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U.S. Stocks May See Initial Strength On Positive Developments Overseas

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Following the sharp pullback seen in the previous session, stocks may move back to the upside in early trading on Wednesday. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 236 points.

News that Hong Kong leader Carrie Lam has withdrawn a controversial extradition bill may contribute to initial strength on Wall Street.

The bill, which would have allowed people in Hong Kong to be extradited to mainland China, sparked widespread protests across Hong Kong.

Positive sentiment may also be generated in reaction to a report showing growth in China's service sector accelerated in August despite broader economic headwinds.

Back in the U.S., the Commerce Department released a report showing the U.S. trade deficit narrowed in the month of July amid an increase in exports and a modest decrease in imports.

The Commerce Department said the trade deficit narrowed to $54.0 billion in July from a revised $55.5 billion in June.

Economists had expected the deficit to narrow to $53.5 billion from the $55.2 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports climbed by 0.6 percent to $207.4 billion, while the value of imports edged down by 0.1 percent to $261.4 billion.

Later in the trading day, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

The Beige Book, which is typically released two weeks before the Fed's next monetary policy meeting, may shed additional light on the outlook for interest rates.

Stocks showed a notable move to the downside during trading on Tuesday as traders returned to their desks following the long holiday weekend. With the pullback on the day, the major averages partly offset the strong gains posted last week.

The major averages climbed off their worst levels of the day but still closed firmly in negative territory. The Dow slumped 285.26 points or 1.1 percent to 26,118.02, the Nasdaq tumbled 88.72 points or 1.1 percent to 7,874.16 and the S&P 500 slid 20.19 points or 0.7 percent to 2,906.27.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, with Hong Kong stocks leading the way higher. Hong Kong's Hang Seng Index spiked by 3.9 percent, while China's Shanghai Composite Index advanced by 0.9 percent.

The major European markets have also moved to the upside on the day. While the U.K.'s FTSE 100 Index has risen by 0.4 percent, the German DAX Index and the French CAC 40 Index are jumping by 1.1 percent and 1.2 percent, respectively.

In commodities trading, crude oil futures are surging up $1.18 to $55.12 a barrel after slumping $1.16 to $53.94 a barrel on Tuesday. Meanwhile, after spiking $26.50 to $1,555.90 an ounce in the previous session, gold futures are sliding $8.60 to $1,547.30 an ounce.

On the currency front, the U.S. dollar is trading at 106.23 yen compared to the 105.94 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1012 compared to yesterday's $1.0974.

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