The negative sentiment that has enveloped the equity market in recent sessions persists amid a lack of clarity regarding the interest rate trajectory. Stock futures point to a narrowly mixed start on Wednesday. A labor market reading, some service sector activity data, and a couple of Federal Reserve speeches are among the key market-moving events of the session. Oil prices tumbled, potentially weighing down on energy stocks. Risk aversion may also come into play amid the brewing political uncertainty following the ouster of Kevin McCarthy (R-Calif) as House Speaker.
If the data points support a pullback in yields, bargain hunting could kick in, setting the stage for the averages to bounce back from their four-month lows.
Cues From Tuesday’s Trading:
Stubbornly high bond yields and data showing much more than expected job openings for August aggravated the market weakness on Tuesday. The major averages opened lower and fell sharply in the morning session. The selling pressure decelerated in the afternoon session and yet the indices closed notably lower for the session.
The major averages all pulled back to a four-month low, while the Russell 2000 Index ended at its lowest since March 23.
The selling was broad-based, although defensive utility stocks gained some ground. Real estate, financial, IT, consumer discretionary, and communication services stocks were among the worst hit.
US Index Performance On Tuesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -1.87% | 13,059.47 |
| S&P 500 Index | -1.37% | 4,229.45 |
| Dow Industrials | -1.29% | 33,002.38 |
| Russell 2000 | -1.69% | 1,727.15 |
Analyst Color:
“With a market keenly focused on the path of interest rates, any data release that points to the possibility of a stronger wage environment is cause for concern to a market that is anxiously deciphering when — and hopefully “if” — the Fed is near the end of its intense rate hiking campaign,” said LPL Financial Chief Global Strategist Quincy Krosby.
“Friday’s payroll data should help clarify if the labor market is as strong as the JOLTS report implies, because at this stage of the Fed’s “last mile” to untangle the remaining “sticky” inflation, a stronger than expected report will be the last thing the Fed wants to see, not to mention financial markets,” he added.
Congressional turmoil also seems to be getting on some nerves. “Investors are sick and tired of being jerked around with out-of-control spending, the inability to govern, and the constant dragging of markets to the edge of economic calamity with shutdowns and debt ceiling nonsense,” said Jamie Cox, Managing Partner, at Harris Financial Group.
Futures Today
Futures Performance On Wednesday
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.12% |
| S&P 500 | +0.05% |
| Dow | +0.02% |
| R2K | -0.33% |
QQQ) fell 0.13% to $354.47, according to Benzinga Pro data.
Upcoming Economic Data:
The ADP is due to release the results of its private payroll survey for September. Economists, on average, expect payroll gains of 153,000 for September compared to August’s number of 177,000. The ADP number and the Bureau of Labor Statistics non-farm payroll number, due Friday, may not be perfectly correlated although the former could give directional cues.
S&P Global is set to release the results of the final service sector survey at 9:45 a.m. EDT. The consensus estimates call for the services purchasing managers’ index to come in at 50.2 for September and the composite PMI to read as 50.1, suggesting the business sector barely expanded.
The Institute of Supply Management will release its non-manufacturing PMI for September at 10 a.m. EDT. Economists expect the index, based on the national survey, to decline from 54.5 in August to 53.6 in September.
The Commerce Department is scheduled to release the factory goods orders report for August at 10 a.m. EDT. The consensus estimate calls for a 0.2% month-over-month increase in factory orders for August, reversing the 2.1% drop in July.
Fed Governor Michelle Bowman is due to speak at 10:25 a.m. EDT.
Chicago Fed President Austan Goolsbee will deliver the opening remarks at the Banking Symposium at 10:30 a.m. EDT.
The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EDT.
See Also: Best Futures Trading Software
Stocks In Focus:
- Apple, Inc. (NASDAQ:AAPL) fell over 1% in premarket trading after KeyBanc Capital Markets analyst Brandon Nispel downgraded the stock from Overweight to Sector Weight.
- Palantir Technologies, Inc. (NYSE:PLTR) climbed over 2% after the data analytics company announced a collaboration with PwC that will combine Palantir’s latest AI capabilities with PwC’s industry experience to help clients realize value with data and AI-enabled operations.
- Intel Corp. (NASDAQ:INTC) added nearly 3% after it announced plans to separate its Programmable Solutions Group operations into a standalone business.
- Acuity Brands, Inc. (NYSE:TLRY) are among the companies due to report their quarterly results ahead of the market open.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures slumped 1.91% to $87.53 in early European session on Wednesday, reversing all of the 0.46% advance made on Tuesday.
The benchmark 10-year Treasury note yielded 4.823%, up 0.023 percentage points. On Tuesday, the yield on the benchmark breached the 4.8% handle to the upside for the first time since July 30, 2007. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), the largest long-dated bond ETF, is continuing to see a drawdown as it is edging down 0.14% to $84.94.
The major Asian markets fell across the board, with Japan’s Nikkei 225 average and South Korea’s Kospi leading the slide. The negative close on Wall Street overnight in the wake of surging bond yields cast a cloud on the markets in the region. The Chinese market remained closed on account of a weeklong holiday.
Among a central bank decision from the region, the Reserve Bank of New Zealand kept its key interest rates unchanged at 5.50%.
European stocks saw uneasy gains by late-morning trading on Wednesday.
Read Next: 10-Year Treasury Yields At 16-Year Highs Shake Markets: How Far Can They Climb?
