Benzinga - by Shanthi Rexaline, Benzinga Editor.
Trading in the index future suggests another lackluster session for stocks on Wednesday. Traders are likely to focus on every piece of economic evidence that drops in between now and the Sept. 19-20 Federal Open Market Committee meeting to gauge their implications for the Fed funds rate. The futures market has priced in a 93% probability of a pause at the meeting, given growing evidence of a slowdown, despite the hawkish comments from the Fed officials.
The August service sector activity readings, the Beige Book, and a couple of Federal Reserve speeches scheduled for the day, therefore assume importance.
Cues From Past Week's Trading:
The major averages pulled back on Tuesday, as the market reopened after the Labor Day holiday. A spike in oil price stirred worries about inflation and in turn, potential rate hikes, and a rebound in Treasury yields also impacted sentiment.
The major averages opened on a mixed note but fell in early trading before going about a consolidation move. The Russell 2,000 Index was the worst hit, as it plunged over 2%, reflecting the acute weakness seen among small-cap stocks.
Utilities, real estate, financial, material, and industrial stocks served as drags in the session.
US Index Performance On Tuesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -0.08% | 14,020.95 |
| S&P 500 Index | -0.42% | 4,496.83 |
| Dow Industrials | -0.56% | 34,641.97 |
| Russell 2000 | -2.10% | 1,880.45 |
Analyst Color:
Despite the rapid rise in interest rates and the fall in bond prices, there's no reason to believe that we are in the beginning of a sustained bear market, said LPL Financial chief fixed income strategist Lawrence Gillum.
The analyst said yields necessarily needn't keep on rising just because they fell for many years.
“In fact, at current levels, after years of artificially suppressed levels, long-term yields are back within longer-term ranges,” he said.
“And with inflation trending in the right direction and the Federal Reserve (Fed) near (at?) the end of its rate hiking campaign, we think the big move in long-term rates has already happened and interest rates are finally back to normal.”
Futures Today
Futures Performance On Wednesday
| Nasdaq 100 | -0.25% |
| S&P 500 | -0.17% |
| Dow | -0.11% |
| R2K | -0.03% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) moved down 0.14% to $448.59 and the Invesco QQQ ETF (NASDAQ:QQQ) fell 0.25% to $377.14, according to Benzinga Pro data.
Upcoming Economic Data:
The Mortgage Bankers Association is due to release the weekly mortgage applications volume data at 7 a.m. EDT. The report for the week ended Aug. 25 showed a seasonally adjusted 2.3% week-over-week increase in mortgage applications volume, rising for the first time in five weeks. The increase came despite the 30-year fixed rate remaining at a nearly 3-year high of 7.31%.
Boston Federal Reserve Bank President Susan Collins is scheduled to speak at 8:30 a.m. EDT.
The Commerce Department will release its trade balance report for July at 8:30 a.m. EDT. Economists, on average, expect a deficit of $65.50 billion in July compared to a $68 billion deficit in June.
S&P Global is due to release its final services purchasing managers' index and the composite PMI, both for August, at 9:45 a.m. EDT. The services PMI is expected to be maintained unchanged at the flash reading of 51, but down from 52.3 in July. The composite PMI is expected to dip from 52 in July to 50.4 in August.
At 10 a.m. EDT, the Insitute for Supply Management will release its non-manufacturing PMI for August, with economists estimating a reading of 52.5 for August, down slightly from 52.7 in July.
At 2 p.m. EDT, the Fed is scheduled to release the Beige Book report, which comprises anecdotal evidence of economic conditions in the 12 Federal Reserve districts.
Dallas Fed President Lorie Logan will make a public appearance at 3 p.m. EDT.
See also: Futures Vs. Options
Stocks In Focus:
- AeroVironment, Inc. (NASDAQ:AVAV) is jumping over 15% in premarket trading following the release of its quarterly results.
- GitLab, Inc. (NASDAQ:GTLB) fell over 5.50% and Zscaler, Inc. (NASDAQ:ZS) slipped more than 1%, also in reaction to their earnings reports.
- American Eagle Outfitters, Inc. (NYSE:AEO), C3.ai, Inc. (NYSE:AI), Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), GameStop Corp. (NYSE:GME) and UiPath, Inc. (NYSE:PATH) are among the companies due to release their quarterly results after the market close.
Crude oil futures fell 0.47% to $86.28 in the early European session on Wednesday following Tuesday's 1% rise achieved on the back of Russia and Saudi Arabia announcing an extension to their production cuts.
The benchmark 10-year Treasury note fell 0.018 percentage points to 4.25% on Wednesday.
Asian markets went about in a lackluster manner on Wednesday before closing on a mixed note. The uninspiring lead from Wall Street overnight and mixed domestic data sapped the risk appetite of traders in the region. European stocks were uniformly lower in late trading on Wednesday.
Read Next: New York Fed’s Inflation Gauge Holds Steady At Over 2-Year Low: Is Threat In Rearview Mirror?
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