Bargain Hunting May Lead To Early 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 after ending the previous session sharply lower.

Bargain hunting may contribute to an early rebound on Wall Street, as traders pick up stocks at relatively reduced levels following yesterday’s sell-off.

The tech-heavy Nasdaq saw its worst day since March on Tuesday, ending the session at its lowest closing level in over a month. The S&P 500 also tumbled to a two-month closing low.

A pullback by treasury yields may also generate some buying interest, with the ten-year yield moving modestly lower after ending the previous session at its highest closing level in three months.

Indications the Federal Reserve plans to begin scaling back its asset purchases in the near future has contributed to a recent spike in yields, which move opposite of bond prices.

Following the mixed performance seen on Monday, stocks moved sharply lower during trading on Tuesday. With the steep drops on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in one and two months, respectively.

The major averages all finished the day firmly in negative territory. The Dow tumbled 569.38 points or 1.6 percent to 34,299.99, the Nasdaq plunged 423.29 points or 2.8 percent to 14,546.68 and the S&P 500 slumped 90.48 points or 2 percent to 4,352.63.

Technology stocks helped lead the notable move to the downside on the day amid a continued advance by treasury yields.

Extending the upward move seen since last week’s announcement from the Federal Reserve, the yield on the benchmark ten-year note reached its highest levels in over three months.

The increase in treasury yields, which move opposite of bond prices, came as the Fed has signaled plans to begin scaling back its asset purchases in the near future.

Also contributing to the continued advance by yields, Federal Reserve Chair Jerome Powell warned members of the Senate Banking Committee about upside risks to inflation during testimony this morning.

In prepared remarks, Powell predicted inflation will remain elevated in the coming months before moderating.

“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors,” Powell said.

He added, “These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.”

Powell warned supply bottlenecks, hiring difficulties, and other constraints could prove to be greater and more enduring as the economic reopening continues, posing upside risks to inflation.

“If sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to ensure that inflation runs at levels that are consistent with our goal,” the Fed chief said.

Adding to the negative sentiment on Wall Street, the Conference Board released a report unexpectedly showing a continued deterioration in U.S. consumer confidence in the month of September.

The Conference Board said its consumer confidence index tumbled to 109.3 in September from an upwardly revised 115.2 in August.

The decrease surprised economists, who had expected the index to inch up to 114.8 from the 113.8 originally reported for the previous month.

Semiconductor stocks showed a substantial move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 3.8 percent to its lowest closing level in over a month.

Significant weakness was also visible among software stocks, as reflected by the 3.7 slump by the Dow Jones U.S. Software Index. The index ended the session at a two-month closing low.

Biotechnology stocks also saw considerable weakness, resulting in a 2.6 percent drop by the NYSE Arca Biotechnology Index.

Housing, steel and computer hardware stocks also showed notable moves to the downside, reflecting broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are slipping $0.30 to $74.99 a barrel after edging down $0.16 to $75.29 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,739.20, up $1.70 compared to the previous session’s close of $1,737.50. On Tuesday, gold slid $14.50.

On the currency front, the U.S. dollar is trading at 111.54 yen compared to the 111.50 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1644 compared to yesterday’s $1.1683.

Asia

Asian stocks ended broadly lower on Wednesday after tech stocks led a sell-off on Wall Street overnight on jitters over inflation and signs of slowing economic growth.

China’s Shanghai Composite Index tumbled 65.92 points, or 1.8 percent, to 3,536.29 as investors looked ahead to the release of the manufacturing, non-manufacturing and Caixin manufacturing purchasing managers’ indexes on Thursday.

Hong Kong’s Hang Seng Index rose 163.11 points, or 0.7 percent, to 24,663.50 as cash-strapped China Evergrande unveiled plans to sell its 19.93 percent stake in Shengjing Bank.

Japanese shares ended sharply lower on concerns about rising bond yields and the U.S. debt-ceiling row. The Nikkei 225 Index plunged 639.67 points, or 2.1 percent, to settle at 29,544.29, while the broader Topix closed 2.1 percent lower at 2,038.29.

Shortly after the closing bell, Fumio Kishida won the ruling party’s leadership vote, setting him on course to become the next prime minister.

High-tech shares faced strong selling pressure, with Screen Holdings, Tokyo Electron and Advantest plummeting 4-6 percent.

Japan Post plunged 5.7 percent amid reports that the government may kick off the process to sell about 950 billion yen ($8.5 billion) shares in the company as early as this week.

Australian markets hit a four-month low as the coronavirus situation in the country, particularly in New South Wales and Victoria, remained a concern.

The benchmark S&P/ASX 200 Index ended down 78.90 points, or 1.1 percent, at 7,196.70, while the broader All Ordinaries Index slumped 80.90 points, or 1.1 percent, to 7,500.20.

Tech stocks followed their U.S. peers lower, with Afterpay and Nearmap losing 4-5 percent.

Mineral Resources slumped 5.6 percent and Champion Iron gave up 3.7 percent as iron ore prices declined on the back of power outages in China and lingering concerns over Evergrande’s default.

Meanwhile, gold miners rose across the board, with Silver Lake Resources, Regis Resources and St Barbara climbing 5-7 percent.

Seoul stocks hit a one-month low as tech heavyweights succumbed to heavy selling pressure on concerns over the widening power crunch in China.

The Kospi ended down 37.65 points or 1.2 percent, at 3,060.27 after falling as much as 2.2 percent to its lowest since March 29 earlier in the session.

Samsung Electronics declined 2.4 percent and SK Hynix shed 3.4 percent after Micron Technology Inc., the largest U.S. maker of memory chips, forecast current-quarter revenue below analysts’ expectations and warned that shipments for its memory chips were set to dip in the near term.

Europe

European stocks have rebounded on Wednesday, with beaten-down tech stocks bouncing back after ASML Holding raised its financial targets.

In economic news, the European Commission said that its economic sentiment indicator, an aggregate measure of business and consumer confidence, rose to 117.8 in September from 117.6 in August, beating forecasts for a small decline.

Elsewhere, U.K. shop prices declined at a slower pace in September, data published by the British Retail Consortium revealed.

The shop price index dropped 0.5 percent on a yearly basis in September after easing 0.8 percent in August.

While the French CAC 40 Index has jumped by 1 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.9 percent.

Chip equipment maker ASML Holding NV have moved to the upside after hiking its financial forecasts. ASM International shares have also jumped.

Wm Morrison Supermarkets has also risen in London as the Takeover Panel established an auction procedure for the company.

Drug maker AstraZeneca has also advanced. The company said its newly acquired Alexion division would purchase the remaining equity in peer Caelum Biosciences in a deal that could be worth up to $500m.

Clothing retailer Next has also climbed. The company reported a swing to a pretax profit for the first half of fiscal 2022 and raised its full-year profit outlook for the fourth time in six months.

GEA Group shares have also rallied after the German food industry system supplier presented its “Mission 26” strategy in London as part of its Capital Markets Day.

Meanwhile, TotalEnergies, BP Plc and Royal Dutch Shell are moving lower as oil extends declines on industry data showing U.S. crude oil, gasoline and distillate inventories unexpectedly rose last week.

Royal Mail has shown a substantial move to the downside after UBS downgraded its rating on the company’s stock to Sell from Buy.

Air France KLM shares have also fallen in Paris. The airline is beginning to see some recovery in business travel on domestic routes but premium travel remains far below pre-crisis levels, CEO Anne Rigail said while speaking at a ceremony to mark the arrival of the first of 60 Airbus A220-300 jets.

U.S. Economic Reports

Philadelphia Federal Reserve President Patrick Harker is due to speak on the economic outlook before a virtual event hosted by the Risk Management Association, Philadelphia Chapter at 9 am ET.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of August. Pending home sales are expected to jump by 1.3 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The Energy Information Administration is due to release its report on oil inventories in the week ended September 24th at 10:30 am ET.

Crude oil inventories are expected to decrease by 2.3 million barrels after falling by 3.5 million barrels in the previous week.

At 11:45 am ET, Federal Reserve Chair Jerome Powell is scheduled to participate in a Policy Panel discussion before a virtual European Central Bank Forum on Central Banking.

San Francisco Federal Reserve President Mary Daly is due to give a virtual speech and participate in a moderated question-and-answer session before a UCLA Anderson Forecast event at 1 pm ET.

At 2 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to speak on “Inclusive Payments” and participate in a moderated question-and-answer session before a virtual Federal Reserve Bank of Chicago Payments Symposium.

New York Federal Reserve President John Williams is scheduled to moderate a Webinar discussion with Tala CEO Shivani Siroya at the Economic Club of New York at 5 pm ET.

Stocks In Focus

Shares of Lucid Motors (LCID) are moving sharply higher in pre-market trading after the electric vehicle company said deliveries of its first electric luxury sedans are expected to begin in late October.

Discount retailer Dollar Tree (DLTR) is also likely to see initial strength after increasing its share repurchase authorization by $1.05 billion to a total of $2.5 billion.

On the other hand, shares of Micron Technology (MU) are likely to come under pressure after the chipmaker reported better than expected fiscal fourth quarter results by provided disappointing guidance.

Paint company Sherwin-Williams (SHW) may also move to the downside after lowering its third quarter and full-year guidance due to raw-material shortages and higher input costs.