Market Analysis

The major U.S. index futures are currently pointing to a slightly lower open on Wednesday, with stocks likely to extend the lackluster performance seen in the previous session.

Traders may remain reluctant to make significant moves as the wait for more clarity about the near-term outlook for the markets.

Strong economic data has helped lift stocks to record highs in recent sessions, but traders may be worried the markets are becoming overbought.

In his annual letter to shareholders, JPMorgan Chase chairman and CEO Jamie Dimon acknowledged valuations are “quite high” but noted a multi-year booming economy could justify current prices.

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon wrote. “This boom could easily run into 2023 because all the spending could extend well into 2023.

He added, “Equity markets look ahead, and they may very well be pricing in not only a booming economy but also the technical factor that lots of the excess liquidity will find its way into stocks.”

Traders may also be looking ahead to the release of the minutes of the Federal Reserve’s latest monetary policy meeting, which could shed additional light on the outlook for interest rates.

Estimates provided after the meeting show Fed officials expect rates to remain at near-zero levels through 2023, but the fed funds futures market is predicting a rate hike in December 2022 following recent upbeat economic data.

Following the rally seen during trading 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 before eventually closing slightly lower.

While the Dow slipped 96.95 points or 0.3 percent to 33,430.24, the Nasdaq and the S&P 500 closed just below the unchanged line. The Nasdaq edged down 7.21 points or 0.1 percent to 13,698.38 and the S&P 500 dipped 3.97 points or 0.1 percent to 4,073.94.

The choppy trading on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets following recent strength.

The Dow and the S&P 500 both ended Monday's trading at record closing highs, while the tech-heavy Nasdaq extended last week's rally to reach its best closing level in well over a month.

A quiet day on the U.S. economic front also kept traders on the sidelines ahead of the release of the minutes of the Federal Reserve's latest monetary policy meeting on Wednesday.

Reports on weekly jobless claims, the U.S. trade deficit and producer price inflation may also attract attention in the coming days along with remarks by Fed Chair Jerome Powell.

Meanwhile, traders largely shrugged off news the International Monetary Fund raised its global growth projections for this year and next, citing huge fiscal stimulus in some big economies and a vaccine-driven recovery in the future.

The world economy is set to grow 6.0 percent this year and 4.4 percent next year, the global lender said in its latest World Economic Outlook report..

In a January update to the WEO, the IMF had projected growth of 5.5 percent and 4.2 percent, respectively. The latest projections are also stronger than those in the October WEO report.

Most of the major sectors ended the day showing only modest moves on the day, although significant strength was visible among gold stocks.

Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index climbed by 1.4 percent. The strength among gold stocks came amid an increase by the price of the precious metal.

Airline stocks also turned in a strong performance on the day, resulting in a 1.1 percent advance by the NYSE Arca Airline Index.

On the other hand, semiconductor stocks showed a notable move to the downside, dragging the Philadelphia Semiconductor Index down by 1.2 percent.

Commodity, Currency Markets

Crude oil futures are rising $0.40 to $59.73 a barrel after climbing $0.68 to $59.33 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,736.10, down $6.90 compared to the previous session’s close of $1,743. On Tuesday, gold advanced $14.20.

On the currency front, the U.S. dollar is trading at 109.85 yen compared to the 109.75 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1881 compared to yesterday’s $1.1876.

Asia

Asian stocks ended broadly higher on Wednesday as the International Monetary Fund raised this year's global economic growth forecast to 6 percent from its earlier estimate of 5.5 percent, citing additional fiscal measures by advanced economies and the rollout of vaccines.

Traders also looked ahead to the release of the minutes of the Federal Reserve's latest monetary policy meeting later in the day, hoping for additional clues on the outlook for interest rates.

Chinese and Hong Kong markets bucked the regional trend to end lower amid worries over policy tightening. China's Shanghai Composite Index ended on a flat note at 3,479.63, reversing early losses.

Hong Kong's Hang Seng Index ended down 263.94 points, or 0.9 percent, at 28,674.80 as traders returned to their desks after a long holiday weekend.

Japanese shares ended slightly higher, with paper & pulp, transport and real estate stocks leading the gainers. The Nikkei 225 Index edged up 34.16 points, or 0.1 percent, to 29,730.79, while the broader Topix closed 0.7 percent higher at 1,967.43.

Toshiba Corp.'s shares soared more than 18 percent after the technology conglomerate confirmed it had received a preliminary acquisition proposal from private equity firm CVC Capital Partners. Sharp Corp, Fujitsu and Hitachi rose between 1.7 percent and 2.2 percent.

Shipping firm Nippon Yusen climbed 3.3 percent after raising its full-year profit forecast. Kawasaki Kisen jumped 4 percent and Mitsui OSK Lines advanced 2.6 percent.

Australian markets advanced as the latest reports on the construction sector and service sector activity painted a positive picture of the economy.

The benchmark S&P/ASX 200 Index climbed 42.10 points, or 0.6 percent, to 6,928, while the broader All Ordinaries Index ended up 43.50 points, or 0.6 percent, at 7,177.40.

Miners and tech stocks ended mixed, while banks eked out modest gains. Gold miners Evolution and Newcrest rose 1-2 percent after the precious metal hit a two-week high in the previous session.

Northern Star Resources jumped 4.2 percent, Resolute Mining added 5.5 percent and Perseus mining surged 5.3 percent.

Energy stocks such as Woodside Petroleum, Origin Energy, Oil Search and Santos rose 1-2 percent. EML Payments soared 5.5 percent on news it would be entering the European open banking market with the acquisition of Sentenial Limited and its wholly-owned subsidiaries.

Seoul stocks gained for the fifth straight session as foreign investors continued to scoop up local stocks on growing hopes for a swift economic recovery.

The benchmark Kospi rose 10.33 points, or 0.3 percent, to close at 3,137.41. Markets ended off their day's highs after South Korea reported the most daily coronavirus cases since early January.

Samsung Electronics shares dropped half a percent after the chip and smartphone maker issued earnings guidance for the first three months of 2021.

South Korea posted a current account surplus of $8.03 billion in February, the Bank of Korea said today, coming roughly in line with expectations and up from $7.06 billion in January.

Europe

European stocks have turned mixed over the course of the trading day on Wednesday after ending the previous session mostly higher.

Final PMI numbers were in focus this morning, with the Eurozone's services PMI increasing from 45.7 to 49.6 in March. That was up from a preliminary reading of 48.8.

Traders await the minutes of the most recent Federal Open Market Committee meeting for clues as to when the U.S. central bank might raise rates.

While the U.K.’s FTSE 100 Index has advanced by 0.7 percent, the French CAC 40 Index and the German DAX Index are both down by 0.2 percent.

Discount carrier Ryanair Holdings has shown a notable move to the upside after trimming its annual loss estimate.

Royal Dutch Shell has also rsien. The oil & gas company said it expects to make the first profit from pumping oil since the start of the pandemic.

Societe Generale has also advanced. The French bank said it has entered into talks with asset manager Amundi with a view to disposing of the asset management activities operated by Lyxor.

Finland's Nokia Corp. has also moved higher after it concluded a multi-year, multi-technology patent cross-license agreement with Chinese PC and mobile maker Lenovo Group Ltd.

Meanwhile, AstraZeneca shares have fallen. The University of Oxford announced that it is halting the trial of the Covid vaccine developed by the company on children and teenagers.

U.S. Economic Reports

Largely reflecting a steep drop in the value of exports, the Commerce Department released a report on Wednesday showing the U.S. trade deficit widened more than expected in the month of February.

The Commerce Department said the trade deficit widened to $71.1 billion in February from a revised $67.8 billion in January.

Economists had expected the deficit to widen to $70.5 billion from the $68.2 billion originally reported for the previous month.

The wider deficit came as the value of exports tumbled by 2.6 percent to $187.3 billion, while the value of imports slid by 0.7 percent to $258.3 billion.

At 9 am ET, Chicago Federal Reserve President Charles Evans is due to speak on current economic conditions and monetary policy before a virtual Prairie State College Foundation Economic Forecast Breakfast.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 2nd at 10:30 am ET.

Crude oil inventories are expected to decrease by 1.3 million barrels after edging down by 0.9 million barrels in the previous week.

At 11 am ET, Dallas Federal Reserve President Robert Kaplan is due to participate in a virtual moderated question-and-answer session before the Reinventing Bretton Woods Committee.

Richmond Federal Reserve President Thomas Barkin is scheduled to speak on the monetary policy outlook, labor market scarring and other topics before a virtual Global Interdependence Center Executive Briefing at 12 pm ET.

At 1 pm ET, San Francisco Federal Reserve President Mary Daly is due to discuss the economy, climate change and economic inequality during a fireside chat webinar.

The Federal Reserve is scheduled to release the minutes of its latest monetary policy meeting at 2 pm ET. As widely expected, the Fed left interest rates unchanged at the March 16-17 meeting.

At 3 pm ET, the Fed is due to release its report on consumer credit in the month of February. Consumer credit is expected to increase by $5.0 billion.

Stocks In Focus

Shares of SunRun (RUN) are moving higher in pre-market trading after RBC Capital initiated coverage on the solar equipment company’s stock with an Outperform rating.

SMART Global Holdings (SGH) may also see initial strength after reporting fiscal second quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Li Auto (LI) are likely to come under pressure after the Chinese electric vehicle maker announced a proposed offering of up to $750 million in convertible senior notes due 2028.

MSC Industrial Direct (MSM) may also move to the downside after reporting fiscal second quarter earnings that beat estimates but weaker than expected revenues.