U.S. stocks on Wednesday looked poised to make a modest rebound from the selling in technology stocks a day ago when investors were rattled by comments from Treasury Secretary Janet Yellen on the possible need for interest rates to rise.
Market participants are parsing another round of corporate quarterly reports and a labor reading from ADP on private-sector employment in April that came in a bit softer than expected but still appears to reflect a healthy recovery from the pandemic.
How are stock benchmarks doing?
Futures for the Dow Jones Industrial Average
rose 76 points to reach around 34,096, a gain of 0.2%.
S&P 500 index futures
added 17.70, or 0.4%, at 4,175.75.
added 105 points, or 0.8%, to 13,640.
On Tuesday, the Dow
rose 19.80 points, or 0.1%, to 34,133.03, bouncing close to 370 points from its intraday low of 33,765.68. The S&P 500
fell 28 points, or 0.7%, at 4,164.66, while the Nasdaq Composite
dropped 261.61 points, or 1.9%, to 13,633.50, for its largest one day decline since Wednesday, March 24, 2021.
What’s driving the market?
The U.S. gained 742,000 private-sector jobs in April, according to data from Automatic Data Processing. Economists polled by The Wall Street Journal and Dow Jones had expected payrolls to rise by 800,000, while average consensus views from economists surveyed by Econoday were forecasting a rise of 763,000, on a range of 600,000 gains to 1 million for the month. The March reading of private-sector employment marked the biggest gain in six months, up 517,000.
Still, the labor-market reading was seen as a strong one and unlikely to derail the possibility of a 1 million print for nonfarm payrolls for April in data due Friday from the U.S. Labor Department, some analysts said.
“Admittedly, the print was certainly well within the error bands for estimates and therefore did little to skew the prospects for a ~1 million NFP read on Friday,” wrote Ian Lyngen, a fixed-income analysts at BMO Capital Markets.
The ADP report comes ahead of Friday’s more closely watched reading on job creation in April from the U.S. Labor Department.
Wall Street has become more attuned to the data amid fears that the economy is overheating due to a combination on fiscal and monetary stimulus that has been put in place to help support the coronavirus-stricken business sector.
On Tuesday, those fears were raised anew when Yellen, the former head of the Federal Reserve and now U.S. Treasury Secretary, suggested that interest rates may need to rise. However, speaking at an event hosted by The Wall Street Journal’s CEO Council Summit she said she wasn’t predicting nor recommending that the Fed raise rates.
“It’s not something I’m predicting or recommending…If anybody appreciates the independence of the Fed, I think that person is me, and I note that the Fed can be counted on to do whatever is necessary to achieve their dual mandate objectives,” she said.
She also told the WSJ that inflation isn’t likely to be a problem, and the Fed can handle it if it does become an issue, helping to ease some of the concerns harbored by market participants that borrowing costs were likely to shoot higher soon.
Even though Yellen doesn’t control interest rate policy as the Treasury Secretary, her former role as the head of the central bank and her close ties with Fed Chairman Jerome Powell resulted in a more pronounced response by investors, some analysts said.
“However, the very thought of a Fed policy turnaround, albeit not from [the Federal Open Market Committee] members, continues to hurt markets,” said Alex Kuptsikevich, a senior market analyst at FxPro.
The Fed members and Powell have been mostly emphasizing a go-slow approach to raising rates and normalizing monetary policy.
Neil Wilson, chief market analyst at Markets.com said that Yellen’s comments were seen as “a significant remark since it is a break with the Fed’s new policy stance.”
Analysts also pointed out that the equity market, trading near records, has been vulnerable to a pullback after a period of sustained gains in the aftermath of the public health crisis.
A number of other Fed speakers are also on deck on Wednesday: Chicago Fed President Charles Evans will speak at the economic conference at Bard College at 9:30 a.m. He will open a conference on ‘how to help Chicago’s youth’ at 3 p.m. Eastern.
Boston Fed President Eric Rosengren is set to speak at 11 a.m., while, Cleveland Fed President Loretta Mester will speak to the Boston Economic Club at noon.
Looking ahead, investors will also being looking for readings on the service sector due at 9:45 a.m. from IHS Markit and 10 a.m. when the Institute for Supply Management releases its April report.
On the public health front, President Joe Biden on Tuesday announced a new goal of getting 70% of U.S. adults vaccinated with at least one COVID-19 vaccine dose by the Fourth of July, along with having 160 million adults fully vaccinated by that holiday.
Which companies are in focus?
- Shares of Lumber Liquidators Holdings Inc. LL were indicated down about 5% in premarket trading Wednesday, after the wood flooring retailer reported first-quarter profit that beat expectations but sales that came up short, as results continued to be impacted by tariffs on certain products imported from China.
- Hilton Worldwide Holdings Inc. shares HLT slid in premarket trade Wednesday, after the hotel chain’s earnings fell short of estimates, as the coronavirus pandemic continued to weigh on demand in January and February.
- Shares of Fresh Del Monte Produce Inc. FDP were indicated up about 4% in premarket trading Wednesday, after the fresh fruit and vegetables producer reported a first-quarter profit that more than tripled from a year ago, even as sales slipped given continued COVID-19 restrictions on food service customers and given hurricane-related supply disruptions.
- Shares of AmerisourceBergen Corp. ABC fell 0.7% in premarket trading Wednesday, after the pharmaceuticals and healthcare products company reported a first-quarter profit that beat expectations but revenue that came up a bit light.
- Shares of ODP Corp. ODP were indicated up in premarket trading Wednesday, after the office supply retailer announced plans to separate into two independent, publicly traded companies.
- New York Times Co. shares NYT edge slightly higher in premarket trade Wednesday, after the newspaper group beat earnings estimates for the first quarter and offered upbeat guidance for the second quarter.
How are other markets faring?
- In Europe, the Stoxx Europe 600 SXXP was up 1.5%, recovering some of its decline from Tuesday, while London’s FTSE 100 UKX, was trading 1.3%.
- The 10-year Treasury note yield TMUBMUSD10Y added 2,8 basis points to 1.62%.
- The greenback was little-changed, trading at around 91.283, based on the ICE U.S. Dollar Index DXY.
- Gold futures GC00 fell $5.80, or 0.3%, to trade at $1,770.10 an ounce on Comex. U.S. crude futures CL.1 rose 79 cents, or 1.2%, at $66.47 a barrel on the New York Mercantile Exchange, heading for a third straight gain.
- In Asian trade, Hong Kong’s Hang Seng Index HSI fell 0.6%. Bourses in Shanghai and Tokyo were closed.