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 regain ground after ending the previous session sharply lower.

The upward momentum on Wall Street comes as the price of crude oil continues to surge, jumping to its highest levels in eleven years.

Energy stocks are likely to benefit from the spike in oil prices, which comes amid the ongoing war in Ukraine and OPEC’s decision to stick with plans for a modest increase in output.

The futures have given back some ground following the release of remarks from Federal Reserve Chair Jerome Powell, who is due to testify before the House Financial Services Committee later this morning.

In prepared remarks, Powell said the Fed still believes it will be appropriate to raise interest rates later this month, citing inflation well above 2 percent and a strong labor market.

The likely increase in interest rates comes even though Powell acknowledged that the Russia-Ukraine conflict has introduced significant uncertainty for the U.S. economic outlook.

“Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways,” Powell said. “We will need to be nimble in responding to incoming data and the evolving outlook.”

U.S. stocks reeled under sustained selling pressure and ended firmly in negative territory on Tuesday amid rising concerns about growth due to the ongoing Russia-Ukraine war and a raft of sanctions imposed on Russia by the U.S. and Western allies.

The market stayed weak throughout the session and the major averages all ended with sharp losses. The Dow ended down by 597.65 points or 1.7 percent at 33,294.95. The S&P 500 drifted down 67.68 points or 1.6 percent to 4,306.26 and the Nasdaq finished with a loss of 218.94 points or 1.6 percent.

According to reports, Russian rockets have hit the center of the Ukrainian city of Kharkiv, and a long line of tanks was heading toward Kyiv.

The first round of talks between Russia and Ukraine ended without a breakthrough. Ukrainian President Volodymyr Zelenskyy said that a second round of talks aimed at ending Russia’s attack on Ukraine will take place soon.

Financial stocks tumbled, weighed down by concerns the sanctions imposed on Russia might significantly hurt the sector. American Express plunged 8.5 percent, while JP Morgan and Goldman Sachs both shed about 3.7 percent. Wells Fargo and Bank of America shares also closed sharply lower.

Boeing ended nearly 5 percent down. Nike, Visa, Honeywell International, Cisco Systems, McDonalds and Caterpillar declined 2 to 4 percent. Microsoft, Apple, IBM, Intel and Procter & Gamble also ended notably lower.

Chevron rallied nearly 4 percent. Home Depot shares gained about 1.6 percent. APA Corporation and Occidental Petroleum Corporation were among the other impressive gainers.

On the economic front, the IHS Markit US Manufacturing PMI was revised lower to 57.3 in February of 2022, from a preliminary estimate of 57.5 but above the previous month’s final reading of 55.5.

According to a report from the Institute for Supply Management, the ISM Manufacturing PMI for the U.S. rose for a second straight month to 58.6 in February from 57.6 in January and compared to market forecasts of 58.

Commodity, Currency Markets

Crude oil futures are surging $8.10 to $111.51 a barrel after soaring $7.69 to $103.41 a barrel a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,932.10, down $11.70 compared to the previous session’s close of $1,943.80. On Tuesday, gold spiked $43.10.

On the currency front, the U.S. dollar is trading at 115.41 yen compared to the 114.92 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1095 compared to yesterday’s $1.1125.

Asia

Asian stocks fell broadly on Wednesday as nervous investors shifted money into bonds amid renewed concerns about Russia’s escalating war on Ukraine. Traders worry the Ukraine tensions may push up commodity prices and halt the global economic recovery.

Meanwhile, in his first State of the Union address, U.S. president Joe Biden said that Russian president Vladimir Putin “badly miscalculated” with his invasion of Ukraine.

Chinese shares ended a tad lower, with new-energy vehicle makers leading losses. The benchmark Shanghai Composite Index dipped 4.64 points, or 0.1 percent, to 3,484.19, while Hong Kong’s Hang Seng Index plunged 1.8 percent to close at 22,343.92.

Japanese shares tumbled, with electrical machinery and transport stocks leading losses amid increasing risks of a global recession. The Nikkei 225 Index fell 451.69 points, or 1.7 percent, to 26,393.03, while the broader Topix closed 2 percent lower at 1,859.94.

Commodity-related stocks bucked the weak trend, with DOWA Holdings, Inpex and Pacific Metals climbing 6-13 percent.

Australian markets ended a choppy session slightly higher, led by gains by commodity-related stocks. The benchmark S&P/ASX 200 Index rose 20.20 points, or 0.3 percent, to 7,116.70, while the broader All Ordinaries Index ended up 21 points, or 0.3 percent, at 7,406.30.

Whitehaven Coal, Santos and Woodside Petroleum all jumped around 6 percent as Brent prices climbed above $110 a barrel. Miners BHP, Rio Tinto and Fortescue Metals Group surged 4-5 percent following a rise in iron ore prices. Core Lithium soared 15.2 percent after announcing a supply deal with Tesla.

Australia’s GDP grew 3.4 in the three months to December, data from the Australian Bureau of Statistics showed earlier in the day. Economists had forecast a 3.5 percent rise.

Seoul stocks ended up for the third straight session despite continued military tensions in Ukraine and the release of mixed economic readings. The Kospi inched up 4.34 points, or 0.2 percent, to close 2,703.52 after choppy trading.

Chipmaker SK Hynix gained 1.2 percent, while top carmaker Hyundai Motor declined 2.6 percent.

Europe

European stocks have recovered from an early slide to turn higher on Wednesday after two days of losses. U.K. stocks have outperformed as oil extends its relentless rally above $110 a barrel for the first time since mid-2014 on supply disruption fears.

The U.K.’s FTSE 100 Index is up by 0.6 percent and the French CAC 40 Index is up by 0.4 percent, although the German DAX Index has bucked the uptrend and edged down by 0.2 percent.

BP plc and Shell have shown significant moves to the upside ahead of an OPEC meeting today to discuss production plans.

Miners Anglo American, Antofagasta and Glencore have also rallied as prices of metals including nickel and aluminum rose following sanctions against Russia over its invasion of Ukraine.

Insurer Hiscox has also moved sharply higher after it swung to a full-year pre-tax profit for 2021 and issued a positive outlook.

Housebuilder Persimmon has also surged after it posted a 23 percent increase in annual profit. Just Eat Takeaway has also jumped after its annual revenues jumped by more than a third.

Finnish mobile game maker Next Games Oyj has soared after Netflix, Inc. entered into a combination agreement to acquire the company.

Meanwhile, Sweden’s Ericsson has plummeted after it emerged that disclosures it made to the U.S. Department of Justice about an internal investigation into conduct in Iraq were insufficient.

French pharma group Biomerieux has also mvoed sharply lower after providing disappointing guidance for the year.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing U.S. private sector employment jumped by much more than expected in the month of February.

ADP said private sector employment surged by 475,000 jobs in February compared to economist estimates for an increase of 388,000 jobs.

The report also showed a substantial revision to the January data, with the revised data showing employment spiked by 509,000 jobs compared to the previously reported loss of 301,000 jobs.

At 9 am ET, Chicago Federal Reserve President Charles Evans is due to speak on current economic conditions and monetary policy before a hybrid Lake Forest-Lake Bluff Rotary Club 2022 Economic Update event.

St. Louis Federal Reserve President James Bullard is scheduled to give a presentation and participate in a moderated conversation on the U.S. economy and monetary policy before a virtual event hosted by Greater St. Louis Inc. at 9:30 am ET.

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

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 25th at 10:30 am ET.

Crude oil inventories are expected to decrease by 2.7 million barrels after jumping by 4.5 million barrels in the previous week.

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.