The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to see further downside following the steep drop seen in the previous session.
Concerns the Federal Reserve may hold off on lowering interest rates may continue to weigh on the markets following the release of more upbeat U.S. economic data.
Payroll processor ADP released a report this morning showing stronger than expected private sector job growth in the U.S. in the month of March.
ADP said private sector employment jumped by 184,000 jobs in March after climbing by an upwardly revised 155,000 jobs in February.
Economists had expected private sector employment to increase by 148,000 jobs compared to the addition of 140,000 jobs originally reported for the previous month.
The report also said the annual rate of pay growth for job-changers accelerated dramatically to 10.0 percent in March.
“Inflation has been cooling, but our data shows pay is heating up in both goods and services,” said ADP chief economist Nela Richardson.
Treasury yields have risen following the release of the data, with the yield on the benchmark ten-year note seeing further upside after ending Tuesday’s trading at a four-month closing high.
A steep drop by shares of Intel (NASDAQ:INTC) may also weigh on Wall Street, as the semiconductor giant is plunging by 5.2 percent in pre-market trading.
Intel is under pressure after disclosing a $7 billion operating loss by its semiconductor manufacturing business in 2023, wider than the $5.2 billion operating loss the year before.
Overall trading activity may be somewhat subdued, however, as traders look ahead to remarks by Federal Reserve Chair Jerome Powell this afternoon.
After moving sharply lower early in the session, stocks continue to see considerable weakness throughout the trading day on Tuesday. The Dow and the S&P 500 added to Monday’s losses, pulling back further off the record closing highs set last Thursday.
The major averages ended the session off their worst levels of the day but still firmly in the red. The Dow tumbled 396.61 points or 1.0 percent to 39,170.24, the Nasdaq slumped 156.38 points or 1.0 percent to 16,240.45 and the S&P 500 slid 37.96 points or 0.7 percent to 5,205.81.
The early sell-off on Wall Street partly reflected renewed uncertainty about the outlook for interest rates as traders digested recent U.S. economic data.
Last Friday’s closely watched inflation data combined with Monday’s stronger than expected manufacturing data have raised questions about whether the Federal Reserve will lower rates in June.
Treasury yields moved sharply higher in reaction to the data on Monday and saw further upside during today’s session, with the yield on the benchmark ten-year note reaching a four-month high.
Traders may also have taken the opportunity to cash in on some of the recent strength in the markets ahead of remarks by Fed Chair Jerome Powell on Wednesday and the release of the monthly jobs report on Friday.
On the U.S. economic front, the Commerce Department released a report showing a significant rebound in factory orders in the month of February.
The Commerce Department said factory orders surged by 1.4 percent in February after plunging by a revised 3.8 percent in January.
Economists had expected factory orders to jump by 1.0 percent compared to the 3.6 percent slump originally reported for the previous month.
Networking stocks moved sharply lower over the course of the session, resulting in a 2.7 percent nosedive by the NYE Arca Networking Index.
Substantial weakness was also visible among housing stocks, with the Philadelphia Housing Sector Index plunging by 2.5 percent. The index pulled back further off last Thursday’s record closing high.
Airline stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 1.8 percent.
Healthcare, computer hardware and semiconductor stocks also saw considerable weakness, while energy stocks bucked the downtrend amid a sharp increase by the price of crude oil.