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 yesterday's sell-off.
Uncertainty about the near-term outlook for the markets may lead to choppy trading amid ongoing concerns about the outlook for interest rates.
Some traders may look to pick up stocks at reduced levels, while others may stick to the sidelines ahead of the release of the closely watched monthly jobs report on Friday.
Economists currently expect employment to jump by 203,000 jobs in February after surging by 517,000 jobs in January, while the unemployment rate is expected to hold at 3.4 percent.
The jobs data could have a significant impact on the outlook for interest rates, as the Federal Reserve has warned about labor market tightness.
Ahead of the Labor Department's report on Friday, payroll processor ADP released a report this morning showing private sector employment in the U.S. increased by more than expected in the month of February.
ADP said private sector employment jumped by 242,000 jobs in February after climbing by an upwardly revised 119,000 jobs in January.
Economists had expected private sector employment to increase by 200,000 jobs compared to the addition of 106,000 jobs originally reported for the previous month.
Meanwhile, the report said annual wage growth for those remaining in their jobs slowed to 7.2 percent in February, reflecting the slowest growth in 12 months.
ADP said annual wage growth for job changers also decelerated to 14.3 percent in February from 14.9 percent in January.
"There is a tradeoff in the labor market right now," said ADP chief economist Nela Richardson. "We're seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated."
She added, "The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near term."
With remarks by Federal Reserve Chair Jerome Powell renewing concerns about the outlook for interest rates, stocks moved sharply lower during trading on Tuesday. The major averages all showed significant moves to the downside after ending Monday's trading narrowly mixed.
The major averages climbed off their worst levels late in the session but still posted steep losses. The Dow plunged 574.98 points or 1.7 percent at 32,856.46, the Nasdaq tumbled 145.40 points or 1.3 percent to 11,530.33 and the S&P 500 dove 62.05 points or 1.5 percent to 3,986.37.
The sell-off on Wall Street reflected a negative reaction to Powell's highly anticipated semiannual monetary policy testimony before the Senate Banking Committee.
Citing stubbornly elevated inflation and stronger than expected economic data, Powell told lawmakers the "ultimate level of interest rates is likely to be higher than previously anticipated."
Powell also said the Fed would be prepared to reaccelerate the pace of rate hikes if the totality of incoming data were to indicate that faster tightening is warranted.
Additionally, the Fed chief reiterated the central bank will likely need to maintain a restrictive stance of monetary policy for "some time" in order to restore price stability.
"The historical record cautions strongly against prematurely loosening policy," Powell said. "We will stay the course until the job is done."
The Fed's next monetary policy meeting is scheduled for March 21-22, with CME Group's FedWatch Tool currently indicating a 70.5 percent chance of 50 basis point rate increase and a 29.5 percent chance of 25 basis point rate hike.
"U.S. stocks did not stand a chance after Fed Chair Powell convinced markets that policymakers are comfortable taking this rate hiking campaign much higher," said Edward Moya, senior market analyst at OANDA.
He added, "Powell is not taking any chances and wants to send home a clear message that the Fed will do whatever it takes to bring down inflation."
Gold stocks turned in some of the worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 4.0 percent to a nearly four-month closing low. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.
Substantial weakness was also visible among banking stocks, as reflected by the 3.9 percent nosedive by the KBW Bank Index. The index tumbled to its lowest closing level in well over a month.
Oil service stocks also saw significant weakness amid a sharp decline by the price of crude oil, resulting in a 2.5 percent slump by the Philadelphia Oil Service Index.
Commercial real estate, steel and biotechnology stocks also moved notably lower on the day, while airline stocks were among the few groups to buck the downtrend.
Commodity, Currency Markets
Crude oil futures are falling $0.43 to $77.15 a barrel after plunging $2.88 to $77.58 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,817.30, down $2.70 compared to the previous session's close of $1,820. On Tuesday, gold dove $34.60.
On the currency front, the U.S. dollar is trading at 137.07 yen compared to the 137.16 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0542 compared to yesterday's $1.0549.
Asia
Asian stocks tumbled on Wednesday as hawkish comments from Fed Chair Jerome Powell on the first day of his semiannual two-day testimony before Congress stoked concerns about interest rates being hiked by 50 basis points at the March FOMC meeting.
Resilient U.S. economic data since start of this year has raised the possibility of the U.S. central bank returning to large rate hikes, Powell acknowledged.
According to CME's FedWatch tool, markets now price in an almost 70 percent chance of a 50-basis point rate hike at the Fed's March 21-22 policy meeting.
Most Asian currencies sank amid the broad dollar strength, as focus shifted to the release of the U.S. nonfarm payrolls report later in the week and next week's inflation figures.
Gold prices extended their fall, while oil steadied after suffering heaving losses in the overnight session.
China's Shanghai Composite Index fluctuated before finishing marginally lower. Hong Kong's tech-heavy Hang Seng Index tumbled 2.4 percent to close at 20,051.25.
Japanese shares rose for a fourth straight session to reach a 3-1/2-month high as a weakening yen buoyed the outlook for exporters. Retailers also posted strong gains on optimism over demand from Chinese travelers after Japan eased its coronavirus border measures.
The Nikkei 225 Index rose 0.5 percent to 28,444.19, while the broader Topix ended 0.3 percent higher at 2,051.21.
Mazda Motor jumped 3 percent as the yen hit a nearly three-month low at 137.90 to the greenback.
Fast Retailing, Front Retailing, Takashimaya and Isetan Mitsukoshi Holdings rallied 2-4 percent. Nissan Motor fell 3.5 percent after a rating cut by S&P to junk status.
Seoul stocks fell sharply to snap a five-day winning streak on U.S. rate hike fears. The Kospi closed 1.3 percent lower at 2,431.91, dragged down by large-cap tech heavyweights.
Australian markets ended lower, with tech, mining and energy stocks pacing the decliners. The benchmark S&P/ASX 200 Index dropped 56.90 points, or 0.8 percent, to 7,307.80, while the broader All Ordinaries Index ended 0.8 percent lower at 7,503.90.
Europe
European stocks have moved to the upside on Wednesday, regaining ground following the weakness seen in the previous session after hawkish messages from the U.S. Federal Reserve and the European Central Bank.
It is now believed that the Fed would revert to a 50-basis point rate hike at the March 21-22 policy meeting instead of 25 basis points expected earlier. The ECB has already flagged a rate increase of 50 basis points in March.
While the German DAX Index has risen by 0.4 percent, the U.K.'s FTSE 100 Index is up by 0.1 percent and the French CAC 40 Index is just above the unchanged line.
Admiral Group shares have moved sharply lower. The British financial services provider proposed a lower dividend for the year after reporting a sharp fall in profit.
Hill & Smith, a provider of infrastructure and safe transport solutions, has also slumped despite reporting a 62 percent increase in its fiscal 2022 profit before tax.
Similarly, financial services group Legal & General has also moved to the downside despite reporting strong growth in profit in 2022.
French aerospace and defense company Thales Group has also tumbled despite posting higher earnings and sales for 2022.
German sportswear firm Adidas has also declined after posting disappointing 2022 results, reflecting geopolitical, macroeconomic and company-specific challenges.
Flavor and fragrance maker Symrise has also moved lower after forecasting 2023 core profit margin slightly below market expectations.
On the other hand, Continental AG has moved sharply higher after forecasting improved earnings and margins in 2023.
In economic news, German industrial production rebounded in January on strong growth in intermediate goods output, data from Destatis revealed.
Industrial production grew by a more-than-expected 3.5 percent on a monthly basis, offsetting the revised 2.4 percent decline in December. Output was forecast to grow 1.4 percent.
Year-on-year, the decline in industrial output halved to 1.6 percent from 3.3 percent in the previous month.
U.S. Economic Reports
A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by more than expected in the month of February.
ADP said private sector employment jumped by 242,000 jobs in February after climbing by an upwardly revised 119,000 jobs in January.
Economists had expected private sector employment to increase by 200,000 jobs compared to the addition of 106,000 jobs originally reported for the previous month.
Meanwhile, the report said annual wage growth for those remaining in their jobs slowed to 7.2 percent in February, reflecting the slowest growth in 12 months.
ADP said annual wage growth for job changers also decelerated to 14.3 percent in February from 14.9 percent in January.
A separate report released by the Commerce Department showed the U.S. trade deficit saw a modest increase in the month of January.
The Commerce Department said the trade deficit widened to $68.3 billion in January from a revised $67.2 billion in December.
Economists had expected the trade deficit to climb to $68.9 billion from the $67.4 billion originally reported for the previous month.
The wider trade deficit came as the value of exports surged by 3.4 percent to $257.5 billion, while the value of imports jumped by 3.0 percent to $325.8 billion.
Federal Reserve Chair Jerome Powell is scheduled to deliver his semiannual monetary policy testimony before the House Financial Services Committee at 10 am ET.
Also at 10 am ET, the Labor Department is due to release its report on job openings in the month of January. Job openings are expected to decrease to 10.6 million in January from 11.0 million in December.
The Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 3rd at 10:30 am ET.
Crude oil inventories are expected to edged down by 0.3 million barrels after rising by 1.2 million barrels in the previous week.
At 1 pm ET, the Treasury Department is due to announce the results of this month's auction of $32 billion worth of ten-year notes.
The Federal Reserve is due to release the Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, at 2 pm ET.
Stocks In Focus
Shares of CrowdStrike (CRWD) are seeing significant pre-market strength after the cybersecurity firm reported fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.
Occidental Petroleum (OXY) may also move to the upside on news Warren Buffett's Berkshire Hathaway has increased its already large stake in the company.
Meanwhile, shares of Stitch Fix (SFIX) are likely to come under pressure after the appeal company reported a wider than expected fiscal second quarter loss.
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