Major U.S. index futures are currently pointing to a weaker open on Wednesday, with stocks likely to give back some ground after rising significantly in the previous session.
Traders may be looking to take advantage of some of yesterday’s gains, which came amid a positive reaction to comments from Federal Reserve Chairman Jerome Powell.
Powell acknowledged recent indications of lower inflation, but noted that the process of disinflation still has a long way to go and warned that further interest rate hikes may be needed.
Overall trading activity may be somewhat muted, however, with a relatively light economic calendar keeping some traders on the sidelines.
Reports on initial jobless claims and consumer sentiment are expected to draw attention in the coming days, with the consumer sentiment report including readings on inflation expectations.
Although they remained weak until midday and suffered a setback after a subsequent rally, US stocks closed on a strong note on Tuesday thanks to strong buying at several counters.
The major averages all ended in impressive gains. The Dow Jones ended up 265.67 points or 0.8% at 34,156.69. The S&P 500 closed up 52.92 points or 1.3% at 4,164.00, and the Nasdaq jumped 226.34 points or 1.9% at 12,113.79.
A positive reaction to Federal Reserve Chairman Jerome Powell’s remarks to the Economic Club of Washington lifted the market.
During a question-and-answer session at the Economic Club of Washington, Powell told Carlyle Group co-founder David Rubenstein that he expects 2023 to be a year of “significant declines in inflation “.
Powell said inflation was starting to subside, although he expects it to be a long process and warned interest rates could rise more than markets wait if the economic data does not cooperate.
“The process of disinflation, the process of reducing inflation, started and it started in the goods sector, which is about a quarter of our economy“, said Powell. “But there is still a long way to go. These are the very first steps.”
Microsoft shares gained almost 4%. Boeing jumped 3.8% and Chevron 2.6%.
Walt Disney, Merck, Travelers Companies, Apple, Intel, Salesforce.com, JP Morgan Chase, American Express, Goldman Sachs and Walgreens Boots Alliance also posted impressive gains.
Hertz climbed 7.5% and DuPont shares jumped 7.8% on stronger-than-expected results.
Verizon, Home Depot, P&G and Caterpillar finished weak. Chegg plunged more than 17% after the company issued a disappointing forecast.
In economic news, data showed the U.S. trade deficit widened to $67.4 billion in December 2022 from a downwardly revised $61.0 billion in November.
Commodities, Forex Markets
Crude oil futures climbed $0.82 to $77.96 a barrel after climbing $3.03 to $77.14 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,886.50, up $1.70 from the previous session’s close of $1,884.80. On Tuesday, gold rose $5.30.
On the currency front, the US dollar is trading at 131.23 yen from 131.07 yen at the close of trading in New York on Tuesday. Against the euro, the dollar is trading at $1.0728 versus $1.0726 yesterday.
Asia
Asian stocks ended mixed on Wednesday amid signs of rising tensions between Washington and Beijing in recent days.
US Senate Democratic Leader Chuck Schumer called the state of bilateral relations “tense”, adding that the Biden administration was considering other steps it could take after bringing down what it called a balloon. Chinese surveillance over the weekend.
In addition, it was reported that China had refused a US request for a phone call between defense chiefs.
The dollar faltered after Fed Chairman Jerome Powell said disinflation “has started” but further rate hikes would be needed. Gold held steady in Asian trading, while oil prices fell after two days of gains.
China’s Shanghai Composite Index fell 0.5% to 3,232.11, while Hong Kong’s Hang Seng Index ended slightly lower at 21,283.52.
Food delivery giant Meituan fell 6.4% following reports that a rival unit of Bytedance is planning to expand its services in China.
Japanese stocks finished slightly lower as the yen stabilized after rising more than 1% in the previous session.
The Nikkei 225 index fell 0.3% to close at 27,606.46 on weak earnings reports from Softbank Group, Nintendo and Sharp Electronics. Shares of the companies plunged 5-13%. The broader Topix finished slightly higher at 1,983.97.
Japan’s current account surplus has nearly halved in 2022 from a year ago to its lowest level in eight years, data showed earlier today.
Shares in Seoul advanced, with the Kospi climbing 1.3% to 2,483.64 on overseas buying. SK Hynix topped the list of winners to close up 4.5%, while Korea Electric Power, Hyundai Motor and Samsung Electronics gained 1-2%.
Australian markets made modest gains, led by financials. The benchmark S&P/ASX 200 rose 0.4% to 7,530.10, while the broader All Ordinaries index closed 0.4% higher at 7,740.50.
Suncorp jumped 4.6% after the general insurer reported strong first-half results, boosted by rising insurance prices. Similarly, investment bank Macquarie Group rebounded 2.6% after announcing exceptional third-quarter results.
Miner Fortescue Metals Group added 2% after signing a mining agreement for the Belinga iron ore project in Gabon.
Europe
European stocks are mostly higher on Wednesday after Federal Reserve Chairman Jerome Powell sounded less hawkish than expected during a question-and-answer session at the Economic Club of Washington, D.C. Powell said that the disinflationary process had begun but it had a long way to go.
While the French CAC 40 index rose by 0.5%, the British FTSE 100 index rose by 0.7% and the German DAX index by 0.8%.
Dutch lender ABN AMRO showed substantial upward movement on share buyback news.
Homebuilder Barratt Developments also rose significantly after raising its home completion forecast.
Transport operator FirstGroup also soared after agreeing to buy Ensign Bus Company Ltd. for an undisclosed sum.
German utility E.ON also rose after saying it likely beat its own 2022 profit outlook.
Meanwhile, TotalEnergies SE, a French energy and oil company, fell after reporting lower fourth-quarter profits.
Societe Generale shares also fell. The lender said its fourth-quarter group net profit fell 35.1% to 1.16 billion euros from 1.79 billion euros last year.
Smurfit Kappa also fell. The British packaging giant reported rising profits in 2022, but carton volumes were down around 2% from a strong previous year.
US Economic Reports
New York Federal Reserve Chairman John Williams is set to take part in a heated discussion ahead of the Wall Street Journal’s CFO Network Summit at 9:20 a.m. ET.
At 9:30 a.m. ET, Federal Reserve Board Governor Lisa Cook is scheduled to participate in a conversation in front of the Joint Center for Political and Economic Studies: Voice at the Table Policy Forum.
The Commerce Department is due to release its December wholesale inventory report at 10 a.m. ET. Wholesale inventories are expected to edge up 0.1%.
Also at 10 a.m. ET, Federal Reserve of Atlanta Chairman Raphael Bostic and Federal Reserve Board Vice Chairman for Oversight Michael Barr are scheduled to participate in a student conversation on economic mobility. organized by Tougaloo College.
The Energy Information Administration is scheduled to release its oil inventory report for the week ended Feb. 3 at 10:30 a.m. ET.
Crude oil inventories are expected to rise 2.5 million barrels after climbing 4.1 million barrels the previous week.
At 12:30 p.m. ET, Minneapolis Federal Reserve Chairman Neel Kashkari is scheduled to answer questions at a Boston Economic Club town hall-style hybrid luncheon.
The Treasury Department is expected to announce the results of this month’s auction of $35 billion in ten-year notes at 1 p.m. ET.
At 1:45 p.m. ET, Federal Reserve Governor Christopher Waller is due to speak on the economic outlook ahead of Arkansas State University’s 2023 Agribusiness Conference.
Actions in brief
Shares of Uber Technologies (UBER) are rising sharply in premarket trading after the ride-hailing company reported better-than-expected fourth-quarter revenue and provided upbeat guidance.
Healthcare company CVS Health (CVS) is also expected to see initial strength after reporting fourth-quarter earnings that beat estimates and announcing an agreement to acquire Oak Street Health (OSH) for about $10.6 billion.
On the other hand, shares of Chipotle Mexican Grill (CMG) may be under pressure after the restaurant chain reported weaker-than-expected fourth-quarter results.
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