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U.S. Stocks Likely To Give Back Ground In Early Trading

wallstreet aug30 22jun22 lt

Following the rally seen in the previous session, stocks are likely to give back ground in early trading on Wednesday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 451 points.

Lingering concerns about inflation, interest rates and a possible recession may inspire traders to cash in on yesterday's strong gains.

In a research note, Citigroup put the odds of a global recession at 50 percent, citing signs of consumers pulling back on spending.

"The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the aggregate probability of recession as now approaching 50%," said Citigroup.

Traders are also likely to keep a close eye on remarks by Federal Reserve Chair Jerome Powell, who is due to testify before the Senate Banking Committee this morning.

Powell's testimony comes after the Fed raised interest rates by 75 basis points last week and indicated further rate hikes are likely in the coming months.

Ahead of Powell's remarks, CME Group's FedWatch tool is currently pointing to 90.9 percent chance of another 75 basis point rate hike next month.

With traders returning to their desks following the long holiday weekend, stocks moved sharply higher during trading on Tuesday. The major averages all showed strong moves to the upside after ending last Friday's volatile session mixed.

The major averages pulled back off their best levels going into the close but still posted substantial gains. The Dow jumped 641.47 points or 2.2 percent to 30,530.25, the Nasdaq surged 270.95 points or 2.5 percent to 11,069.30 and the S&P 500 spiked 89.95 points or 2.5 percent to 3,764.79.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.4 percent, while China's Shanghai Composite Index slumped by 1.2 percent.

The major European markets have also shown significant moves to the downside on the day. While the German DAX Index has tumbled by 2 percent, the French CAC 40 Index is down by 1.8 percent and the U.K.'s FTSE 100 Index is down by 1.3 percent.

In commodities trading, crude oil futures are plunging $6.05 to $103.47 a barrel after jumping $1.53 to $109.52 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,842.90, up $4.10 compared to the previous session's close of $1,838.80. On Tuesday, gold slipped $1.80.

On the currency front, the U.S. dollar is trading at 135.89 yen compared to the 136.57 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0517 compared to yesterday's $1.0533.

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