U.S. Stocks May See Further Downside In Early Trading

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to add to the losses posted in the previous session.

Concerns about the outlook for the global economy may continue to weigh on the markets following the recent release of disappointing data from overseas.

A recent surge in oil prices may add to the negative sentiment amid worries higher oil prices could keep inflation at elevated levels.

The price of crude oil reached its highest levels since last November after Saudi Arabia and Russia extended supply cuts until the end of the year.

In U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit widened in the month of July.

U.S. stocks closed lower on Tuesday after posting some strong gains last week. The major averages all ended in negative territory, although the Nasdaq managed to see a few brief spells above the flat line.

The Dow ended with a loss of 195.74 points or 0.6 percent at 34,641.97. The S&P 500 settled lower by 18.94 points or 0.4 percent at 4,496.83, while the Nasdaq finished with a marginal loss of 10.86 points or 0.1 percent at 14,020.95.

Concerns about the outlook for the global economy following the release of disappointing Chinese and European data weighed on the markets. A firm dollar and higher Treasury yields hurt as well.

Chinese services activity expanded at the slowest pace in eight months in August, a private-sector survey showed earlier today.

Business activity in the euro zone weakened further in August as the economic downturn extended from manufacturing to the services sector.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 46.7 in August from July’s 48.6, marking the lowest level since November 2020.

On the U.S. economic front, the Commerce Department released a report showing a significant pullback in factory orders in the month of July.

The Commerce Department said factory orders tumbled by 2.1 percent in July after surging by 2.3 percent in June. Economists had expected factory orders to plunge by 2.6 percent.

The Energy sector saw some brisk buying as oil prices climbed after Russia and Saudi Arabia decided to extend their voluntary production cuts to the end of this year.

Walgreens Boots Alliance dropped 2.7 percent. Nike, Merck, Caterpillar, Verizon, Home Depot, Honeywell International, Visa, P&G, Salesforce, JP Morgan and Amgen lost 1 to 2 percent.

Microsoft gained about 1.5 percent. Meta Platforms surged 1.3 percent. Chevron, United Health and IBM also closed higher. Alphabet and Apple edged up marginally.

Commodity, Currency Markets

Crude oil futures are falling $0.42 to $86.28 a barrel after jumping $1.14 to $86.69 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,950, down $2.60 compared to the previous session’s close of $1,952.60. On Tuesday, gold fell $14.50.

On the currency front, the U.S. dollar is trading at 147.29 yen compared to the 147.72 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0736 compared to yesterday’s $1.0722.

Asia

Asian markets finished trading on a mixed note on Wednesday amidst concerns about growth in China as well the broader world economy. A rise in crude oil prices also weighed on sentiment.

China’s Shanghai Composite Index gained 3.71 points or 0.1 percent to finish trading at 3,158.08. The day’s trading ranged between 3,162.15 and 3,136.90. The Shenzhen Component Index shed 13.38 points or 0.1 percent to close at 10,527.33.

The Japanese benchmark Nikkei 225 Index climbed 204.26 points or 0.6 percent to end trading at 33,241.02. The day’s trading range was between 33,090 and 33,282.50.

Mitsui Engineering & Shipbuilding topped gains with a rally of 8.9 percent. Oki Electric Industry followed with a gain of 5.4 percent. Mazda Motor and Pacific Metals both added more than 4.5 percent. Mitsubishi Heavy Industries gained 3.7 percent.

Asahi Group Holdings was the biggest laggard, declining 2.4 percent. Nippon Yusen, Mitsubishi Logistics Corp., Nippon Express and Yamato Holdings all declined more than 1 percent.

The Hang Seng Index of the Hong Kong Stock Exchange shed 6.93 points or less than a tenth of a percent from the previous close to finish trading at 18,449.98. The day’s trading range was between a high of 18,492.59 and a low of 18,256.10.

The Korean Stock Exchange’s Kospi Index declined 18.84 points or 0.7 percent to close trading at 2,563.34. The day’s trading range was between 2,560.09 and 2,585.98.

Australia’s S&P/ASX200 Index closed trading at 7,257.10, falling 57.20 points or 0.8 percent. The index has lost more than half a percent in the last five days and sits 4.1 percent below its 52-week high. The day’s trading range was between 7,253.20 and 7,314.30.

Media and entertainment business Domain Holdings Australia rallied 3.9 percent followed by Telix Pharmaceuticals that gained 2.5 percent. HMC Capital, Syrah Resources and Kelsian Group all gained more than 1 percent.

Packaging business Orora Plunged 18.2 percent following an equity raise. Cromwell Property Group lost 5.4 percent. Biotechnology business Imugene, retail business Lovisa Holding and software business Altium all declined more than 4 percent.

The NZX 50 Index of the New Zealand Stock Exchange edge down 9.59 points or 0.1 percent to close at 11,427.66. Trading ranged between 11,393.17 and 11,469.17.

Sanford topped with a gain of 2.6 percent followed by Arvida Group that rallied 2.5 percent. Sky Network Television, Skellerup Holdings and Vista Group International all gained close to 2 percent.

Meridian Energy and Fletcher Building slipped close to 2 percent. Investore Property, Serko and Fisher & Paykel Healthcare all declined around 1.5 percent.

Europe

European stocks are mostly on Wednesday following mixed trading in Asian markets and negative Wall Street sentiment. Investors continue to worry about the global economy and rising crude oil prices and are anxious about trade and inflation data due from China later in the week.

As per economic data, factory orders in Germany are down 11.7 percent, versus an upwardly revised 7.6 percent increase in the previous month. Markets had anticipated a decline of 4 percent.

In other economic news, Eurozone July retail sales dropped 1 percent year-over-year, and 0.2 percent sequentially.

While the French CAC 40 Index has slumped by 1.0 percent, the U.K.’s FTSE 100 Index is down by 0.6 percent and the German DAX Index is down by 0.5 percent.

In corporate news, Telefonica S.A. gained around 2 percent after Saudi Telecommunication Co. or stc Group’s acquisition of a 9.9 percent stake in the Spanish telecommunication firm in 2.1 billion euros deal.

Polish parcel locker company InPost gained 10.1 percent after reporting higher second-quarter results. Shares of Swiss insurer Swiss Life Holding AG were up 2.5 percent after reporting higher first-half profit.

Renault stock was up 2.8 percent, and United Internet AG was up 2.2 percent.

Among losers, Swiss biotech Idorsia Ltd. was down 8.1 percent. The company agreed with Janssen Biotech Inc., affiliated to Johnson & Johnson, for the return of rights for aprocitentan. In return, Idorsia will pay up to 306 million Swiss francs, subject to marketing application approval by the US FDA and Europe’s EMA.

WH Smith stock fell 6 percent. In its pre-close update, the company said it expects the outcome for fiscal 2023 to be in line with the upgraded expectations which followed the previous trading update.

British drug major AstraZeneca was down 1 percent after it said the FDA has issued a complete response letter regarding the supplemental Biologics License Application for long-acting C5 complement inhibitor Ultomiris to treat adult patients with neuromyelitis optica spectrum disorder who are anti-aquaporin-4 antibody positive.

U.S. Economic Reports

The Commerce Department released a report on Wednesday showing the U.S. trade deficit widened in the month of July.

The report said the trade deficit increased to $65.0 billion in July from a revised $63.7 billion in June. Economists had expected the trade deficit to rise to $65.8 billion from the $65.5 billion originally reported for the previous month.

The wider trade deficit came as the value of imports increased by slightly more than the value of exports.

The value of imports climbed by 1.7 percent to $316.7 billion, while the value of exports rose by 1.6 percent to $251.7 billion.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of August.

The ISM’s services PMI is expected to edge down to 52.5 in August from 52.7 in July, although a reading above 50 would still indicate growth.

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.