Upbeat Earnings News May Lead To Extended Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to extend the modest rebound seen in the previous session.

The markets may continue to benefit from bargain hunting, as the uptick seen on Tuesday came after the major averages slumped to their lowest closing levels in over a month on Monday.

A surge by shares of Nike (NKE) is also likely to provide a boost for the Dow, with the athletic footwear and apparel giant spiking by 11.2 percent in pre-market trading.

The rally by Nike comes after the company reported better than expected fiscal second quarter results and provided upbeat full-year revenue guidance.

Delivery giant FedEx (FDX) is also likely to see initial strength after reporting fiscal second quarter results that exceeded analyst estimates.

After recovering from an early move to the downside, stocks moved modestly higher over the course of the trading session on Tuesday. The major averages climbed well off their early lows and into positive territory.

The major averages all finished the day in the green, although the tech-heavy Nasdaq was little changed, inching up 1.08 points or 0.1 percent to 10,547.11. The Dow rose 92.20 points or 0.3 percent to 32,849.74 and the S&P 500 crept up 3.96 points or 0.1 percent to 3,821.62.

The modest strength on Wall Street came as some traders looked to pick up stocks at relatively reduced levels following recent weakness.

The major averages closed lower for four consecutive session, ending Monday’s trading at their lowest closing levels in over a month.

Buying interest remained somewhat subdued, however, with some traders reluctant to get back into the markets amid lingering concerns the Federal Reserve’s aggressive interest rate hikes will tip the economy into a recession.

On Friday, the Commerce Department is due to release its report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require “substantially more evidence” inflation is on a sustained downward trend before halting its rate hikes, traders are likely to keep a close eye on the inflation reading.

Reports on consumer confidence, new and existing home sales and durable goods orders are also likely to attract attention in the coming days.

In U.S. economic news, the Commerce Department released a report showing a decrease in new residential construction in the U.S. in the month of November.

The report said housing starts fell by 0.5 percent to an annual rate of 1.427 million in November after tumbling by 2.1 percent to a revised rate of 1.434 million in October.

Economists had expected housing starts to decline by 0.7 percent to a rate of 1.415 million from the 1.425 million originally reported for the previous month.

The Commerce Department also said building permits plunged by 11.2 percent to an annual rate of 1.342 million in November after slumping by 3.3 percent to a revised rate of 1.512 million in October.

Building permits, an indicator of future housing demand, were expected to dive by 3.7 percent to 1.470 million from the 1.526 million originally reported for the previous month.

Gold stocks moved sharply higher on the day, resulting in a 4.6 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a notable increase by the price of the precious metal.

An increase by the price of crude oil also contributed to considerable strength among oil service stocks, driving the Philadelphia Oil Service Index up by 3.1 percent.

Substantial strength was also visible among steel stocks, as reflected by the 2.2 percent surge by the NYSE Arca Steel Index.

Oil producer, biotechnology and tobacco stocks also moved to the upside on the day, while transportation stocks saw notable weakness.

Commodity, Currency Markets

Crude oil futures are surging $1.55 to $77.78 a barrel after advancing $0.90 to $76.09 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,828.80, up $3.40 compared to the previous session’s close of $1,825.40. On Tuesday, gold jumped $27.70.

On the currency front, the U.S. dollar is trading at 131.85 yen compared to the 131.73 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0641 compared to yesterday’s $1.0624.

Asia

Asian shares ended mixed on Wednesday as recession worries persisted, and China continued to grapple with a surge in the number of new Covid-19 cases.

The Japanese yen weakened slightly after having jumped to a four-month high versus the dollar on Tuesday following a surprise Bank of Japan policy tweak.

Gold dipped from a one-week high hit in the previous session, while oil edged up slightly as a drawdown in U.S. crude stocks countered China Covid concerns.

China’s Shanghai Composite Index slipped 0.2 percent to 3,068.41 after a range-bound session. Hong Kong’s Hang Seng Index edged up 0.3 percent to settle at 19,160.49.

Japanese shares extended losses for a fifth straight session following the BoJ’s unexpected hawkish pivot. The Nikkei 225 Index dropped 0.7 percent to 26,387.72, while the broader Topix closed 0.6 percent lower at 1,893.32. Automakers Toyota, Honda Motor and Nissan lost 2-3 percent.

Banks extended gains from the previous session on expectations that they would benefit from the BoJ policy tweak. Mitsubishi UFJ Financial and Sumitomo Mitsui Financial Group both surged around 4 percent.

Seoul stocks ended modestly lower, with the Kospi average finishing down 0.2 percent at 2,328.95.

Australian markets bounced back from four days of losses, led by miners and energy stocks. The benchmark S&P/ASX 200 Index rallied 1.3 percent to 7,115.10 points, after losing 2.5 percent over the previous four sessions. The broader All Ordinaries Index ended 1.3 percent higher at 7,293.

Strong overnight bullion prices lifted gold miners, with Newcrest Mining climbing 6.5 percent. Energy stocks such as Woodside Energy and Santos rose around 2.7 percent each.

TPG Telecom lost 1.1 percent as the antitrust regulator blocked an asset transfer deal between Telstra and TPG.

Europe

European stocks have bounced back from a six-week low on Wednesday, with consumer discretionary firms rising heading into the year-end holiday period.

While the French CAC 40 Index has jumped by 1.3 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 1.0 percent.

Adidas AG and Puma have moved sharply higher on expectations of higher sales during the peak period for Christmas sales.

Philips has also rallied after the Dutch health technology company provided an update on a completed set of test results for first-generation DreamStation sleep therapy devices.

Uniper has also jumped after the European Commission conditionally approved the nationalization of the troubled gas giant.

Aurubis has also moved to the upside. The copper smelter scrapped its existing dividend policy and announced 530 million euro of growth-oriented investments.

Ferrexpo has also advanced after saying it was now receiving sufficient levels of power to bring one iron ore pelletizer line in central Ukraine back into operation.

Meanwhile, French utility Engie is marginally lower after warning of a hit to earnings from windfall levies and Belgian nuclear provisions.

In economic news, a survey showed German consumer sentiment is set to extend its recovery heading into the new year as a result of government measures to curb rising energy costs.

The forward-looking consumer sentiment index rose to -37.8 in January from -40.1 in December, while economists had forecast a score of 38.0.

The U.K. budget deficit was the biggest for the month of November, data from the Office for National Statistics revealed earlier today.

Public sector net borrowing excluding banks increased by GBP 13.9 billion from last year to GBP 22.0 billion. This was the biggest November borrowing since monthly records began in 1993.

U.S. Economic Reports

The Conference Board is scheduled to release its report on consumer confidence in the month of December at 10 am ET. The consumer confidence index is expected to inch up to 101.0 in December from 100.2 in November.

Also at 10 am ET, the National Association of Realtors is due to release its report on existing home sales in the month of November. Existing home sales are expected to drop to an annual rate of 4.20 million in November from 4.43 million in October.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended December 16th at 10:30 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $12 billion worth of twenty-year bonds.

Stocks In Focus

Shares of Rite Aid (RAD) are moving notably higher in pre-market trading after the drugstore operator reported a narrower than expected fiscal third quarter loss on revenues that exceeded analyst estimates.

Theme park operator Six Flags (SIX) is also likely to see initial strength following news Land & Buildings Investment Management has accumulated an approximately 3 percent stake in the company.

On the other hand, shares of Starbucks (SBUX) may move to the downside after Jefferies downgraded its rating on the coffee giant’s stock to Hold from Buy.