Recent Upward Trend May Resume On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside following the pullback seen in the previous session.

The markets may once again benefit from recent upward momentum, which has helped the major averages recover after tumbling to their lowest levels in over a year.

Positive sentiment may also be generated in reaction to news that Shanghai has formally ended its two-month citywide lockdown.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of the closely watched monthly jobs report on Friday.

Stocks closed lower on Wall Street on Tuesday, as concerns about soaring inflation and looming policy tightening by the Federal Reserve rendered the mood bearish.

The major averages all ended on a negative note despite recovering well from an early setback. The Dow, which plunged to 32,752.34 in early trading, ended the session with a loss of 222.84 points or 0.7 percent at 32,990.12.

The S&P 500 drifted down 26.09 points or 0.6 percent to 4,132.15, while the Nasdaq, which managed to spend some time in positive territory during the session, ended down 49.74 points or 0.41 percent at 12,081.39.

The Dow posted a small gain for the month of May, while the S&P 500 ended little changed and the Nasdaq shed about 2.1 percent.

In a speech at the Institute for Monetary and Financial Stability in Frankfurt, Germany, Federal Reserve governor Christopher Waller said that he favored 50 basis point rate hikes at every meeting until there is a substantial reduction in inflation.

In U.S. economic news, a report released by the Conference Board showed a modest decrease in U.S. consumer confidence in the month of May.

The Conference Board said its consumer confidence index dipped to 106.4 in May from an upwardly revised 108.6 in April. Economists had expected the consumer confidence index to drop to 104.0 from the 107.3 originally reported for the previous month.

According to a report released by MNI Indicators, Chicago-area business activity unexpectedly grew at a faster rate in the month of May.

The Chicago business barometer rose to 60.3 in the month, from 56.4 in April. The increase surprised economists, who had expected the business barometer to dip to 55.0.

Johnson & Johnson, Honeywell International, Boeing and 3M shed about 2 to 2.8 percent in the session.

Alphabet gained more than 1.5 percent, while Facebook, Microsoft and Apple ended with modest losses.

Merck, Coca-Cola, Cisco Systems, American Express, JP Morgan Chase, Visa, Caterpillar and McDonald’s ended notably lower.

Energy stocks shed ground after oil prices pared early gains and drifted lower on reports some OPEC members are in favor of suspending Russia’s participation in the oil-production deal.

Commodity, Currency Markets

Crude oil futures are jumping $1.30 to $115.97 a barrel after slipping $0.40 to $114.67 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,827.70, down $15 compared to the previous session’s close of $1,842.70. On Tuesday, gold fell $8.60.

On the currency front, the U.S. dollar is trading at 129.49 yen compared to the 128.67 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0719 compared to yesterday’s $1.0734.

Asia

Asian stocks ended mixed on Wednesday after a private survey showed Chinese factory activity shrank less sharply than expected in May.

The Caixin/Markit manufacturing PMI rose to 48.1 in May from a 26-month low of 46.0 in the previous month.

Manufacturing expansion slowed in Australia and Japan’s manufacturing activity grew at the weakest pace in three months, underlining investor worries over an economic slowdown.

A firmer dollar and higher Treasury yields weighed on gold prices, while oil prices rose over 1 percent in Asian trading on expectations of firmer fuel demand from China.

China’s Shanghai Composite Index slipped 0.1 percent to 3,182.16 as Shanghai formally ended its two-month citywide lockdown. Hong Kong’s Hang Seng Index ended 0.6 percent lower at 21,294.94.

With China committed to its COVID-Zero policy, there were fears that restrictions will be swiftly reimposed in the event of any further virus flare-ups.

The South Korean market was closed for a holiday. Japanese shares rose notably as automakers rallied after J.P. Morgan analysts forecast record profits this year on the back of price hikes and reductions in some production-related expenses.

Nissan Motor soared 7.8 percent, while Honda Motor surged 4.3 percent and Toyota Motor added 3.5 percent. Drug maker Daiichi Sankyo led losses to close 4.9 percent lower.

Australian markets eked out modest gains as investor cheered better-than-expected growth data and the easing of Covid-19 restrictions in China.

The benchmark S&P/ASX 200 Index rose 0.3 percent to 7,234, while the broader All Ordinaries index edged up 0.1 percent to 7,462.90.

The big banks rose between 0.9 percent and 2.3 percent on expectations of a larger 40 basis points rate hike by the RBA this month.

Lithium and rare earth miners declined after Goldman Sachs forecast a sharp correction in lithium prices over the next two years. IGO lost 11.8 percent, Liontown Resources slumped 19.1 percent and Pilbara Minerals plunged 22 percent.

Europe

European stocks are turning in a mixed performance on Wednesday as investors react to weak German retail sales and Eurozone manufacturing data.

Data from Destatis revealed that retail sales in Germany fell by 5.4 percent in April compared to the previous month, due to a record decrease in food sales.

S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) for the euro zone fell to 54.6 in May from April’s 55.5 due to supply shortages, price pressures and a drop in demand.

U.K. house prices grew 11.2 percent on a yearly basis in May following the 12.1 percent increase in April, data from the Nationwide Building Society showed earlier in the day.

Eurozone bond yields have extended their climb as investors factor in a 50 basis-point rate hike from the ECB in July.

While the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.4 percent, the U.K.’s FTSE 100 Index is marginally lower ahead of a long holiday weekend. London markets will remain closed on Thursday and Friday for Queen Elizabeth’s Platinum Jubilee.

Dr. Martens shares have soared after the British footwear brand reported record revenue in the 12 months to March 2022 and upped its outlook for the fiscal year 2023.

Tullow Oil has also moved to the upside. The oil & gas exploration firm has reached an agreement on the terms of a recommended all-share merger of equals with Capricorn Energy Plc.

Drug major Sanofi has also risen. The company said that the U.S. FDA has granted Breakthrough Therapy designation to efanesoctocog alfa (BIVV001) for the treatment of people with hemophilia A.

Nordea Bank has also edged higher after saying it has suspended two employees on the suspicion of loans being issued on false grounds.

Meanwhile, French building materials firm Saint-Gobain is moving lower after it agreed to acquire Kaycan, Ltd., a family-owned manufacturer and distributor of exterior building materials in Canada and in the United States, for US$928 million or about 860 million euros in cash.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of May at 10 am ET.

The ISM’s manufacturing PMI is expected to edge down to 54.5 in May from 55.4 in April, although a reading above 50 would still indicate growth in the sector.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of April. Construction is expected to increase by 0.5 percent.

New York Federal Reserve President John Williams is scheduled to give opening remarks before the Monetary Policy Implementation and Digital Innovation workshop organized by the New York Fed and Columbia University School of International and Public Affairs at 11:30 am ET.

At 1 pm ET, St. Louis Federal Reserve President James Bullard is due to give a presentation on the U.S. economy and monetary policy before a hybrid Economic Club of Memphis event.

The Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, at 2 pm ET.

Stocks In Focus

Shares of Victoria’s Secret (VSCO) are moving sharply higher in pre-market trading after the intimate apparel retailer reported fiscal first quarter earnings that exceeded analyst estimates.

Business software giant Salesforce (CRM) is also likely to see initial strength after reporting better than expected first quarter results and raising its full-year guidance.

On the other hand, shares of Ambarella (AMBA) may come under pressure after the chipmaker reported fiscal first quarter results that beat estimates but provided disappointing guidance for the current quarter.