Futures Pointing To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to see further downside following the steep drop seen in the previous session.

Concerns the Federal Reserve may hold off on lowering interest rates may continue to weigh on the markets following the release of more upbeat U.S. economic data.

Payroll processor ADP released a report this morning showing stronger than expected private sector job growth in the U.S. in the month of March.

ADP said private sector employment jumped by 184,000 jobs in March after climbing by an upwardly revised 155,000 jobs in February.

Economists had expected private sector employment to increase by 148,000 jobs compared to the addition of 140,000 jobs originally reported for the previous month.

The report also said the annual rate of pay growth for job-changers accelerated dramatically to 10.0 percent in March.

“Inflation has been cooling, but our data shows pay is heating up in both goods and services,” said ADP chief economist Nela Richardson.

Treasury yields have risen following the release of the data, with the yield on the benchmark ten-year note seeing further upside after ending Tuesday’s trading at a four-month closing high.

A steep drop by shares of Intel (INTC) may also weigh on Wall Street, as the semiconductor giant is plunging by 5.2 percent in pre-market trading.

Intel is under pressure after disclosing a $7 billion operating loss by its semiconductor manufacturing business in 2023, wider than the $5.2 billion operating loss the year before.

Overall trading activity may be somewhat subdued, however, as traders look ahead to remarks by Federal Reserve Chair Jerome Powell this afternoon.

After moving sharply lower early in the session, stocks continue to see considerable weakness throughout the trading day on Tuesday. The Dow and the S&P 500 added to Monday’s losses, pulling back further off the record closing highs set last Thursday.

The major averages ended the session off their worst levels of the day but still firmly in the red. The Dow tumbled 396.61 points or 1.0 percent to 39,170.24, the Nasdaq slumped 156.38 points or 1.0 percent to 16,240.45 and the S&P 500 slid 37.96 points or 0.7 percent to 5,205.81.

The early sell-off on Wall Street partly reflected renewed uncertainty about the outlook for interest rates as traders digested recent U.S. economic data.

Last Friday’s closely watched inflation data combined with Monday’s stronger than expected manufacturing data have raised questions about whether the Federal Reserve will lower rates in June.

Treasury yields moved sharply higher in reaction to the data on Monday and saw further upside during today’s session, with the yield on the benchmark ten-year note reaching a four-month high.

Traders may also have taken the opportunity to cash in on some of the recent strength in the markets ahead of remarks by Fed Chair Jerome Powell on Wednesday and the release of the monthly jobs report on Friday.

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

The Commerce Department said factory orders surged by 1.4 percent in February after plunging by a revised 3.8 percent in January.

Economists had expected factory orders to jump by 1.0 percent compared to the 3.6 percent slump originally reported for the previous month.

Networking stocks moved sharply lower over the course of the session, resulting in a 2.7 percent nosedive by the NYE Arca Networking Index.

Substantial weakness was also visible among housing stocks, with the Philadelphia Housing Sector Index plunging by 2.5 percent. The index pulled back further off last Thursday’s record closing high.

Airline stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 1.8 percent.

Healthcare, computer hardware and semiconductor stocks also saw considerable weakness, while energy stocks bucked the downtrend amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are climbing $0.71 to $85.86 a barrel after jumping $1.44 to $85.15 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,288.70, up $6.90 compared to the previous session’s close of $2,281.80. On Tuesday, gold jumped $24.70.

On the currency front, the U.S. dollar is trading at 151.87 yen compared to the 151.56 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0775 compared to yesterday’s $1.0770.

Asia

Asian stocks tumbled on Wednesday, as strong U.S. data dented rate cut hopes and oil extended gains amid rising tension in the Middle East, clouding the inflation outlook.

Investors also awaited Federal Reserve Chair Jerome Powell’s speech later in the day and the release of Friday’s U.S. non-farm payroll data for additional clarity on the timing and pace of Fed easing.

Gold ticked lower after mixed comments from a pair of Fed officials. Crude prices extended gains amid concerns around crude and fuel supplies.

China’s Shanghai Composite Index slipped 0.2 percent to 3,069.30 even as a private survey showed service sector activity in the country grew as expected in March.

Hong Kong’s Hang Seng Index dove 1.2 percent to 16,725.10, falling from a nearly three-week high in the aftermath of a powerful earthquake in Taiwan that damaged dozens of buildings and prompted tsunami warnings that extended to Japan and the Philippines before being lifted.

Japanese markets closed sharply lower amid worries that sticky inflation and a resilient U.S. economy may prompt the Fed to delay rate cuts for longer.

The Nikkei 225 Index slid 1.0 percent to 39,451.85, while the broader Topix index settled 0.3 percent lower at 2,706.51. Among the prominent decliners, Nippon Steel, Advantest, Fast Retailing and Nintendo lost 2-4 percent.

Earlier today, the Japan Meteorological Agency issued a tsunami warning for Japan’s southern islands, but this was later lifted.

On the data front, a survey showed Japanese service sector activity expanded at its quickest pace in seven months in March.

Seoul stocks slumped to snap a three-day winning streak, with tech, battery and auto stocks leading losses. The Kospi plunged 1.7 percent to 2,706.97.

Australian markets fell, dragged down by financials, healthcare and real estate stocks. The benchmark S&P ASX 200 Index dropped 1.3 percent to 7,782.50 while the broader All Ordinaries Index ended down 1.4 percent at 8,033.60.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index fell 0.5 percent to 12,040.49.

Europe

European stockshave cut early losses to trade mixed on Wednesday after data showed Eurozone inflation softened in March, supporting expectations that the European Central Bank will start lowering interest rates in June.

According to the flash estimate from Eurostat, the harmonized index of consumer prices registered an increase of 2.4 percent annually, slower than the 2.6 percent rise in February. Prices were forecast to climb 2.5 percent.

Likewise, core inflation eased to 2.9 percent in March from 3.1 percent in the previous month.

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

Meyer Burger shares have plummeted. The Swiss solar panel maker said it had successfully completed a capital increase through a rights issue.

Reinsurer Swiss Re has also declined after an announcement that Andreas Berger will become Group Chief Executive Officer effective 1 July 2024.

British engineer Renishaw has also plunged after Germany’s Siemens said it does not intend to make an offer for the company.

Topps Tiles has also moved to the downside after the tiles retailer reported lower half-yearly sales and issued a profit warning.

Meat, seafood and meat alternatives group Hilton Food has also slumped after reporting modest top-line growth in 2023.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing stronger than expected private sector job growth in the U.S. in the month of March.

ADP said private sector employment jumped by 184,000 jobs in March after climbing by an upwardly revised 155,000 jobs in February.

Economists had expected private sector employment to increase by 148,000 jobs compared to the addition of 140,000 jobs originally reported for the previous month.

The stronger than expected job growth was led by the leisure and hospitality industry, which added 63,000 jobs during the month.

At 9:45 am ET, Federal Reserve Board Governor Michelle Bowman is due to speak on “Bank Liquidity, Regulation, and the Fed’s Role as Lender of Last Resort” at the Committee on Capital Markets Regulation Roundtable on Lender of Last Resort.

The Institute for Supply Management is scheduled to release its report on service sector activity in the month of March at 10 am ET. The services PMI is expected to inch up to 52.7 in March from 52.6 in February, with a reading above 50 indicating growth.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended March 29th.

Crude oil inventories are expected to decrease by 2.0 million barrels after jumping by 3.2 million barrels in the previous week.

Chicago Federal Reserve President Austan Goolsbee is scheduled to give opening remarks before a virtual event, “Preventing Elder Financial Exploitation: Research, Policies, and Strategies,” at 12 pm ET.

At 12:10 pm ET, Federal Reserve Chair Jerome Powell is due to speak on the economic outlook at the Stanford Business, Government and Society Forum.

Federal Reserve Vice Chair for Supervision Michael Barr is scheduled to participate in a discussion about the Community Reinvestment Act at the Just Economy Conference 2024 at 1:10 pm ET.

At 4:30 pm ET, Federal Reserve Board Governor Adriana Kugler is due to discuss “The Outlook of the U.S. Economy and Monetary Policy” during a conversation hosted by Washington University in St. Louis.

Stocks In Focus

Shares of Cal-Maine Foods (CALM) are moving sharply higher in pre-market trading after the egg producer reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Restaurant and entertainment chain Dave & Buster’s (PLAY) is also likely to see initial strength after reporting weaker than expected fiscal fourth quarter earnings but increasing its share repurchase authorization by an additional $100 million.

On the other hand, shares of Wolfspeed (WOLF) may move to the downside after Wells Fargo downgraded its rating on the chipmaker’s stock to Equal Weight from Overweight.