’s retreat helped gold and oil prices push higher but the upside was capped ahead of the release of the U.S. jobs report and upcoming elections in France and the U.K.

China’s Shanghai Composite Index dipped 0.5 percent to 2,982.38 after a private survey showed services sector activity in the country cooled to the weakest in eight months in June.

Hong Kong’s Hang Seng Index jumped 1.2 percent to 17,978.57, led by technology stocks.

Japanese stocks rose for a fourth consecutive session as technology stocks followed their U.S. peers higher.

The Nikkei 225 Index surged 1.3 percent to 40,580.76, while the broader Topix Index settled 0.5 percent higher at 2,872.18.

Shin-Etsu Chemical, Advantest and Tokyo Electron rallied 2-3 percent, while Screen Holdings soared 6.8 percent.

The USD/JPY pair reached a fresh 38-year high of 161.91 after the Jibun Bank Japan Services PMI was revised downward to 49.4 in June.

Seoul stocks closed a tad higher on hopes for a possible U.S. rate cut. The Kospi rose 0.5 percent to 2,794.01. Electric vehicle battery maker LG Energy Solution surged 4.2 percent and Samsung SDI added 4.3 percent.

Australian markets closed higher amid strength in mining and energy stocks, thanks to higher iron ore and crude oil prices on expectations of strong China demand.

The benchmark S&P/ASX 200 Index edged up 0.3 percent to 7,7,39.90, while the broader All Ordinaries Index gained 0.3 percent to close at 7,986.10.

Australian retail sales rose more than expected in May, adding to bets that the Reserve Bank could raise interest rates in August.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index inched up 0.1 percent to 11,790.92.

Europe

European stocks have advanced on Wednesday as traders react to dovish comments from Federal Reserve Chair Jerome Powell and look ahead to key elections in France and the U.K.

On Tuesday, Powell acknowledged progress in disinflation but added that officials need more confidence before cutting interest rates.

Over 200 candidates have withdrawn from France’s runoff election to block the far right, as Macron and a left wing coalition unite.

Marine Le Pen said that the National Rally would still try to form a government even if they failed to achieve an overall majority.

In the U.K., the Labour Party is set to grab 484 out of the total 650 seats in the Parliament, a pre-poll company Survation projected.

In economic releases, the Eurozone PMI Services index has been finalized at 52.8, slightly down from May’s 53.2.

Eurozone producer prices posted an annual fall of 4.2 percent in May after a 5.7 percent decrease in April.

While the French CAC 40 Index has shot up by 1.3 percent, the German DAX Index is up by 0.8 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.

In corporate news, Swedish construction company Skanska has moved to the upside after securing a contract worth $97 million.

Technology company Johnson Matthey has also rallied after launching a share buyback program.

French aerospace major Airbus has also jumped after it received a $24 billion order from Philippines’ budget airline operator Cebu Air Inc. for up to 152 A321neo aircraft.

Volkswagen has also risen after U.S. electric vehicle maker Rivian said it had no plans to produce vehicles with the German automaker.

On the other hand, Belgian postal company Bpost has slumped after its annual profit guidance missed expectations.

Retailer JD Sports has also moved notably lower after Barclays downgraded the stock to “underweight” from “equalweight”.

Topps Tiles has also tumbled after the tile retailer reported a sales drop in its third quarter.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by slightly less than expected in the month of June.

ADP said private sector employment climbed by 150,000 jobs in June after rising by an upwardly revised 157,000 jobs in May.

Economists had expected private sector employment to increase by 160,000 jobs compared to the addition of 152,000 jobs originally reported for the previous month.

“Job growth has been solid, but not broad-based,” said ADP chief economist Nela Richardson. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month.”

With the more closely watched monthly jobs report looming, the Labor Department released a report on Wednesday showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended June 29th.

The report said initial jobless claims rose to 238,000, an increase of 4,000 from the previous week’s revised level of 234,000.

Economists had expected jobless claims to inch up to 235,000 from the 233,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also crept up to 238,500, an increase of 2,250 from the previous week’s revised average of 236,250.

A separate report released by the Commerce Department on Wednesday showed the U.S. trade deficit widened less than expected in the month of May.

The Commerce Department said the trade deficit rose to $75.1 billion in May from a revised $74.5 billion in April.

Economists had expected the trade deficit to increase to $76.2 billion from the $74.6 billion originally reported for the previous month.

The wider trade deficit came as the value of imports fell by 0.3 percent to $336.7 billion, while the value of exports slid by 0.7 percent to $261.7 billion.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of June.

The ISM’s services PMI is expected to slip to 52.5 in June from 53.8 in May, but a reading above 50 would still indicate growth.

The Commerce Department is also due to release its report on factory orders in the month of May at 10 am ET. Factory orders are expected to rise by 0.2 percent in May after climbing by 0.7 percent in April.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended June 28th.

Crude oil inventories are expected to edge down by 0.2 million barrels after jumping by 3.6 million barrels in the previous week.

The Treasury Department is scheduled to announce the details of this month’s auction of three-year and ten-year notes and thirty-year bonds at 11 am ET.

At 2 pm ET, the Federal Reserve is scheduled to release the minutes of its latest monetary policy meeting, when the central bank once again left interest rates unchanged.