Benzinga - by Shanthi Rexaline, Benzinga Editor.
A negative sentiment might linger on Wall Street on Wednesday, as evidenced by stock futures, after Advanced Micro Devices, Inc.‘s (NASDAQ:AMD) underwhelming quarterly report, exerting pressure on the tech sector and the broader market. However, the afternoon’s Federal Reserve interest rate decision and subsequent press conference by Chairman Jerome Powell could be the key catalyst that ultimately determines the session’s direction.
Despite potential short-term headwinds, some analysts view the April market pullback as a necessary correction after a strong rally, paving the way for renewed momentum in the coming months.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.72% |
| S&P 500 | -0.43% |
| Dow | -0.21% |
| R2K | -0.60% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) fell 0.41% to $499.92, and the Invesco QQQ ETF (NASDAQ:QQQ) slumped 0.75% to $421.40, according to Benzinga Pro data.
Cues From Previous Session:
Inclement economic data weighed down on the market on Tuesday, as the major averages reversed course, snapping a two-session advance. The employment cost index – a measure of wage-induced inflation rose more than expected in the first quarter, Chicago region’s manufacturing activity sunk further into contraction territory and consumer confidence fell below a threshold that demarcates receding and improving sentiment, three separate reports showed.
Bond yields spiked, exerting further downward pressure on stocks.
The averages opened narrowly mixed and moved roughly sideways in early trading. The indices declined steadily through the remainder of the session, ending notably lower for the day. The sell-off was broad-based, with IT, energy, and consumer discretionary stocks serving as big drags.
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -2.04% | 15,657.82 |
| S&P 500 Index | -1.57% | 5,035.69 |
| Dow Industrials | -1.49% | 37,815.92 |
| Russell 2000 | -2.09% | 1,973.91 |
For the month, the indices fell 4.41%, 4.16%, 5.00% and 7.09%, respectively, with the S&P 500 snapping a five-month winning run.
Insights From Analysts:
Powell alone can help lift some of the overhang surrounding the rate outlook and this could be the need of the hour, according to an analyst. Charlie Ripley, Senior Investment Strategist for Allianz Investment Management, said, “Market sentiment continues to waver on inflation-related data sets,” said the analyst, adding that data showing a jump in employment costs left an “unsavory taste in the mouth of investors.”
“The continued realization that sticky service-related inflation metrics are taking a bite out of the Fed's rate-cutting plans has investors on edge for the time being and this is squarely being reflected in the sell-off of both bonds and equities,” Ripley said.
He expects Powell to help shed some light on the current uncertainty surrounding the path of policy rates.
Carson Group’s Ryan Detrick, meanwhile, isn’t worried about the normally bullish April struggling this year. The S&P 500 Index has been higher for five months in a row heading into it and some type of break was warranted, he said.
“In fact, we wouldn't be surprised if stocks consolidated for another month or so, working off some of the historic rebound off the late-October lows. We do not expect major weakness, but a break makes sense,” he added.
Detrick raised the specter of a summer rally, and strength during these six months, given it is an election year and stocks have been strong so far this year.
Upcoming Economic Data:
- ADP is due to release its private payroll data for April at 8:15 a.m. EDT. Economists, on average, expect the sector to have added 183,000 jobs during the month, flattish with the previous month.
- The Institute for Supply Management is scheduled to release its manufacturing purchasing managers’ index for March at 10 a.m. EDT. The consensus estimate calls for a reading of 49.9, suggesting contraction, down from 50.3 in February.
- The Labor Department will release the results of its Job Openings and Labor Turnover survey at 10 a.m. EDT, with the average economists’ estimate for job openings at 8.7 million for March, down from 8.8 million in February.
- The Commerce Department’s construction spending report, due at 10 a.m. EDT, will likely show a 0.3% month-over-month increase in spending in March. This compares to a 0.3% drop in the previous month.
- The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EDT.
- The Fed will release its post-meeting policy statement at 2 p.m. EDT and this will be followed by Powell’s press conference at 2:30 p.m. EDT.
Stocks In Focus:
- AMD fell over 6.5% in premarket trading after the company reported a small first-quarter beat and issued a lukewarm forward guidance. Peer Nvidia Corp. (NASDAQ:NVDA) and other chip stocks moved in sympathy.
- Amazon.com, Inc. (NASDAQ:AMZN) climbed over 2% following its first-quarter results.
- Other stocks moving on earnings are Pinterest, Inc. (NYSE:PINS) (up about 18%), Starbucks Corporation (NASDAQ:SBUX) (down over 12%), Skyworks Solutions, Inc. (NASDAQ:SWKS) (down about 13%), and Super Micro Computer, Inc. (NASDAQ:SMCI) (down about 9%).
- Bausch + Lomb Corporation (NYSE:BLCO), CVS Health Corporation (NYSE:CVS), DuPont de Nemours, Inc. (NYSE:DD), The Estée Lauder Companies Inc. (NYSE:EL), Garmin Ltd. (NYSE:GRMN), GSK plc (NYSE:GSK), The Kraft Heinz Company (NASDAQ:KHC), KKR & Co. Inc. (NYSE:KKR), Logitech International S.A. (NASDAQ:LOGI), Mastercard Incorporated (NYSE:MA), Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH), Pfizer, Inc. (NYSE:PFE), Wingstop Inc. (NASDAQ:WING) and Yum! Brands, Inc. (NYSE:YUM) are among the notable companies reporting earnings ahead of the market opening.
- Notable names reporting after the close are Albemarle Corporation (NYSE:ALB), The Allstate Corporation (NYSE:ALL), Beazer Homes USA, Inc. (NYSE:BZH), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Devon Energy Corporation (NYSE:DVN), eBay Inc. (NASDAQ:EBAY), Etsy, Inc. (NASDAQ:ETSY), First Solar, Inc. (NASDAQ:FSLR), Freshworks Inc. (NASDAQ:FRSH), Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), Marathon Oil Corporation (NYSE:MRO), MetLife, Inc. (NYSE:MET), MGM Resorts International (NYSE:MGM), NETGEAR, Inc. (NASDAQ:NTGR), Qorvo, Inc. (NASDAQ:QRVO), Sunnova Energy International Inc. (NYSE:NOVA), Upwork Inc. (NASDAQ:UPWK), Wolfspeed, Inc. (NYSE:WOLF) and Zillow Group, Inc. (NASDAQ:ZG).
Crude oil futures fell for a third straight session, as the price pulled back toward the $80-a-barrel mark, and gold futures were little changed with a negative bias. An ounce of gold traded for around $2,300.
The 10-year note yield edged up and was around the 4.69% mark.
Bitcoin (CRYPTO: BTC) pulled back sharply toward the $57K mark.
Most global equity markets remained closed for the Labor Day holiday. The open ones, including Japan, New Zealand, and Australia, settled lower ahead of the U.S. Fed decision.
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