Nasdaq, S&P 500 Futures Point To Cautious Optimism As Traders Look Ahead To More Of Powell, ADP Private Payrolls Report

Zinger Key Points
  • With Powell leaving the door open for a 50 basis-point hike in March, the focus shifts to Friday's job data.
  • A strong jobs report and hot inflation data next week could push up terminal rate expectation closer to 6%, economist says.

U.S. stocks could start Wednesday's session modestly higher after rate fears weighed down on the averages in the previous session. Traders will get to sift through comments from Federal Reserve Chair Jerome Powell yet again as he travels to Capitol Hill again on his second day of Congressional testimony. 

Cues From Tuesday’s Trading:

On Tuesday, stocks fell sharply as Powell prepared the market for a pickup in the pace of rate hikes in March. The major averages traded on a nervous note until the prepared remarks of the Fed president were released and declined steadily through the remainder of the session.

The sell-off was broad-based, with material, real estate and financial stocks facing the brunt of the selling pressure.

U.S. Indices' Performance On Tuesday
Index Performance (+/-)   Value
Nasdaq Composite -1.25%   11,530.33
S&P 500 Index -1.53%   3,986.37
Dow Industrials -1.72%   32,856.46

Analyst Color: Daniel Berkowitz, investment director for Prudent Management Associates, said Powell’s remarks to Congress can be summarized in one sentence:  “50 basis point hike in March is on the table.”

“While markets are still somewhat split on the magnitude of the next hike per data from CME FedWatch, this morning’s comments make clearer that regardless of the next increase, the likelihood of a Fed pivot has been pushed further down the road,” he added.

The economists expect Friday’s jobs report, in combination with next week’s consumer price inflation report, to provide more clarity as to how aggressive the Federal Open Market Committee, the policy-setting arm of the Fed, would be in March.

“Should we see a set of strong readings across both indicators, we expect markets to reprice again, pushing terminal rate expectations up closer to 6%,” he added.

Futures Today

U.S. Futures' Performance On Wednesday
Index Performance (+/-)  
Nasdaq 100 Futures +0.41%  
S&P 500 Futures +0.28%  
Dow Futures +0.19%  
R2K Futures +0.22%  

In premarket trading on Wednesday, the SPDR S&P 500 ETF TrustSPY rose 0.26% to $399.32 and the Invesco QQQ TrustQQQ gained 0.36% to $297.40, according to Benzinga Pro data.

See Also: How To Trade Futures

Upcoming Economic Data:

The Mortgage Bankers Association will release its weekly mortgage applications volume data at 7 a.m. EST. Mortgage applications to buy a home fell 5.7% week-over-week in the week ended February 24, dropping for a third straight week.

ADP will release the results of its private payrolls survey at 8:15 a.m. EST. Economists, on average, expect the private sector to have added 200,000 jobs in February, up from 106,000 in January. Although ADP’s numbers do not correlate perfectly with the Bureau of Labor Statistics data, traders usually look ahead to the former as a precursor for the latter.

The Commerce Department will release its trade balance report for January at 8:30 a.m. EST. Economists expect a wider trade deficit of $68.9 billion for the month compared to December’s deficit of $67.40 billion.

Powell’s testimony to the House Financial Services Committee will begin at 10 a.m. EST.

The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EST.

The Treasury will auction 10-year notes at 1 p.m. EST.

The Federal Reserve will release the Beige Book at 2 p.m. EST. The report will give anecdotal evidence regarding economic conditions in the 12 Federal Reserve districts.

Stocks In Focus:

Crowdstrike Holdings, Inc. CRWD advanced over 6.70% in premarket trading in reaction to its quarterly results released after the close.

Occidental Petroleum Corp. OXY rose over 2.70% after Warren Buffett’s Berkshire Hathaway, Inc. BRKA BRKB bought more shares in the oil company.

Campbell Soup Co. CPB, Children’s Place, Inc. PLCE, United Natural Foods, Inc. UNFI and MongoDB, Inc. MDB are among the companies due to report their quarterly results on Wednesday.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were seen extending their losses after Tuesday’s 4%+ drop. A barrel of WTI-grade crude oil traded down 0.18% at $77.44.

The 10-year Treasury note yield flatlined and trended at 3.974%.

The major Asian markets followed Wall Street lower on Wednesday, while European stocks showed jitteriness in late-morning trading after eurozone fourth-quarter GDP was revised down to show stagnation.

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Posted In: EarningsNewsFuturesPreviewsSmall CapTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasJerome PowellNasdaq futuresS&P 500 futures
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