Choppy Trading Likely To Persist Ahead Of Powell Speech

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to extend the lackluster performance seen in the previous session.

Traders may be reluctant to make significant remarks ahead of a speech by Federal Reserve Chair Jerome Powell later this afternoon.

Powell’s remarks at a hybrid Brookings Institution event are likely to closely watched for additional clues about the outlook for interest rates.

While the central bank is widely expected to slow the pace of rate hikes next month, recent comments from Fed officials have led to uncertainty about how high rates will go.

Traders are also digesting mixed economic data, which has added some uncertainty about the outlook for rates.

Payroll processor ADP released a report showing private sector job growth in the U.S. fell well short of economist estimates in the month of November.

ADP said private sector employment increased by 127,000 jobs in November after surging by an unrevised 239,000 jobs in October. Economists had expected employment to jump by another 200,000 jobs.

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” said ADP chief economist Nela Richardson.

Meanwhile, revised data released by the Commerce Department showed the U.S. economy grew by more than previously estimated in the third quarter.

The report said real gross domestic product spiked by 2.9 percent in the third quarter compared to the previously reported 2.6 percent surge. Economists had expected the pace of GDP growth to be unrevised.

Following the sell-off seen to start the week, stocks fluctuated over the course of the trading day on Tuesday. The Dow eventually ended the session nearly unchanged, while the Nasdaq and S&P 500 closed lower for the third straight session.

The Dow spent the day bouncing back and forth across the unchanged line before closing up 3.07 points or less than a tenth of a percent to 33,852.53. Meanwhile, the S&P 500 edged down 6.31 points or 0.2 percent to 10,983.78 and the Nasdaq slid 65.72 points or 0.6 percent to 10,983.78.

The choppy trading on Wall Street came amid lingering uncertainty about the situation in China following widespread protests over the country’s Covid restrictions.

Mainland China reported the first decrease in new Covid infections in more than a week on Monday, generating some positive sentiment.

Chinese health officials also released a plan to boost vaccinations for elderly people and said they are “closely watching” the virus as it evolves and mutates.

The officials defended China’s zero-Covid policy at a press briefing on Tuesday but said lockdowns would be lifted “as quickly as possible.”

However, traders previously saw their hopes for an easing of Covid restrictions in China dashed by the recent surge in new cases, leading to some hesitation.

Traders may also have been reluctant to make significant moves ahead of the release of some key economic data in the coming days, including the Labor Department’s closely watched monthly jobs report on Friday.

The Conference Board released a report this morning showing a modest decrease in U.S. consumer confidence in the month of November.

The Conference Board said its consumer confidence index dipped to 100.2 in November from a revised 102.2 in October. Economists had expected the index to slip to 100.0 from the 102.5 originally reported for the previous month.

Despite the lackluster performance by the broader markets, gold stocks moved sharply higher in the day, driving the NYSE Arca Gold Bugs Index up by 2.9 percent. The rally by gold stocks came amid an increase by the price of the precious metal.

Significant strength was also visible among steel stocks, as reflected by the 2.8 percent surge by the NYSE Arca Steel Index.

Energy, commercial real estate and transportation stocks also saw notable strength on the day, while computer hardware and biotechnology stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are surging $2.50 to $80.70 a barrel after climbing $0.96 to $78.20 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,774.80, up $11.10 compared to the previous session’s close of $1,763.70. On Tuesday, gold rose $8.40.

On the currency front, the U.S. dollar is trading at 139.08 yen compared to the 138.63 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0375 compared to yesterday’s $1.0330.

Asia

Asian stocks ended Wednesday’s session broadly higher despite weak data from China and worries about the worsening Covid-19 situation in the country. Investors also awaited U.S. Federal Reserve Chair Jerome Powell’s speech later in the day for interest rate clues.

China’s Shanghai Composite Index fluctuated before finishing marginally higher at 3,151.34 as hopes of China eventually reopening its economy offset disappointing factory and services sector data.

Hong Kong’s Hang Seng Index rallied 2.2 percent to 18,597.23 after surging more than 5 percent in the previous session.

China’s official manufacturing purchasing managers index fell to 48.0 in November from 49.2 in October, while the non-manufacturing PMI dropped to 48.0 from 49.2, separate reports from the National Bureau of Statistics showed.

Japanese shares fell for a fourth straight session as weak industrial production data added to jitters surrounding ongoing protests in China against strict pandemic curbs.

Industrial production fell 2.6 percent in October from the prior month as a result of stalling global demand and lingering supply bottlenecks, data showed earlier today. Analysts had expected a drop of 1.5 percent.

The Nikkei 225 Index slipped 0.2 percent to 27,968.99, while the broader Topix closed 0.4 percent lower at 1,985.57. Utility Tokyo Electric Power and contact lens maker Menicon both lost over 3 percent.

Seoul stocks extended gains from the previous session amid hopes that China could loosen Covid-19 restrictions.

The Kospi rallied 1.6 percent to settle at 2,472.53. Among the top gainers, POSCO Holdings, Samsung Electronics, LG Energy Solution and LG Electronics jumped 2-4 percent.

South Korea’s industrial output fell by the most in 30 months in October, data showed earlier today. Retail sales also dipped, while facility investment remained nearly unchanged from a month earlier.

Australian stocks ended modestly higher as higher base metal and energy prices boosted mining and energy stocks.

A drop in the inflation rate in October and an unexpected decline in retail sales boosted hopes that the Reserve Bank may pause its tightening cycle.

The benchmark S&P/ASX 200 Index rose 0.4 percent to 7,284.20, while the broader All Ordinaries Index ended 0.5 percent higher at 7.480.70.

Europe

European stocks have advanced on Wednesday, as investors react to a report showing eurozone inflation moderated for the first time since the middle of 2021.

Inflation slowed more-than-expected to 10.0 percent in November from 10.6 percent in October, the flash estimate from Eurostat showed. Economists had forecast an annual rate of 10.4 percent.

Ahead of the ECB’s interest-rate decision next month, ECB President Christine Lagarde said earlier this week that inflation in Europe hasn’t reached its peak yet and it risks turning out even higher than currently expected.

Traders also await a speech by U.S. Federal Reserve Chair Jerome Powell later in the day for clues over the size of future rate hikes.

Meanwhile, U.K. shop prices grew at the fastest pace since records began in 2005 largely due to rising food and energy prices, the British Retail Consortium said earlier today.

Shop price inflation accelerated to 7.4 percent in November from 6.6 percent in October. This was above the three-month average rate of 6.5 percent.

While the German DAX Index has risen by 0.3 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are up by 0.8 percent and 0.9 percent, respectively.

SBB has surged. The Swedish real estate company agreed to sell a 49 percent stake in its education unit to Brookfield for 9.2 billion Swedish krone ($870.42 million).

Fashion retailer H&M Group has also shown a notable move to the upside after announcing it will cut 1,500 jobs in a cost saving drive.

AstraZeneca has also moved higher after selling its manufacturing site in West Chester, Ohio to National Resilience, Inc.

Property investment and development firm SEGRO has also risen after announcing the launch and pricing of 350 million pounds, 19-year senior unsecured bond issue.

Meanwhile, British water and waste management company Pennon Group has tumbled after reporting a decline in pretax profit for the first half of fiscal 2023.

U.S. Economic Reports

Private sector job growth in the U.S. fell well short of economist estimates in the month of November, payroll processor ADP revealed in a report released on Wednesday.

ADP said private sector employment increased by 127,000 jobs in November after surging by an unrevised 239,000 jobs in October. Economists had expected employment to jump by another 200,000 jobs.

Meanwhile, revised data released by the Commerce Department showed the U.S. economy grew by more than previously estimated in the third quarter.

The report said real gross domestic product spiked by 2.9 percent in the third quarter compared to the previously reported 2.6 percent surge. Economists had expected the pace of GDP growth to be unrevised.

The Commerce Department said the stronger than previously estimated growth reflected upward revisions to consumer spending and nonresidential fixed investment.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of November. The Chicago business barometer is expected to inch up to 47.0 in November from 45.2 in October, although a reading below 50 would still indicate a contraction.

The National Association of Realtors is due to release its report on pending home sales in the month of October at 10 am ET. Pending home sales are expected to tumble by 5.2 percent in October after plunging by 10.2 percent in September.

Also at 10 am ET, the Labor Department is scheduled to release its report on job openings in the month of October. Job openings are expected to decrease to 10.3 million in October from 10.7 million in September.

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

Crude oil inventories are expected to decrease by 2.5 million barrels after falling by 3.7 million barrels in the previous week.

At 12:35 pm ET, Federal Reserve Board Governor Lisa Cook is scheduled to present her views on the outlook for monetary policy and share her observations on the evolving economy before a hybrid event hosted by the Detroit Economic Club.

Federal Reserve Chair Jerome Powell is due to speak on the economic outlook and the labor market before a hybrid Brookings Institution event at 1:30 pm ET.

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

Stocks In Focus

Shares of Horizon Therapeutics (HZNP) are skyrocketing in pre-market trading after the drug maker confirmed it is in preliminary discussions with Amgen (AMGN), Sanofi (SNY) and Johnson & Johnson’s (JNJ) Janssen Global Services unit about potential offers for the company.

Human resources software maker Workday (WDAY) is also seeing significant pre-market strength after reporting better than expected fiscal third quarter results, raising its full-year guidance and announcing a stock repurchase program.

On the other hand, shares of CrowdStrike (CRWD) are likely to come under pressure after the cybersecurity company reported mixed third quarter results and provided disappointing guidance.