Pullback By Commodities Prices May Spark Rebound On Wall Street

The major U.S. index futures are currently pointing to a sharply higher open on Wednesday, with stocks likely to regain ground after closing lower for four consecutive sessions.

A pullback by commodities prices may contribute to initial strength on Wall Street, as the recent surge in prices has led to worries about even higher inflation.

Crude oil for April delivery is currently plunging $6.16 to $117.54 a barrel, while gold for April delivery is tumbling $44.60 to $1,998.70 an ounce.

The markets may also benefit from bargain hunting, as traders look to pick up stocks at reduced levels following the recent weakness.

The tech-heavy Nasdaq ended yesterday’s trading at its lowest closing level in a year, while the Dow fell to an eleven-month closing low and the S&P 500 dropped to its lowest closing level since last June.

Following the sell-off seen on Monday, stocks went on a rollercoaster ride during the trading session on Tuesday. The major averages showed wild swings over the course of the session before closing in negative territory.

The major averages moved to the downside going into the close after a very volatile afternoon. The Dow fell 184.73 points or 0.6 percent to 32,632.64, the Nasdaq dipped 35.41 points or 0.3 percent to 12,795.55 and the S&P 500 slid 30.39 points or 0.7 percent to 4,170.70.

Adding to the steep losses posted on Monday, the major averages once again ended the session at new multi-month closing lows.

The volatility on Wall Street came as crude oil prices continued to skyrocket as President Joe Biden officially announced a U.S. ban on the import of Russian oil, liquefied natural gas, and coal in response to Russia’s unprovoked invasion of Ukraine.

Crude for April delivery gave back ground after reaching a high of $129.44 a barrel but still spiked $4.30 to $123.70 a barrel.

“We’re banning all imports of Russian oil and gas and energy,” Biden said. “That means Russian oil will no longer be acceptable at U.S. ports, and the American people will deal another powerful blow to Putin’s war machine.”

Biden acknowledged many European countries would not be able to join the U.S. in the ban but said his administration would work with their partners to reduce their dependence on Russian energy.

Earlier in the day, the European Union’s executive arm the European Commission had pledged to reduce Russian gas imports by two-thirds by the end of this year.

Gas stations are raising prices along with the spike in oil futures, as AAA said the average price for a gallon of gas has reached a record high of $4.173.

The national average gas price is up by nearly $0.11 a gallon from just yesterday and up more than $0.55 a gallon from a week ago.

The higher gas prices are likely to weigh on consumer spending in other areas, potentially leading to an economic slowdown even as the Federal Reserve prepares to begin raising interest rates.

Steel stocks showed a substantial move to the downside amid worries about global economic growth, with the NYSE Arca Steel Index plunging by 2.8 percent.

Significant weakness was also visible among healthcare stocks, as reflected by the 2 percent slump by the Dow Jones U.S. Health Care Index.

Utilities, tobacco and natural gas stocks also moved to the downside on the day. The Dow Jones Utility Average gave back ground after ending the previous session at a record closing high.

On the other hand, airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 5.6 percent after ending the previous session at its lowest closing level in over a year.

Oil service stocks also saw continued strength, driving the Philadelphia Oil Service Index up by 3.3 percent to its best closing level in almost three years.

Commodity, Currency Markets

Crude oil futures are plunging $6.16 to $117.54 a barrel after surging $4.30 to $123.70 a barrel a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,998.70, down $44.60 compared to the previous session’s close of $2,043.30. On Tuesday, gold soared $47.40.

On the currency front, the U.S. dollar is trading at 115.79 yen compared to the 115.67 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0997 compared to yesterday’s $1.0899.

Asia

Asian stocks ended mixed on Wednesday after U.S. President Joe Biden announced a ban on Russian oil and gas imports, prompting Russia to retaliate with a wider ban on commodity exports until the end of 2022. South Korean markets were closed for a presidential election.

Russia is the world’s third-largest crude oil producer and is a major exporter of aluminum, nickel, and palladium. Traders worry that curbs on commodity exports from Russia could have devastating effects on the global economy.

Chinese shares fell sharply after Norway’s $1.3 trillion sovereign wealth fund said it would sell off its stake in China’s Li Ning over suspicions of human rights violations in Xinjiang. The benchmark Shanghai Composite Index dropped 37.14 points, or 1.1 percent, to 3,256.39, while Hong Kong’s Hang Seng Index slid 0.7 percent to settle at 20,627.71.

In economic news, overall consumer prices in China were up an annual 0.9 percent in February, the National Bureau of Statistics said, in line with expectations and unchanged from the January reading.

On a monthly basis, inflation jumped 0.6 percent, topping forecasts for a gain of 0.3 percent and up from 0.4 percent a month earlier.

The bureau also said that producer prices advanced 8.8 percent year-on-year in February, exceeding expectations for 8.7 percent but down from 9.1 percent in the previous month.

Japanese shares gave up early gains to end slightly lower, extending losses for the fourth straights session amid concerns about inflationary risks and a slowdown in the global economy. The Nikkei 225 Index slipped 73.42 points, or 0.3 percent, to 24,717.53, marking a 16-month low. The broader Topix ended marginally lower at 1,758.89.

Recruit Holdings, Tokyo Electric Power Company and Kikkoman lost 4-7 percent, while automaker Isuzu Motors jumped nearly 8 percent.

Japan’s gross domestic product expanded an annualized 4.6 percent year-on-year in the fourth quarter of 2021, the Cabinet Office said in a report. That was well shy of forecasts for a gain of 5.6 percent following the downwardly revised 2.8 percent contraction in the previous three months.

Australian markets rose sharply to snap three straight sessions of losses, led by gains in banks and technology stocks. The benchmark S&P/ASX 200 Index jumped 72.70 points, or 1 percent, to 7,053.00, marking its best day since February 16. The broader All Ordinaries Index ended up 78.90 points, or 1.1 percent, at 7,331.80.

The big four banks rose 1-2 percent as Reserve Bank of Australia Governor Philip Lowe said its plausible interest rates could rise in 2022. In the technology sector, Novonix and WiseTech Global surged 8.3 percent and 6.4 percent, respectively.

In economic news, consumer confidence in Australia took a hit in March, the latest survey from Westpac Bank revealed with an index score of 96.6 – down 4.2 percent from the February reading of 100.8. This is the weakest reading since September 2020.

Europe

European stocks have bounced back on Wednesday after suffering heavy losses over the past four sessions on worries around the Russia-Ukraine crisis.

Sentiment was helped after analysts said the U.S. and U.K. ban on Russian oil imports will be far less disruptive to global markets than a full international embargo.

In addition, Ukraine President Volodymyr Zelensky said he is no longer pressing for NATO membership for Ukraine, a delicate issue that was one of Russia’s stated reasons for invading its pro-Western neighbor.

While the U.K.’s FTSE 100 Index has surged by 1.7 percent, the French CAC 40 Index and the German DAX Index are soaring by 4.8 percent and 5.3 percent, respectively.

Banks have topped the gainers list, with Commerzbank, Deutsch Bank, BNP Paribas and UniCredit posting strong gains after a recent string of heavy losses.

British insurer Prudential has also jumped after it posted a 16 percent increase in operating profit last year, helped by strong new insurance sales.

Phoenix Group Holdings has also rallied. The company said it was talking to its asset management partners to understand how they are managing their Russia and Ukraine risks.

Consumer goods giant Unilever has also shown a notable move to the upside after suspending imports and exports out of Russia.

Polymetal International shares have soared. The precious metals miner said it continued to be unaffected by ongoing sanctions against Russia.

Apple suppliers such as ASML, ams and Infineon have also surged after Apple announced a new version of its low-cost iPhone SE that includes 5G connectivity, a new iPad Air and a faster chip for its desktop Mac computers.

French software major Dassault Systèmes SA has also advanced. The company said it has decided to suspend all new business in Russia and Belarus due to the ongoing Russian invasion in Ukraine.

Similarly, Alstom SA, a rolling stock maker, has spiked after saying it has decided to suspend all deliveries to Russia and suspend all future investments in the country.

Adidas has also shown a strong move to the upside after the German sportswear firm forecast strong growth for the year.

Logistics company Deutsche Post has also jumped after reporting a 65 percent increase in 2021 operating profit.

On the other hand, oil and gas explorer Tullow Oil has moved sharply lower after it refrained from upgrading cashflow expectations.

U.S. Economic Reports

The Labor Department is scheduled to release the results of its Job Openings and Labor Turnover Survey for January at 10 am ET. Job openings are expected to come in unchanged at 10.9 million.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended March 4th.

Crude oil inventories are expected to edged down by 0.8 million barrels after falling by 2.6 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 $34 billion worth of ten-year notes.

Stocks In Focus

Shares of Bumble (BMBL) are surging in pre-market trading after dating service operator reported better than expected fourth quarter earnings and provided upbeat guidance.

Apparel and accessories retailer Express (EXPR) is also likely to see initial strength after swinging to a fourth quarter profit on sales that exceeded analyst estimates.

Shares of Thor Industries (THO) may also move to the upside after the recreational vehicle maker reported fiscal second quarter results that beat expectations on both the top and bottom lines.

Meanwhile, shares of Stitch Fix (SFIX) are seeing substantial pre-market weakness after the clothing styling company reported better than expected fiscal second quarter revenues but provided disappointing guidance.