(RTTNews) - The major U.S. index futures are pointing to a higher opening on Wednesday, with stocks likely to move to the upside following the lackluster performance seen in the previous session.
Early buying interest may be generated in reaction to a report from payroll processor ADP showing much stronger than expected private sector job growth in the month of September.
Stocks may also benefit from easing concerns about the new Italian government's spending plans, which have recently weighed on the European markets.
A report from the Italian newspaper Corriere della Sera said the government expects to reduce the budget deficit from an estimated 2.4 percent of GDP in 2019 to 2.2 percent in 2020 and 2.0 percent in 2021.
Stocks fluctuated over the course of the trading session on Tuesday before eventually ending the session mixed. Despite the choppy trading on the day, the Dow reached a new record closing high.
The major averages ended the day on opposite sides of the unchanged line. While the Dow climbed 122.73 points or 0.5 percent to 26,773.94, the Nasdaq fell 37.76 points or 0.5 percent to 7,999.55 and the S&P 500 edged down 1.16 points or less than a tenth of a percent to 2,923.43.
The lackluster performance on Wall Street came as traders seemed reluctant to make significant moves amid a quiet day on the U.S. economic front.
Lingering uncertainty about trade also kept some traders on the sidelines even after President Donald Trump announced a new trade deal between the U.S., Mexico, and Canada to replace the North American Free Trade Agreement.
Trump praised the new United States-Mexico-Canada Agreement as an "historic transaction" on Monday but also said it is "too early to talk" with China about the escalating trade dispute between the two countries.
"Can't talk now because they're not ready," Trump said of China. "Because they have been ripping us for so many years, it doesn't happen that quickly."
He added, "If politically, people force it too quickly, you're not going to make the right deal for our workers and for our country."
Reports of the last-minute cancellation of U.S. Defense Secretary Jim Mattis' trip to China have added to the concerns about rising tensions.
The mixed close on Wall Street also came after Federal Reserve Chairman Jerome Powell delivered remarks at the annual meeting of the National Association for Business Economics in Boston.
Powell acknowledged concerns about the outlook for inflation due to the low unemployment rate but said the Fed stands ready to "act with authority" if inflation expectations drift materially up or down.
"This historically rare pairing of steady, low inflation and very low unemployment is testament to the fact that we remain in extraordinary times," Powell said.
He added, "Our ongoing policy of gradual interest rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times, so as to extend the current expansion, while maintaining maximum employment and low and stable inflation."
Gold stocks showed a substantial move to the upside on the day, resulting in a 3.6 percent jump by the NYSE Arca Gold Bugs Index. The index ended the session at its best closing level in a month. The rally by gold stocks came amid a sharp increase by the price of the precious metal.
Considerable strength also emerged among tobacco stocks, which rebounded strongly after trending lower in recent sessions. After closing lower for seven straight sessions, the NYSE Arca Tobacco Index surged up by 2.7 percent.
The rebound by tobacco stocks came after the FDA revealed it seized "thousands of pages of documents" in a surprise inspection of e-cigarette maker Juul's headquarters last week.
Utilities and telecom stocks also moved notably higher on the day, while retail and transportation stocks showed significant moves to the downside.
Commodity, Currency Markets
Crude oil futures are inching up $0.10 to $75.33 a barrel after dipping $0.07 to $75.23 a barrel on Tuesday. Meanwhile, after jumping $15.30 to $1,207 an ounce in the previous session, gold futures are slipping $1.10 to $1,205.90 an ounce.
On the currency front, the U.S. dollar is trading at 113.85 yen compared to the 113.65 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1542 compared to yesterday's $1.1548.
Asian stocks ended mostly lower on Wednesday as investors fretted about Italy's budgetary spending and a controversial clause in the new U.S.-Mexico-Canada trilateral pact put the focus back on the U.S.-China tariff dispute.
The U.S.-China trade dispute is unlikely to be resolved anytime soon as a provision in the new U.S.-Mexico-Canada trade agreement gives the Trump administration an effective veto over any China trade deal by Canada or Mexico.
China's financial markets remained closed for the National Day holiday. South Korean markets were also closed for a public holiday. Hong Kong's Hang Seng Index slipped 35.12 points or 0.1 percent to 27,091.26.
Japanese shares fell as the weak yen trend paused on concerns over Italian finances and automakers skidded after reporting weak U.S. sales.
The benchmark Nikkei 225 Index dropped 159.66 points or 0.7 percent to 24,110.96, while the broader Topix index tumbled 1.2 percent to finish at 1,802.73.
Automakers Honda Motor, Toyota, Mazda and Nissan Motor lost 2-4 percent after reporting lower U.S. new vehicle sales for September.
Financials also ended lower, with banks Mitsubishi UFJ Financial and Sumitomo Mitsui Financial Group ending down around 1.7 percent.
Meanwhile, Suruga Bank shares soared 11.3 percent after reports that Japan's financial regulator will order the bank to halt new property loans.
On the economic front, the latest survey from Nikkei revealed that the services sector in Japan continued to expand in September, but at a sharply slower pace, with a two-year low services PMI score of 50.2. That is down from 51.5 in August.
Australian markets finished modestly higher, led by financials and commodity-related stocks. The benchmark S&P/ASX 200 Index rose 19.90 points or 0.3 percent to 6,146.10, while the All Ordinaries Index ended up 19.40 points or 0.3 percent at 6,265.20.
Rising metal prices lifted miners, with BHP Billiton, Rio Tinto and South32 rising 1-2 percent. Gold miners also performed well, with Newcrest, Evolution Mining and St Barbara rallying 3-7 percent as gold prices inched higher on safe-haven demand amid worries surrounding the populist Italian government's fiscal plans.
Banks ended on a subdued note, adding to losses in the previous two sessions after the release of the banking royal commission's interim report. Embattled Freedom Insurance Group plummeted 25.4 percent on restructuring news.
In economic news, the latest survey from the Australian Industry Group revealed that the service sector in Australia expanded at a faster rate in September, with a Performance of Service Index score of 52.5, up from 52.2 in August.
On the other hand, Australian building approvals unexpectedly declined in August due to a slump in apartment approvals, official data showed
European stocks have rebounded on Wednesday after reports that Italy plans to reduce its budget deficit by 2.0 percent in 2021.
Italian newspaper Corriere della Sera reported that the government estimates a budget deficit of 2.4 percent of GDP for 2019 and then slash it to 2.2 percent for 2020. Italian bond yields fell after the report, helping lift banking stocks.
The French CAC 40 Index and the U.K.'s FTSE 100 Index are climbing by 0.7 percent and 0.6 percent, respectively, while the German markets are closed for a public holiday.
Vodafone Group has advanced in London after it acquired spectrum in Italy to enable the deployment of new 5G technology for a total cost of 2.4 billion euros.
On the other hand, shares of Tesco have fallen sharply after the grocer reported its first-half results.
In economic news, the euro area private sector expanded at the slowest pace in four months in September on weak manufacturing activity, survey data from IHS Markit showed.
The final composite output index dropped to 54.1 from 54.5 in August, coming in slightly below the flash estimate of 54.2.
September's increase in activity, which marked the sixty-third successive month of growth, masked divergent trends between the manufacturing and services economies.
Eurostat figures showed that Eurozone retail sales dropped unexpectedly in August, reflecting weakness in food turnover.
Retail sales decreased 0.2 percent month-on-month following a 0.6 percent drop in July. Economists had forecast a 0.2 percent increase for August. This was the second consecutive decrease in sales.
Meanwhile, British service sector activity maintained strong growth momentum in September, survey data from IHS Markit showed.
The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index dropped to 53.9 from 54.3 in August. The index was forecast to fall to 54.0.
U.S. Economic Reports
Reflecting strong job growth in both the goods-producing and service-providing sectors, payroll processor ADP released a report showing a much bigger than expected increase in U.S. private sector employment in the month of September.
ADP said private sector employment jumped by 230,000 jobs in September after climbing by an upwardly revised 168,000 jobs in August.
Economists had expected employment to increase by about 185,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
At 10 am ET, the Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of September.
The ISM's non-manufacturing index is expected to edge down to 58.0 in September from 58.5 in August, although a reading above 50 would still indicate growth in the service sector.
The Energy Information Administration is due to release its report on oil inventories in the week ended September 28th at 10:30 am ET.
Crude oil inventories are expected to rise by 1.1 million barrels after climbing by 1.9 million barrels in the previous week.
At 12 pm ET, Philadelphia Federal Reserve President Patrick Harker is scheduled to deliver closing remarks at the "Reinventing Our Communities: Investing in Opportunity" Conference in Baltimore, Maryland.
Fed Governor Lael Brainard is due to give a speech at the FedPayments Improvement Community Forum in Chicago, Illinois, at 2 pm ET.
At 2:15 pm ET, Cleveland Fed President Loretta Mester is scheduled to give the keynote address at the sixth annual Community Banking in the 21st Century research and policy conference in St. Louis, Missouri.
Fed Chairman Jerome Powell is due to participate in a discussion with Judy Woodruff at the Atlantic Festival in Washington, D.C. at 4 pm ET.
At 8 pm ET, Dallas Fed President Robert Kaplan is scheduled to participate in a moderated Q&A session at the University of Kansas School of Business Anderson Chandler Lecture in Lawrence, Kansas.
Stocks In Focus
Shares of J.C. Penney (JCP) are moving sharply higher in pre-market trading after the department store chain named former Jo-Ann Stores executive Jill Soltau as its new CEO.
Homebuilder Lennar (LEN) may also see early strength after reporting fiscal third quarter earnings that exceeded analyst estimates.
Shares of Tempur Sealy (TPX) are also likely to see an initial jump after a report from Reuters said competitor Mattress Firm is close to filing for bankruptcy.
On the other hand, shares of Epizyme (EPZM) are likely to come under pressure after the biopharmaceutical company announced the pricing of an underwritten public offering of 8.3 million shares of its common stock at a price of $9.00 per share.
Athletic apparel and footwear maker Nike (NKE) may also move to the downside after HSBC downgraded its rating on the company's stock to Hold from Buy.
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