The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the mixed performance seen in the previous session.
Traders may be reluctant to make significant moves as they look ahead to the release of key U.S. inflation data in the comings days.
The Labor Department’s reports on consumer and producer price inflation, which are due to be released on Thursday and Friday, respectively, could have a significant impact on the outlook for interest rates.
With economists expecting the reports to show slowdowns in the annual rate of core price growth, the data could bolster optimism about near-term rate cuts by the Federal Reserve.
However, if the data surprises to the episode, it could add to recent skepticism about whether the Fed will begin cutting rates in March.
Later in the day, trading could be impacted by reaction to the results of the Treasury Department’s auction of $37 billion worth of ten-year notes.
The results of the auction could affect treasury yields, which have recently been a key driver of trading on Wall Street. The ten-year yield is moving moderately lower ahead of the release of the auction results.
Stocks moved mostly lower in early trading on Tuesday but regained ground over the course of the session. The major averages climbed well off their worst levels of the day, with the tech-heavy Nasdaq peeking above the unchanged line.
The major averages finished the day mixed. While the Nasdaq inched up 13.94 points or 0.1 percent to 14,857.71, the S&P 500 edged down 7.04 points or 0.2 percent to 4,756.50 and the Dow fell 157.85 points or 0.4 percent to 37,525.16.
The early weakness on Wall Street came as some traders looked to cash in on Monday’s strong gains amid lingering uncertainty about the outlook for interest rates.
While the Federal Reserve is widely expected to leave interest rates unchanged later this month, traders have recently become increasingly skeptical about whether the central bank will cut rates in March.
CME Group’s FedWatch Tool still indicates a 60.9 percent chance the Fed will lower rates by a quarter point in March, but that figure is well below recent highs.
Selling pressure waned over the course of the session, however, as traders seemed reluctant to make move significant bets ahead of the release of key inflation data later this week.
On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit unexpectedly shrank in the month of November.
The report said the trade deficit narrowed to $63.2 billion in November from a revised $64.5 billion in October. Economists had expected the trade deficit to widen to $65.0 billion from the $64.3 billion originally reported for the previous month.
The unexpectedly smaller trade deficit came as the value of imports tumbled by 1.9 percent to $316.9 billion, while the value of export slumped by 1.9 percent to $253.7 billion.
Despite the recovery attempt by the broader markets, tobacco stocks continued to see substantial weakness on the day, with the NYSE Arca Tobacco Index plunging by 3.7 percent.
Significant weakness also remained visible among oil service stocks, as reflected by the 2.4 percent slump by the Philadelphia Oil Service Index. The weakness in the sector came despite a rebound by the price of crude oil.
Steel stocks also continued to see considerable weakness on the day, moving notably lower along with airline, brokerage and gold stocks.
On the other hand, networking stocks showed a strong move to the upside, driving the NYSE Arca Networking Index up by 1.1 percent.
Juniper Networks (JNPR) led the sector higher, soaring by 21.8 percent after a report from the Wall Street Journal said Hewlett Packard Enterprise (HPE) is in advanced talks to buy the company for about $13 billion.