Tech Stocks May Lead Initial Upward Move 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 after ending yesterday’s choppy trading session little changed.

Technology stocks may lead an early upward move after Taiwan Semiconductor (TSM) reported its second quarter sales surged much more than expected.

Shares of Taiwan Semiconductor, which supplies chips for AI giants like Nvidia (NVDA) and Apple (AAPL), are jumping by 2.6 percent in pre-market trading.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of closely watched consumer price inflation data on Thursday.

Economists expect the annual rate of consumer price growth to slow to 3.1 percent in June from 3.3 percent in May, while the annual rate of core consumer price growth is expected to hold at 3.4 percent.

Stocks showed a lack of direction over the course of the trading session on Tuesday, with the major averages bouncing back and forth across the unchanged line before eventually ending the day narrowly mixed.

Despite the choppy trading, the Nasdaq and the S&P 500 once again reached new record closing highs. While the Dow edged down 52.82 points or 0.1 percent to 39,291.97, the Nasdaq inched up 25.55 points or 0.1 percent to 18,429.29 and the S&P 500 crept up 4.13 points or 0.1 percent to 5,576.98.

The lackluster performance on Wall Street came as traders digested Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee.

Powell told the committee more good data would strengthen the central bank’s confidence inflation is moving sustainably toward its 2 percent target and lead to a potential interest rate cut.

“The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent,” Powell said in prepared remarks.

“Incoming data for the first quarter of this year did not support such greater confidence,” he continued. “The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”

Powell’s remarks come as a report released by the Commerce Department late last month showed the annual rate of growth by core consumer prices, which exclude food and energy prices, slowed to 2.6 percent in May from 2.8 percent in April.

The Fed Chair also warned of the risk that leaving interest rates at an elevated level for too long could jeopardize economic growth.

“In light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” Powell said. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Banking stocks showed a significant move to the upside, however, with the KBW Bank Index climbing by 1.5 percent.

Notable strength was also visible among brokerage stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Broker/Dealer Index.

On the other hand, software stocks saw considerable weakness on the day, dragging the Dow Jones U.S. Software Index down by 1.6 percent.

Energy stocks also moved to the downside, as the price of crude oil moved lower for the third consecutive session.

Commodity, Currency Markets

Crude oil futures are inching up $0.06 to $81.47 a barrel after slumping $0.92 to $81.41 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,286.70, up $18.80 compared to the previous session’s close of $2,367.90. On Tuesday, gold rose $4.40.

On the currency front, the U.S. dollar is trading at 161.45 yen compared to the 161.33 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0823 compared to yesterday’s $1.0813.

Asia

Asian shares ended mixed on Wednesday, with Japanese markets reaching another record high, buoyed by a weaker yen and strong gains in technology shares as Nvidia supplier TSMC’s sales surged past expectations on AI infrastructure demand.

The dollar recovered from a three-week low and Treasury yields rose slightly as investors eyed the second round of testimony by Federal Reserve Chair Jerome Powell.

In testimony Tuesday before the Senate Banking Committee, Powell reiterated that officials seek more evidence inflation is slowing down.

His testimony comes ahead of key readings on U.S. consumer inflation and producer inflation later this week.

A majority of economists currently expect that the U.S. central bank will cut its main interest rate as soon as September.

Gold ticked higher on speculation of a Fed rate cut in September, while oil extended declines for a fourth day running on signs of easing supply concerns.

China’s Shanghai Composite Index fell 0.7 percent to 2,939.36 as data showed consumer inflation in the country slipped to 0.2 percent in June from 0.3 percent in May, signaling weak consumer demand.

Producer prices posted an annual decrease of 0.8 percent in June, as expected, but slower than the 1.4 percent slump in May.

Japan’s Nikkei 225 Index rose 0.6 percent to 41,831.99 after reaching a record high of 41,889.16 earlier in the day. The broader Topix Index settled 0.5 percent higher at 2,909.20.

Technology-related shares gained, with Tokyo Electron and SoftBank climbing around 1 percent.

Japan’s wholesale inflation accelerated in June as a weak yen raised import costs, data showed.

Seoul stocks ended on a flat note, with the Kospi finishing marginally higher at 2,867.99 after a choppy session. Hanwha Aerospace gained 1.8 percent after it signed a contract to supply Romania with K9 and K10 artillery systems.

Australian markets ended slightly lower, dragged down by mining stocks. The benchmark S&P/ASX 200 Index slipped 0.2 percent to 7,816.80, while the broader All Ordinaries Index eased 0.2 percent to close at 8,058.30.

BHP, Rio Tinto and Fortescue Metals Group all fell over 1 percent as iron ore prices declined on weak demand signals from China.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index jumped 0.80 percent to 11,943.33 as the Reserve Bank of New Zealand hinted at a dovish future stance after holding its Official Cash Rate (OCR) unchanged at 5.50 percent for an eighth consecutive meeting.

Europe

European stocks have moved mostly higher in cautious trading on Wednesday as investors eye the second round of testimony by Federal Reserve Chair Jerome Powell as well as key U.S. inflation readings for directional cues.

Ahead of key readings on U.S. consumer inflation and producer inflation later this week, Powell reiterated before the Senate Banking Committee on Tuesday that officials seek more evidence inflation is slowing down.

Currently, the French CAC 40 Index, the German DAX Index and the U.K.’s FTSE 100 Index are all up by 0.6 percent.

In corporate news, Evotec has surged as it announced a collaboration with Pfizer Inc. (PFE) to advance drug discovery efforts in France.

Spanish gas grid operator Enagas has also rallied after it agreed to sell its 30.2 percent stake in Tallgrass Energy to U.S. fund Blackstone for $1.1 billion.

Construction materials firm Travis Perkins has also shown a significant move to the upside after appointing a new chief executive.

On the other hand, German automaker BMW has fallen after reporting weak vehicle deliveries in its second quarter.

Volkswagen has also declined after a warning that it may close the Brussels site of its luxury brand Audi due to a sharp drop in demand for high-end electric cars.

Barratt Developments shares have also smped in London. Citing high mortgage rates and broader economic concerns, the housebuilder said it is targeting to deliver fewer homes in the year ahead.

Hostelworld Group, a social network powered Online Travel Agent focused on the hostelling category, has plunged despite reporting higher earnings in its first half and reiterating its fiscal 2024 adjusted EBITDA guidance.

U.S. Economic Reports

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

Also at 10 am ET, the Commerce Department is due to release its report on wholesale inventories in the month of May. Wholesale inventories are expected to increase by 0.6 percent.

The Energy Information Administration is due to release its report on oil inventories in the week ended July 5th at 10:30 am ET.

Crude oil inventories are expected to decrease by 3.0 million barrels after plunging by 12.2 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $39 billion worth of ten-year notes.

Chicago Federal Reserve President Austan Goolsbee and Federal Reserve Board Governor Michelle Bowman are due to give opening remarks before a Fed Listens event at 2:30 pm ET.

At 7:30 pm ET, Federal Reserve Board Governor Lisa Cook is scheduled to speak on “Global Inflation and Monetary Policy Challenges” at the 2024 Australian Conference of Economists.