Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks likely to extend the upward trend seen over the past few sessions.

A continued decline by treasury yields may contribute to strength on Wall Street, with yields pulling back further off their highest levels in over sixteen years.

Treasuries have recently benefited from their appeal as a safe haven amid the deadly conflict between Hamas and Israel.

However, stock futures gave back some ground following the release of a Labor Department report showing producer prices in the U.S. increased by slightly more than expected in the month of September.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in September after advancing by 0.7 percent in August. Economists had expected prices to rise by 0.4 percent.

The producer price growth was partly due to a continued surge in energy prices, which spiked by 3.3 percent in September after skyrocketing by 10.3 percent in August.

The report also said the annual rate of producer price growth accelerated to 2.2 percent in September from a revised 2.0 percent in August.

Economists had expected the pace of price growth to come in unchanged compared to the 1.6 percent originally reported for the previous month.

After opening on a slightly subdued note, U.S. stocks climbed higher and held firm throughout the day’s session on Tuesday to eventually close with solid gains.

Despite concerns about the ongoing war in the Middle East, the mood in the markets remained positive as dovish comments from Federal Reserve officials lowered expectations for further interest rate hikes and pushed down bond yields.

The yield on benchmark 10-year treasury note dropped to around 4.65 percent as investors chose to pick up some safe-haven assets amid geopolitical concerns.

The major averages all ended on a firm note. The Dow settled with a gain of 134.65 points or 0.4 percent at 33,739.30. The S&P 500 climbed 22.58 points or 0.5 percent to 4,358.24, and the Nasdaq advanced 78.60 points or 0.6 percent to 13,562.84.

PepsiCo climbed nearly 2 percent after the company’s earnings and revenue beat expectations.

Bank of America, Tesla, Boeing, Coca-Cola, 3M, American Express, Walmart, Home Depot, Intel and Verizon closed notably higher.

Fed Bank of Atlanta President Bostic reiterated that he doesn’t think policymakers need to raise interest rates any further.

Fed Vice Chair Philip Jefferson said on Monday that the central bank is “in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary.”

“Higher term premiums result in higher term interest rates for the same setting of the fed funds rate, all else equal. Thus, if term premiums rise, they could do some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening,” Dallas Fed President Lorie Logan said.

The International Monetary Fund (IMF) downgraded the global growth forecast for next year, saying the projections are the weakest in decades, while the likelihood of a soft-landing has increased with growing divergences amid modestly easing inflationary pressures.

Global growth was forecast at 3.0 percent this year, the IMF said in its October World Economic Outlook report released on Tuesday in Marrakech, Morocco, where the lender is holding its annual meeting.

Growth forecasts for the U.S. economy for this year and next were raised to 2.1 percent and 1.5 percent, respectively.

Commodity, Currency Markets

Crude oil futures are slumping $0.94 to $85.03 a barrel after falling $0.41 to $85.97 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,882.10, up $6.80 compared to the previous session’s close of $1,875.30. On Tuesday, gold climbed $11.

On the currency front, the U.S. dollar is trading at 148.95 yen compared to the 148.71 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0597 compared to yesterday’s $1.0605.

Asia

Asian stocks hit two-week highs on Wednesday as investors cheered dovish Fed talk as well as reports that China is mulling fresh stimulus to boost slowing growth in the world’s second-largest economy.

Underlying sentiment was also boosted after the International Monetary Fund said it sees a greater chance of a soft landing for the global economy.

The dollar traded well off its recent highs and Treasury yields were mixed as dovish comments from several Federal Reserve officials prompted traders to pare interest-rate expectations. Investors also awaited cues from the Fed’s meeting minutes and U.S. inflation data due this week.

Gold held steady near a more than one-week high, while oil ticked up slightly on lingering worries about supply disruptions from the Middle East as the Israel-Hamas war entered its fifth day.

Chinese shares edged up slightly, with the Shanghai Composite Index settling 0.1 percent higher at 3,078.96 after reports that China is considering raising the budget deficit for 2023.

Hong Kong’s Hang Seng Index rallied 1.3 percent to 17,893.10, extending gains for a fifth day running.

Japanese shares hit a two-week high on dovish Fed talk. The Nikkei 225 Index climbed 0.6 percent to 31,936.51, after having crossed the psychological 32,000 mark earlier for the first time since October 2. The broader Topix Index closed 0.2 percent lower at 2,307.84.

Chip-related stocks led the rally after the Philadelphia Semiconductor Index rallied 1.3 percent overnight. Screen Holdings, Tokyo Electron and Advantest rose between 1.4 percent and 2.5 percent.

Heavyweight SoftBank Group advanced 2.6 percent. Shipping stocks underperformed, with Kawasaki Kisen Kaisha plunging 6.1 percent.

Seoul stocks posted strong gains, with technology companies and battery makers leading the surge. The Kospi jumped 2.0 percent to 2,450.08.

Chip giant Samsung Electronics added 2.7 percent despite forecasting a 78 percent drop in its third-quarter operating profit. LG Energy Solution soared 7.3 percent on strong earnings guidance.

Australian markets ended higher for a fifth consecutive session as strong commodity prices boosted mining stocks.

The benchmark S&P ASX 200 Index rose 0.7 percent to 7,088.40, marking a three-week high. The broader All Ordinaries Index ended 0.7 percent higher at 7,281.30.

Bank of Queensland slumped 7.4 percent after its annual profit tumbled about 70 percent. Qantas Airways advanced 2.7 percent on news that board chairman Richard Goyder will quit the airline.

Europe

European stocks are turning in a mixed performance during trading on Wednesday, with French stocks underperforming.

Dovish Fed talk and Chinese stimulus hopes helped underpin investor sentiment ahead of the release of minutes of the Fed’s September policy meeting later in the day and U.S. inflation data due on Thursday.

Meanwhile, German consumer price inflation eased to the lowest level in just over one-and-a-half years in September, as initially estimated, the latest data from Destatis showed earlier today.

The consumer price index rose 4.5 percent year-on-year in September, slower than the 6.1 percent rise in August. That was in line with the flash data published on September 28. Further, this was the lowest rate since February 2022, when inflation stood at 4.3 percent.

ECB policymaker Francois Villeroy de Galhau expressed confidence on Tuesday that inflation should still land at the target rate of around 2 percent by 2025 despite the violence in Israel.

While the French CAC 40 Index is down by 0.2 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the German DAX Index is up by 0.3 percent.

In corporate news, German kidney dialysis provider Fresenius Medical Care has plunged after Danish drug maker Novo Nordisk said its weight-loss drug showed success in a trial for kidney failure in diabetes patients. Shares of the latter have jumped.

Avingtrans has surged after bagging two nuclear waste contracts. British bus and rail operator FirstGroup has also rallied after raising its annual profit outlook.

Pub group Marston’s has moved to the downside despite reporting an 11.3 percent increase in sales in the year to the end of September.

Travis Perkins has also moved sharply lower after the building merchant warned its annual profits will be far lower than forecast.

Page Group has also slumped. The recruitment firm warned that its full-year profits are likely to fall by at least a third as a result of ongoing challenging conditions across Asia, the U.K. and U.S. markets in the third quarter.

Roche Holding AG has risen. Genentech, a member of the Roche Group, announced encouraging late-breaking data from the Phase III OCARINA II study of Ocrevus, the company’s investigational drug to treat patients with relapsing or primary progressive multiple sclerosis.

French luxury goods bellwether LVMH has tumbled after it reported lower sales growth in the third quarter in a sign that the post-pandemic luxury boom is waning.

U.S. Economic Reports

Producer prices in the U.S. increased by slightly more than expected in the month of September, the Labor Department revealed in a report released on Wednesday.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in September after advancing by 0.7 percent in August. Economists had expected prices to rise by 0.4 percent.

The producer price growth was partly due to a continued surge in energy prices, which spiked by 3.3 percent in September after skyrocketing by 10.3 percent in August.

The report also said the annual rate of producer price growth accelerated to 2.2 percent in September from a revised 2.0 percent in August.

Economists had expected the pace of price growth to come in unchanged compared to the 1.6 percent originally reported for the previous month.

At 10:15 am ET, Federal Reserve Board Governor Christopher Waller is scheduled to participate in a fireside chat at the E2 Summit.

Atlanta Federal Reserve President Raphael Bostic is due to speak on economic conditions before the Metro Atlanta Chamber’s ATLeaders lunch at 12:15 pm ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $35 billion worth of ten-year notes.

The Federal Reserve is due to release the minutes of its September monetary policy meeting at 2 pm ET. During the meeting, the Fed decided to leave interest rates unchanged.

At 4:30 pm ET, Boston Federal Reserve President Susan Collins is scheduled to give 2023 Goldman Lecture in Economics, “Reflections on Policymaking Amidst (Pandemic) Uncertainty,” at an event hosted by Wellesley College.

Stocks In Focus

Shares of Plug Power (PLUG) are moving sharply higher in pre-market trading after the hydrogen fuel cell specialist said it expects to revenue to jump to $6 billion by 2027.

Hydrocarbon exploration company Pioneer Natural Resources (PXD) may also move to the upside after agreeing to be acquired by Exxon Mobil (XOM) in an all-stock transaction valued at $59.5 billion or $253 per share.

On the other hand, shares of Timken (TKR) may see initial weakness after Bank of America downgraded its rating on the company’s stock to Underperform from Neutral.