The major U.S. index futures are pointing to a lower open on Wednesday, with stocks likely to give back ground following the strength seen in the previous session.
The downward momentum on Wall Street comes after the rally seen in the previous session lifted the Nasdaq and the S&P 500 to new record closing highs.
Traders may look to cash in on yesterday's gains amid lingering concerns about the economic impact of the recent spike in new coronavirus cases.
Negative sentiment may also be generated in reaction to a report from payroll processor ADP showing private sector employment in the U.S. increased by less than expected in the month of November.
Selling pressure may be somewhat subdued, however, as traders remain optimistic about potential coronavirus vaccines.
The U.K. has approved the vaccine candidate developed by Pfizer (PFE) and BioNTech (BNTX), with the vaccine expected to be rolled out next week.
Following the pullback seen on Monday, stocks showed a strong move back to the upside during trading on Tuesday. With the upward move on the day, the Nasdaq and the S&P 500 reached new record closing highs.
The major averages finished the session off their best levels of the day but still firmly positive. The Dow climbed 185.28 points or 0.6 percent to 29,823.92, the Nasdaq surged up 156.37 points or 1.3 percent to 12,355.11 and the S&P 500 jumped 40.82 points or 1.1 percent at 3,662.45.
Strength in the overseas markets carried over onto Wall Street following the release of upbeat Chinese manufacturing data.
China's manufacturing sector logged its strongest growth in a decade in November to indicate a sustained recovery from the Covid-19 outbreak, survey data from IHS Markit showed.
Continued optimism about a potential coronavirus vaccine also generated buying interest, with Pfizer (PFE) and BioNTech (BNTX) applying to the European Medicines Agency for conditional marketing authorization of their vaccine.
Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing a slowdown in the pace of growth in U.S. manufacturing activity.
The ISM said its manufacturing PMI dropped to 57.5 in November from 59.3 in October, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to dip to 58.0.
"Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
"But absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that will likely limit future manufacturing growth potential," he added. "Panel sentiment, however, is optimistic."
A separate report from the Commerce Department showed a bigger than expected increase in construction spending in the month of October.
In testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell called the economic outlook "extraordinarily uncertain" and noted it will depend, in large part, on the success of efforts to keep the coronavirus in check.
"The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months," Powell said. "A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities."
"Recent news on the vaccine front is very positive for the medium term," he added. "For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups."
Steel stocks saw substantial strength on the upbeat Chinese manufacturing data, with the NYSE Arca Steel Index spiking by 4.5 percent to its best closing level in well over a year.
Significant strength was also visible among gold stocks, as reflected by the 4.5 percent jump by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a sharp increase by the price of the precious metal.
Oil service stocks also turned in a strong performance despite a decrease by the price of crude oil, resulting in a 3.6 percent gain by the Philadelphia Oil Service Index.
Financial, computer hardware and airline stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.
Commodity, Currency Markets
Crude oil futures are slipping $0.19 to $44.36 a barrel after sliding $0.79 to $44.55 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,825.90, up $7 compared to the previous session's close of $1,818.90. On Tuesday, gold spiked $38.
On the currency front, the U.S. dollar is trading at 104.56 yen compared to the 104.33 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2073 compared to yesterday's $1.2071.
Asia
Asian stocks fluctuated before ending little changed on Wednesday as investors booked profits after a record November.
Sentiment was underpinned after the European Medicines Agency said it received applications for emergency approval of vaccines developed by Pfizer with BioNTech and Moderna.
In another development, a bipartisan group of U.S. lawmakers unveiled a $908 billion Covid-19 relief bill on Tuesday, keeping hopes for additional stimulus alive.
Chinese shares swung between gains and losses before ending little changed. The benchmark Shanghai Composite Index slipped 2.56 points, or 0.1 percent, to 3,449.38, while Hong Kong's Hang Seng Index edged down 35.10 points, or 0.1 percent, to 26,532.58.
Japanese shares ended little changed as investors book some profits after recent strong gains on hopes for additional stimulus and economic recovery if vaccines are rolled out fast. The Nikkei 225 Index inched up 13.44 points, or 0.1 percent, to 26,800.98, while the broader Topix closed 0.3 percent higher at 1,773.97.
Investors chased value stocks, with Takeda Pharmaceutical climbing 2.9 percent and Honda Motor spiking 5.1 percent. Staffing giant Recruit Holdings slumped 4.8 percent on reports its shareholders plan to sell $4 billion in shares in an effort to unwind cross-shareholdings.
Nishimatsuya Chain fell 2.7 percent on profit taking after steep gains so far this year. Specialty retail company Workman lost 5 percent after its November sales figures came in short of expectations.
Australian markets fluctuated before finishing on a flat note after Reserve Bank of Australia governor Philip Lowe described the rebound in economic growth that has lifted the economy out of recession as "good."
New data released by the Australian Bureau of Statistics showed that the nation's GDP grew 3.3 percent in the September quarter after a record 7.0 decline in the June quarter. In the year to September 2020, GDP declined 3.8 percent.
The benchmark S&P/ASX 200 Index inched up 1.70 points to 6,590.20, while the broader Ordinaries Index finished marginally lower at 6,811.30.
Lender ANZ rose 0.7 percent, while the other three big banks ended narrowly mixed. Mining heavyweights BHP and Rio Tinto rose about 2 percent.
Biotechnology firm Mesoblast surged 7.3 percent after it was granted fast-track designation from the U.S. Food and Drug Administration for its therapy product, Remestemcel-L, to treat acute respiratory distress syndrome.
Seoul stocks hit record highs for the second consecutive session on the back of optimism surrounding Covid-19 vaccines and U.S. stimulus. The benchmark Kospi rallied 41.65 points, or 1.6 percent, to close at 2,675.90.
Market bellwether Samsung Electronics jumped 2.5 percent and SK Hynix surged 8.5 percent after a new forecast showed the global semiconductor industry will return to growth this year despite disruptions from the Covid-19 pandemic.
Europe
European stocks have moved mostly lower on Wednesday despite a series of positive vaccine developments and increased expectations of a fiscal stimulus package in the U.S.
The French CAC 40 Index is down by 0.5 percent and the German DAX Index is down by 0.7 percent, although the U.K.'s FTSE 100 Index has bucked the downtrend and rose by 0.2 percent.
Banks and automakers have led the losses after British Prime Minister Boris Johnson's Brexit supremo Michael Gove said on Tuesday that there was a chance that Brexit trade talks may end without a deal.
Tesco shares have also fallen. The British retailer announced its decision to repay the U.K. government and the Devolved Administrations the 585 million pounds of business rates relief received in respect of the Covid-19 pandemic.
Centamin has also mvoed to the downside. The gold miner said that it targets US$100 million reduction in the gross annual cost base by 2024.
On the other hand, BioNTech SE shares have moved sharply higher after the U.K. approved its Covid-19 vaccine developed with Pfizer.
Swiss drug maker Roche Group has also moved to the upside after it received FDA emergency use authorization for a new test to detect antibodies against the SARS-CoV-2 spike protein.
In economic news, German retail sales grew more than expected in October, data released by Destatis revealed.
Retail sales increased 2.6 percent on a monthly basis, reversing a 1.9 percent drop in September. Sales were expected to climb only 1.2 percent.
Year-on-year, retail sales surged around 8.2 percent in October, bigger than economists' forecast of 5.9 percent.
U.S. Economic Reports
Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by less than expected in the month of November.
ADP said private sector employment rose by 307,000 jobs in November after climbing by an upwardly revised 404,000 jobs in October.
Economists had expected employment to increase by 410,000 jobs compared to the addition of 365,000 jobs originally reported for the previous month.
At 9 am ET, Federal Reserve Vice Chair Randal Quarles is scheduled to participate in a "Financial Regulation" discussion before the virtual Financial Times Global Banking Summit.
New York Federal Reserve President John Williams is also due to make Opening remarks in Session 2 of the "New York Fed Webinar Series on Culture - Trust and Decision-Making" at 9 am ET.
At 10 am ET, Federal Reserve Chair Jerome Powell is scheduled to testify on the Quarterly CARES Act Report to Congress before the House Financial Services Committee.
Philadelphia Federal Reserve President Patrick Harker is also due to speak on the economic outlook and participate in an interview before the virtual 2020 CIO Leaders in Alternative Investments Summit at 10 am ET.
At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended November 27th.
Crude oil inventories are expected to decrease by 2.3 million barrels after dipping by 0.8 million barrels in the previous week.
New York Fed President John Williams is due to make opening remarks in a Press Briefing on the Economic Impacts of COVID-19 on the Second District webinar at 1 pm ET.
At 2 pm ET, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.
Stocks In Focus
Shares of Salesforce (CRM) are moving significantly lower in pre-market trading after the cloud-based software company announced an agreement to acquire messaging platform Slack (WORK) for $27.7 billion. Salesforce also reported better than expected third quarter results.
Cloud storage company Box (BOX) may also come under pressure after reporting third quarter results that exceeded analyst estimates but providing disappointing guidance.
On the other hand, shares of NetApp (NTAP) are likely to see initial strength after the enterprise storage company reported fiscal second quarter results that beat expectations on both the top and bottom lines.
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