Market Analysis

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

Concerns about the impact of new, more contagious coronavirus strains may weigh on the markets along with uncertainty about the prospects for a new relief package under President Joe Biden.

Negative sentiment may also be generated in reaction to comments from Russian President Vladimir Putin, who warned of a collapse of global development that might result in a “fight of all against all.”

Putin claimed during a virtual meeting of the World Economic Forum that the coronavirus pandemic has aggravated existing global tensions, comparing the current state of affairs to the situation preceding World War II.

“Of course, nowadays such a heated conflict is not possible. I hope that it’s not possible in principle, because it would mean the end of our civilization,” Putin said.

He added, “But I would like to reiterate, that the situation might develop unpredictably and uncontrollably if we will sit on our hands doing nothing to avoid it.”

The downward momentum on Wall Street may also reflect apprehension ahead of the Federal Reserve’s monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates unchanged, but traders will be closely watching the central bank’s comments about its bond purchasing program, hoping they avoid any mention of “tapering.”

Concerns about recent speculative trading by retail investors may also weigh on Wall Street amid continued spikes by heavily shorted stocks like GameStop (GME) and AMC Entertainment (AMC).

On the earnings front, shares of Boeing (BA) are likely to come under pressure after the aerospace giant reported a steep fourth quarter loss and further delayed its new 777x jet.

Telecom giant AT&T (T) is also seeing some pre-market weakness after reporting better than expected fourth quarter results but providing disappointing revenue guidance for 2021.

Meanwhile, shares of Microsoft (MSFT) are moving notably higher in pre-market trading after the software giant reported fiscal second quarter results that beat expectations on both the top and bottom lines.

Following the mixed performance seen on Monday, stocks showed a lack of direction over the course of the trading day on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the day modestly lower. The Dow slipped 22.96 points or 0.1 percent to 30,937.04, the Nasdaq edged down 9.93 points or 0.1 percent to 13,626.07 and the S&P 500 dipped 5.74 points or 0.2 percent to 3,849.62.

The choppy trading on Wall Street partly reflected uncertainty about the near-term outlook for the markets after the Nasdaq and the S&P 500 climbed to new record closing highs on Monday.

Optimism about additional stimulus under President Joe Biden has helped drive stocks higher in recent sessions, although reports have pointed to intensifying opposition from GOP lawmakers.

The Biden administration has signaled a willingness to negotiate over the president's $1.9 trillion proposal, but it is worth noting that talks over the previous relief package dragged on for months.

Traders may also have been reluctant to make significant moves ahead of the Federal Reserve's monetary policy announcement on Wednesday.

The lackluster performance on the day also reflected a mixed reaction to earnings news from a number of big-name companies.

3M (MMM) and Johnson & Johnson (JNJ) moved notably higher after reporting quarterly results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, fellow Dow components American Express (AXP) and Verizon (VZ) moved to the downside despite reporting better than expected fourth quarter earnings.

Shares of General Electric (GE) moved higher after the industrial conglomerate reported a surge in fourth quarter net profits amid better than expected revenues and cash flow.

Meanwhile, traders largely shrugged off a report from the Conference Board showing an unexpected improvement in U.S. consumer sentiment in the month of January.

The Conference Board said its consumer confidence index climbed to 89.3 in January from a downwardly revised 87.1 in December.

The increase surprised economists, who had expected the index to edge down to 88.5 from the 88.6 originally reported for the previous month.

Despite the lackluster performance by the broader markets, biotechnology stocks showed a substantial move to the downside on the day.

The NYSE Arca Biotechnology Index tumbled by 2.3 percent after reaching a new record intraday high in early trading.

Significant weakness was also visible among energy stocks, which moved lower amid a modest decrease by the price of crude oil.

Housing, transportation and semiconductor stocks also saw notable weakness on the day, while telecom stocks moved sharply higher, driving the NYSE Arca North American Telecom Index up by 2.4 percent.

Commodity, Currency Markets

Crude oil futures are edging down $0.08 to $52.53 a barrel after dipping $0.16 to $52.61 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,838.90, down $12 compared to the previous session’s close of $1,850.90. On Tuesday, gold fell $4.30.

On the currency front, the U.S. dollar is trading at 103.98 yen compared to the 103.62 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2108 compared to yesterday’s $1.2160.

Asia

Asian stocks ended mixed on Wednesday after the International Monetary Fund raised its forecast for global growth this year and said it sees major central banks holding their policy-rate settings through 2022.

Gains, if any, were modest as investors looked ahead to the U.S. Federal Reserve's monetary policy decision due later in the day.

Chinese shares edged up slightly after official data showed the country's industrial profits increased notably at the end of 2020. The benchmark Shanghai Composite Index inched up 3.91 points, or 0.1 percent, to 3,573.34, while Hong Kong's Hang Seng Index ended down 93.73 points, or 0.3 percent, at 29,297.53.

China's industrial profits grew 20.1 percent year-on-year in December, bigger than the 15.5 percent increase registered in November. This was the eighth consecutive month of growth.

In the whole year of 2020, profits of industrial firms increased 4.1 percent, in contrast to a 3.3 percent drop in 2019.

Japanese shares rose on continued hopes for upbeat corporate earnings from major domestic firms. The Nikkei 225 Index edged up 89.03 points, or 0.3 percent, to 28,635.21, while the broader Topix closed 0.7 percent higher at 1,860.07.

During a parliamentary committee session, Bank of Japan Governor Haruhiko Kuroda said the country's fiscal situation is "very serious" and the central bank is buying government bonds not as a way to finance fiscal policies but as part of its policy to achieve its 2 percent inflation target.

Australian markets fell from an 11-month high as traders returned to their desks after a public holiday on Tuesday.

The benchmark S&P/ASX 200 Index dropped 44.10 points, or 0.7 percent, to 6,780.60, with miners and energy companies pacing the declines. The broader All Ordinaries Index ended down 51.20 points, or 0.7 percent, at 7,060.20.

The Aussie dollar showed little reaction to stronger than expected consumer inflation and business conditions data.

Falling iron ore prices weighed on the mining sector, with BHP and Rio Tinto losing 3-4 percent. Smaller rival Fortescue Metals Group slumped 6.4 percent ahead of its quarterly production results.

Energy stocks also ended broadly, lower, with Woodside Petroleum, Santos and Beach Energy giving up 3-5 percent. Oil Search lost 3.3 percent after it reported an almost 42 percent drop in fourth quarter revenue.

Seoul stocks ended a choppy session lower due to heavy foreign selling amid concerns that emerging economies may hasten the tightening of their fiscal policies. The benchmark Kospi dipped 17.75 points, or 0.6 percent, to close at 3,122.56.

Market bellwether Samsung Electronics gave up 1.3 percent and Hyundai Motor, the country's largest automaker, fell 2.4 percent, while top pharmaceutical firm Samsung Biologics soared 5.9 percent.

Consumer confidence in South Korea improved in January, the latest survey from the Bank of Korea showed, with an index score of 95.4. That beat forecasts for 93.6 and was up from 89.8 in December.

Europe

European stocks have come under pressure over the course of the trading session on Wednesday amid concerns over the spread of coronavirus variants.

Global coronavirus cases surpassed 100 million, with Europe currently reporting a million new infections about every four days.

Investors await a Federal Reserve policy decision, hoping for indications the U.S. central bank will not taper its bond-buying scheme anytime soon.

While the German DAX Index has plunged by 2.1 percent, the French CAC 40 Index is down by 1.8 percent and the U.K.’s FTSE 100 Index is down by 1.5 percent.

Precious metals miner Fresnillo has moved sharply lower on the day after forecasting a decrease in gold production.

Oil exploration company Tullow Oil has also shown a notable move to the downside after it warned of lower output in 2021.

On the other hand, Dutch telecommunications company KPN has surged higher after its fourth-quarter profit more than doubled.

Hygiene and health company Essity AB has also rallied after reporting a smaller-than-expected drop in quarterly operating profit.

Jenoptik shares have also spiked. The optical products company said the Group's adjusted EBITDA margin will be significantly above the expected range of between 15.0 and 15.5 percent for fiscal year 2020.

Siemens Healthineers has also moved notably higher after the healthcare company raised its outlook for 2021 sales and earnings per share.

In economic news, a survey showed German consumer confidence is set to deteriorate in February under strict lockdown restrictions.

Market research group GfK said its forward-looking consumer sentiment index dropped 8.1 points to -15.6 in February from -7.5 in January. The expected reading was -7.9.

The French consumer confidence index dropped more-than-expected to 92 in January from 95 in December, survey results from the statistical office Insee revealed. The expected level was 94.

U.K. shop prices decreased 2.2 percent year-on-year in January after a 1.8 percent drop in the previous month, hit by the renewed Covid-19 lockdown measures, data from the British Retail Consortium showed.

U.S. Economic Reports

A report released by the Commerce Department on Wednesday showed new orders for U.S. manufactured durable goods rose by much less than expected in the month of December.

The Commerce Department said durable goods orders edged up by 0.2 percent in December after surging by an upwardly revised 1.2 percent in November.

Economists had expected durable goods orders to increase by 0.9 percent compared to the 1.0 percent jump that had been reported for the previous month.

Excluding a pullback in orders for transportation equipment, durable goods orders climbed by 0.7 percent in December after advancing by 0.8 percent in November. Ex-transportation orders were expected to rise by 0.5 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended January 22nd

Crude oil inventories are expected to inch up by 0.6 million barrels after climbing by 4.4 million barrels in the previous week.

The Federal Reserve is due to announce its latest monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.

Stocks In Focus

Shares of F5 Networks (FFIV) are moving sharply lower in pre-market trading after the networking company reported fiscal first quarter earnings that beat estimates but on weaker than expected revenues, The company also provided disappointing second quarter revenue guidance.

Coffee giant Starbucks (SBUX) may also come under pressure after reporting mixed fiscal first quarter results and forecasting weaker than expected fiscal second quarter earnings. Starbucks also announced the departure of Chief Operating Officer Rosalind Brewer.

Shares of Advanced Micro Devices (AMD) and Texas Instruments (TXN) are also seeing pre-market weakness even though the chipmakers reported better than expected quarterly results and provided upbeat guidance.

On the other hand, shares of Capital One (COF) are likely to move to the upside after the financial services provider reported fourth quarter results that exceeded analyst estimates on both the and bottom lines.