Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to give back ground after moving sharply higher over the two previous sessions.

Profit taking may contribute to an initial pullback on Wall Street, as traders cash in on the strong gains seen to start the week.

The major averages ended Tuesday’s trading well off their highs of the session, although the Dow still ended the day at its best closing level in almost a month.

Lingering concerns about higher interest rates and the impact on the global economy may also continue to weigh on the markets.

The downward momentum on Wall Street comes despite a notable pre-market advance by shares of Netflix (NFLX), with the streaming giant surging by 10.6 percent.

The spike by Netflix comes after the company reported third quarter earnings and revenue that beat analyst estimates on strong subscriber growth.

Dow components Procter & Gamble (PG) and Travelers (TRV) are also seeing pre-market strength after reporting better than expected quarterly results, potentially limiting the downside for the blue chip index.

After surging early in the session, stocks gave back some ground over the course of the trading day on Tuesday but managed to close firmly positive. The major averages added to the strong gains posted on Monday, further offsetting recent weakness.

The Dow pulled back well off its early high but still ended the day up 337.98 points or 1.1 percent at 30,523.80, its best closing level in almost a month. The Nasdaq advanced 96.60 points or 0.9 percent to 10,772.40 and the S&P 500 jumped 42.03 points or 1.1 percent at 3,719.98.

The initial strength on Wall Street partly reflected a positive reaction to upbeat earnings news from companies like Goldman Sachs (GS) and Johnson & Johnson (JNJ)

Shares of Goldman Sachs jumped 2.3 percent after the financial giant reported third quarter results that beat analyst estimates on both the top and bottom lines.

Johnson & Johnson also reported better than expected third quarter results, although the healthcare giant moved modestly lower over the course of the session.

The upbeat results from Goldman Sachs and J&J have helped ease concerns about the strength of the earnings season.

Netflix (NFLX), United Airlines (UAL) and J.B. Hunt (JBHT) are among the companies due to report their quarterly results after the close of today’s trading.

“The banks have given Wall Street some reasons to be optimistic, but now the focus shifts to Netflix and sectors that are quickly making their way into a recession,” said Edward Moya, senior maker analyst at OANDA.

Big-name companies like Procter & Gamble (PG), IBM Corp. (IBM), Tesla (TSLA), AT&T (T) and American Express (AXP) are also due to report their results in the coming days.

In U.S. economic news, the Federal Reserve released a report showing industrial production increased by more than expected in the month of September.

The Fed said industrial production rose by 0.4 percent in September after edging down by a revised 0.1 percent in August.

Economists had expected industrial production to inch up by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

Housing stocks turned in some of the market’s best performances on the day, resulting in a 2.7 percent spike by the Philadelphia Housing Sector Index.

The strength among housing stocks came even though the National Association of Home Builders released a report showing a continued deterioration in homebuilder confidence in the month of October.

Substantial strength was also visible among networking stocks, as reflected by the 2.6 percent surge by the NYSE Arca Networking Index.

Chemical stocks also saw considerable strength on the day, driving the S&P Chemical Sector Index up by 2.2 percent.

Airline, retail and utilities stocks also showed notable moves to the upside amid another day of broad based strength on Wall Street.

Commodity, Currency Markets

Crude oil futures are jumping $1.36 to $84.18 a barrel after tumbling $2.64 to $82.82 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,636.40, down $19.40 compared to the previous session’s close of $1,655.80. On Tuesday, gold fell $8.20.

On the currency front, the U.S. dollar is trading at 149.73 yen compared to the 149.26 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $0.9776 compared to yesterday’s $0.9858.

Asia

Asian stocks finished mixed on Wednesday, with the benchmarks in Japan, Australia and New Zealand tracking Tuesday’s positive sentiment on Wall Street, while stocks in China, Hong Kong and South Korea moved lower amid concerns over inflation and economic growth.

China’s Shanghai Composite Index dropped 36.58 points or 1.2 percent to finish at 3,044.38. The day’s trading ranged between 3,044.38 and 3,081.39. The Shenzhen Component Index also lost 1.4 percent to close at 11,027.24.

The Japanese benchmark Nikkei 225 Index rose 101.24 points or 0.4 percent to end trading at 27,257.38. The day’s trading range was between 27,192.79 and 27,371.38.

Softbank Group was the biggest gainer with a 3.7 percent surge. Tokyo Electric Power, Tokyo Gas, Kansai Electric Power and Osaka Gas also jumped more than 2 percent.

Credit Saison was the biggest loser with a decline of more than 7 percent. Konami Corp. lost 3.3 percent. TDK Corp., J. Front Retailing and Chugai Pharmaceutical all declined more than 1 percent.

The Hang Seng Index of the Hong Kong Stock Exchange shed 403.30 points or 2.4 percent from the previous close to finish trading at 16,511.28. The day’s trading range was between a high of 16,923.12 and a low of 16,508.37.

The Korean Stock Exchange’s Kospi Index fell 12.51 points or 0.6 percent to close trading at 2,237.44. The day’s trading range was between 2,234.59 and 2,266.80.

Australia’s S&P/ASX200 Index closed trading at 6,800.10 after adding 20.90 points or 0.3 percent. The day’s trading was between 6,777.50 and 6,822.20.

Core Lithium spike 8.2 percent. Pilbara Minerals, financial services business Pendal Group, integrated resorts business Star Entertainment Group and mining stock IGO all rallied more than 5 percent.

Technology business Megaport plunged more than 22 percent following its first quarter update. Software business Nuix declined more than 6 percent, while Zip dropped 5.9 percent. Gold miner St Barbara as well as Resolute Mining have declined more than 4 percent in the day’s trading,

Europe

After a slightly positive start and a subsequent retreat, European stocks recovered some lost ground Wednesday morning and are currently seeing modest weakness.

Investors are digesting a slew of earnings announcements and the latest batch of economic data from the region while continuing to assess the possible impact of tighter monetary policies on growth.

While the French CAC 40 Index is just below the unchanged line, the German DAX Index is down by 0.1 percent and the U.K.’s FTSE 100 Index is down by 0.2 percent.

In the UK market, HSBC Holdings is posting a strong gain, while IAG, BP, Pershing Square Holdings, BAE Systems, Smith (DS), F&C Investment Trust and GSK are also moving to the upside.

Dechra Pharmaceuticals has also shown a notable move to the downside. Kingfisher, Lloyds Banking Group, ICP, Land Securities, Segro, Persimmon, RightMove, British Land, Ocado Group and B&M European Value Retail are also moving lower.

In Paris, Air France-KLM is moving sharply higher. Publicis Groupe, Valeo, Thales, AXA, Veolia, Carrefour and Orange are also notably higher.

Covestro, Brenntag, Munich RE, Deutsche Bank, Daimler, Allianz, BASF and Deutsche Telekom are among the top gainers in the German DAX index.

Sartorius is plunging after the company said its full-year sales would come in at the lower half of its target range due to a drop in demand.

Preliminary data from the Office for National Statistics showed U.K. consumer price inflation accelerated more than expected in September to reach its recent high marked in July, led mainly by rising food prices.

The consumer price index rose 10.1 percent year-on-year following a 9.9 percent increase in August. Economists had forecast inflation to jump 10.0 percent.

The latest figure is the highest annual CPI inflation rate in the National Statistic series, which began in January 1997, the ONS said. Compared to the previous month, the CPI climbed 0.5 percent, the same as in August. Economists had forecast a 0.4 percent increase.

Final data from Eurostat showed Eurozone inflation rose less than estimated in September, advancing to 9.9 percent in the month, slightly slower than the flash estimate of 10 percent. The rate was up from 9.1 percent in August.

Core inflation, which excludes energy, food, alcohol and tobacco, increased to 4.8 percent in September from 4.3 percent a month ago. The rate came in line with the flash estimate published on September 30.

On a monthly basis, the harmonized index of consumer prices gained 1.2 percent in September.

Eurozone construction output dropped 0.6 percent month-over-month in August, reversing a 0.3 percent uptick in July, another report from Eurostat showed.

U.S. Economic Reports

A report released by the Commerce Department on Wednesday showed new residential construction in the U.S. tumbled by more than expected in the month of September.

The Commerce Department said housing starts plunged by 8.1 percent to an annual rate of 1.439 million in September after soaring by 13.7 percent to a revised rate of 1.566 million in August.

Economists had expected housing starts to dive 6.4 percent to a rate of 1.475 million from the 1.575 million originally reported for the previous month.

Meanwhile, the report showed building permits jumped by 1.4 percent to an annual rate of 1.564 million in September after plummeting by 8.5 percent to a revised rate of 1.542 million in August.

Building permits, an indicator of future housing demand, were expected to increase by 0.9 percent to a rate of 1.530 million from the 1.517 million originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 14th.

Crude oil inventories are expected to increase by 1.6 million barrels after jumping by 9.9 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of this month’s auction of $12 worth of twenty-year bonds at 1 pm ET.

Also at 1 pm ET, Minneapolis Federal Reserve President Neel Kashkari is due to participate in a question-and-answer session on Inflation, Interest Rates and the State of the U.S. Economy before a Travelers Institute Employee Town Hall.

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.

At 6:30 pm ET, Chicago Federal Reserve President Charles Evans is due to participate in a moderated question-and-answer session on current economic conditions and monetary policy hosted by the Jefferson Scholars Foundation.

Stocks In Focus

Shares of Intuitive Surgical (ISRG) are seeing significant premarket strength after the medical equipment maker reported third quarter results that beat analyst estimates on both the top and bottom lines.

Semiconductor equipment maker ASML (ASML) is also likely to the upside after reporting better than expected third quarter results.

Meanwhile, shares of Generac (GNRC) are moving sharply lower in pre-market trading after the power equipment maker reported preliminary third quarter results that missed analyst estimates.