Futures trading indicates that the two-day rally seen in the market may stall, as traders pause for a breather and harp on economic fundamentals.
On Tuesday, the major U.S. averages gap-opened sharply higher. Consolidating the gains over the course of the sessions, each of them closed 2.8% or above.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | +3.34% | 11,176.41 | |
| S&P 500 Index | +3.06% | 3,790.93 | |
| Dow Industrials | +2.80% | 30,316.32 |
The S&P 500’s 3.06% advance was its best one-day gain since May 2020. Thanks to the stellar gains of the past two sessions, the major averages are now perched at 2-week highs. The catalyst that drove the latest rally is an expectation of a dovish stance from the Fed amid recent soft economic data.
Not everyone is convinced that the rally holds firm ground. The ralIy is a welcome change but does not point to any “fundamental shift in the underlying economic forces that to-date have dominated sentiment," Daniel Berkowitz, senior investment officer at Prudent Management Associates said.
Berkowitz did not rule out disappointment as the quarter rolls on. The analyst sees the upcoming third-quarter earnings season, the advance third-quarter GDP data due on October 27 and the mid-term elections as key data points that could render some clarity to the near- to medium-term outlook.
| Index | Performance (+/-) | |
|---|---|---|
| Nasdaq 100 Futures | -0.90% | |
| S&P 500 Futures | -0.91% | |
| Dow Futures | -0.94% | |
| R2K Futures | -1.32% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust(NYSE:SPY) fell 0.95% to $374.38, and Invesco QQQ Trust (NASDAQ:QQQ) was down 0.87% to $279.68, according to Benzinga Pro data.
On the economic front, traders get to digest ADP’s U.S. private payrolls report for September, which is due at 8:15 a.m. EDT. Economists expect the sector to have added 200,000 jobs during the month, faster than the 132,000-addition seen in the previous month. The ADP report is often seen as a precursor to Labor Department’s non-farm payrolls report, although the two metrics are not perfectly correlated.
At 8:30 a.m. EDT, the Commerce Department is set to release the trade balance report for August, with consensus modeling a deficit of $68.1 billion compared to July’s deficit of $70.7 billion.
S&P’s September U.S. service sector purchase managers’ index is due at 9:45 a.m. EDT followed by the corresponding reading compiled by the Institute for Supply Management at 10 a.m. EDT.
Atlanta Federal Reserve Bank President Raphael Bostic, who is also a member of the Federal Open Market Committee – the policy-setting arm of the Fed – is due to 4 pm. ET.
See also: Fear Among US Investors Is Decreasing, Here's Why
Stocks In Focus
- Tesla, Inc. (NASDAQ:TSLA) and Twitter, Inc. (NYSE:TWTR) could continue to be in the spotlight after Elon Musk did a U-turn and renewed his interest in the social media platform. Both stocks were trading lower in premarket trading.
- Amazon, Inc. (NASDAQ:AMZN) was slipping after a New York Times report said the ecommerce giant is freezing hiring in retail business.
- Ford Motor Company (NYSE:F) rose over 2%, extending the previous day’s momentum following the release of its U.S. sales for September.
Commodities, Global Equity Markets:
Crude oil futures are retreating modestly as traders look ahead to the outcome of the OPEC+ meeting that is underway. Black gold climbed solidly in two sessions ahead of the key meeting.
Asian stocks locked step with their U.S. counterparts, rallying for a second straight day. Hong Kong’s Hang Seng Index climbed over 5%, as it reopened after Tuesday’s public holiday.
The Chinese and Indian markets remained closed for trading.
The European markets opened lower and saw some volatility in early trading before moving decisively lower in late morning trading.
