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Upward Momentum May Propel Stocks To New Record Highs

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks likely to add to the modest gains posted in the previous session.

Traders seem committed to continuing to push stocks to new record highs despite concerns about the economic impact of the coronavirus outbreak.

While China's National Health Commission reported 2,015 new confirmed coronavirus cases and 97 additional deaths, a recent slowdown in the rate of growth in new infections has led to optimism the outbreak is being contained.

With traders consistently shrugging off concerns about the outbreak and a lack of major U.S. economic news to drive the markets, the path of least resistance for stocks still seems to be the upside.

Shortly after the start of trading, Federal Reserve Chairman Jerome Powell is scheduled to begin his testimony before the Senate Banking Committee.

Powell's prepared remarks are likely to mirror those he delivered before the House Financial Services Committee on Tuesday, although traders are still likely to keep an eye on the Q&A portion of his testimony.

Stocks showed a notable move to the upside in early trading on Tuesday but gave back some ground over the course of the session. The major averages pulled back well off the record intraday highs set early in the session, although the Nasdaq and the S&P 500 still ended the day at new record closing highs.

While the Nasdaq edged up 10.55 points or 0.1 percent to 9,638.94 and the S&P 500 rose 5.66 points or 0.2 percent to 3,357.75, the Dow spent the latter part of the session bouncing back and forth across the unchanged before closing down 0.48 points or less than a tenth of a percent at 29,276.34.

The early upward move on Wall Street came as traders continued to shrug off concerns about the economic impact of the deadly coronavirus outbreak.

Several companies have already warned about the impact of the virus, but traders seem confident the U.S. economy is strong enough to withstand the negative effects.

Recent reports suggesting the rate of growth in coronavirus infections has slowed also generated optimism Chinese efforts to contain the outbreak are working.

Federal Reserve Chairman Jerome Powell said during testimony before the House Financial Services Committee that the central bank is closely monitoring the coronavirus outbreak but also highlighted the resilience of the U.S. economy.

In prepared remarks, Powell noted some of the uncertainties around trade have diminished following the signing of the phase one U.S.-China trade deal but cautioned risks to the outlook remain.

"In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy," Powell said.

However, Powell pointed out that the U.S. economy has recently appeared resilient to global headwinds, with economic activity increasing at a moderate pace over the second half of last year.

Despite the pullback by the broader markets, substantial strength remained visible among telecom stocks. Reflecting the strength in the sector, the NYSE Arca North American Telecom Index spiked by 6.5 percent to its best closing level in over a year.

Sprint (S) led the telecom sector higher, skyrocketing by 7.7 percent following news T-Mobile (TMUS) has won court approval for its $26.5 billion takeover of the telecom company.

Semiconductor stocks also turned in a strong performance on the day, resulting in a 2.1 percent jump by the Philadelphia Semiconductor Index.

Steel, brokerage and networking stocks also saw notable strength, moving higher along with most of the other major sectors.

Meanwhile, tobacco stocks bucked the uptrend, giving back ground following the rally seen in the previous session.

Commodity, Currency Markets

Crude oil futures are jumping $1.11 to $51.05 a barrel after rising $0.37 to $49.94 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,568.80, down $1.30 compared to the previous session's close of $1,570.10. On Tuesday, gold slid $9.40.

On the currency front, the U.S. dollar is trading at 109.98 yen compared to the 109.79 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0912 compared to yesterday's $1.0916.

Asia

Asian stocks advanced on Wednesday as anxiety ebbed over the spread of a deadly virus in mainland China and Federal Reserve Chair Jerome Powell told Congress that the U.S. economy is in a good place, despite the potential threat from the coronavirus outbreak in China.

Chinese stocks rose for the seventh straight day as virus worries waned. The benchmark Shanghai Composite index climbed 25.22 points, or 0.9 percent, to 2,926.90 after officials reported the lowest daily increase in coronavirus infection cases in nearly two weeks, calming investor nerves over the epidemic's economic impact. Hong Kong's Hang Seng Index ended 0.9 percent higher at 27,823.66.

Japanese shares gained ground as a positive mood prevailed across global markets despite lingering concerns about the coronavirus outbreak. The Nikkei 225 Index climbed 175.23 points, or 0.7 percent, to 23,861.21, while the broader Topix finished marginally lower at 1,718.92.

Heavyweight SoftBank Group Corp soared 11.9 percent to become the country's second-biggest company by market value after a U.S. federal judge approved a merger between its U.S. wireless unit Sprint Corp. and T-Mobile U.S. Inc.

Taiko Pharmaceutical Co. jumped 18.2 percent after the drug maker raised its operating profit forecast for the year ending in March. Tech stocks also posted strong gains, with Advantest surging 4.3 percent and Tokyo Electron adding 3.5 percent.

Meanwhile, Nissan Motor dropped 1.7 percent after temporarily halting production at its plant in Kyushu, southwestern Japan, due to a shortage of parts from China.

Australian markets advanced after positive offshore leads. The benchmark S&P/ASX 200 Index rose 32.90 points, or 0.5 percent, to 7,088.20, while the broader All Ordinaries Index ended up 33.90 points, or 0.5 percent, at 7,185.30.

Lender Commonwealth Bank of Australia surged 4.1 percent after its half-year cash profit topped forecasts.

CSL shares advanced 0.8 percent. After reporting an 11 percent increase in first-half net profit, the biotech company raised its full-year profit outlook and interim dividend.

Online vehicle sales company Carsales.com rallied 8.3 percent after its statutory net profit for the half-year surged more than five-fold.

On the other hand, health supplements firm Blackmores slumped 12.8 percent as the company scrapped its dividend and warned that this year's profit will more than halve because of adverse costs and the coronavirus outbreak.

Australia's consumer confidence advanced in February but sentiment remained weak overall, survey data from Westpac showed today.

South Korea's Kospi rose 15.26 points, or 0.7 percent, to 2,238.38 after Fitch Ratings affirmed the country's sovereign ratings with a 'stable' outlook.

The agency said the 2020 budget, enacted in December, implemented significant fiscal stimulus to confront sluggish growth prospects. Korea also has the fiscal space to utilize near-term fiscal stimulus, Fitch said.

Europe

European stocks have risen on Wednesday to reach record highs as a drop in the number of new coronavirus cases helped ease investor concerns surrounding the economic impact of the outbreak.

According to the National Health Commission, 2,015 new cases had been reported over the last 24 hours, declining for a second day.

Hopes of additional stimulus measures from China as well as recent data indicating continued strength in the U.S. economy also helped underpin investor sentiment.

Federal Reserve Chair Jerome Powell told Congress on Tuesday that the U.S. economy is in a good place, despite the potential threat from the coronavirus outbreak in China.

While the German DAX Index has risen by 0.8 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are up by 0.5 percent and 0.4 percent, respectively.

French luxury goods company Kering has moved notably higher. The company's net profit for 2019 fell on one-offs, but fourth-quarter revenue grew 11 percent on a comparable basis.

Automakers, which depend heavily on Chinese demand for their exports, have also moved to the upside. German automakers BMW, Daimler and Volkswagen are posting notable gains.

Dutch brewer Heineken NV has surged after its fiscal 2019 net profit on an IFRS basis rose 13.2 percent to 2.17 billion euros from 1.91 billion euros in the prior year.

Akzo Nobel NV has also jumped. The company reported that its fourth quarter adjusted operating income rose 23 percent to 223 million euros from the prior year, driven by ongoing pricing initiatives, margin management and cost-saving programs.

Rio Tinto shares have also advanced. The mining giant announced that it would conduct a strategic review of its aluminium smelter in Iceland.

Dunelm Group, a homewares retailer, has also moved sharply higher. The company's first-half profit before tax increased 19.4 percent to 83.6 million pounds from 70.0 million pounds last year.

U.S. Economic Reports

San Francisco Federal Reserve President Mary Daly is due to have a Q&A with Laura Noonan of the Financial Times at the European Financial Forum at Dublin Castle in Dublin, Ireland, at 9 am ET.

At 10 am ET, Federal Reserve Chairman Jerome Powell is scheduled to begin his testimony before the Senate Banking Committee.

The Energy Information Administration is due to release its report on oil inventories in the week ended February 9th at 10:30 am ET.

Crude oil inventories are expected to increase by 2.9 million barrels after climbing by 3.4 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $27 billion worth of ten-year notes.

Stocks In Focus

Shares of Shopify (SHOP) are seeing significant pre-market strength after the e-commerce company reported fourth quarter earnings well above analyst estimates and provided upbeat guidance.

Beer brewer Molson Coors (TAP) is also likely to move to the upside after reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of CyberArk Software (CYBR) may come under pressure after the cybersecurity company reported better than expected fourth quarter results but provided disappointing guidance.

Ride-sharing company Lyft (LYFT) is also likely to see initial weakness after reporting fourth quarter results that beat estimates but saying it still expects to lose money until the end of next year.

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