The major U.S. index futures are currently indicating a lower open on Wednesday, with stocks poised for continued decline following Tuesday's significant drop.
Concerns about escalating tensions in the Middle East may persist, impacting Wall Street after Iran's ballistic missile attack on Israel on Tuesday. Despite Iran's statement of having no desire for a broader conflict, the attacks have triggered a surge in crude oil prices, raising fears of renewed inflation pressures due to higher energy costs.
Diminishing optimism surrounding the Federal Reserve's potential to further cut interest rates could also drive selling pressure. This sentiment follows the release of a report by payroll processor ADP, which showed stronger-than-expected private sector job growth in September. According to ADP, private sector employment rose by 143,000 jobs in September, following an upwardly revised increase of 103,000 jobs in August. Economists had anticipated an addition of 120,000 jobs, compared to the initially reported 99,000 jobs for the previous month.
The Labor Department is scheduled to release its more closely followed employment report for September this Friday. Currently, economists expect the report to indicate an employment increase of 140,000 jobs in September, following a gain of 142,000 jobs in August, with the unemployment rate projected to remain steady at 4.2 percent.
On Tuesday, stocks initially plummeted but managed to recoup some losses throughout the trading day, though they remained firmly negative. The major indices all recorded declines, with the tech-heavy Nasdaq leading the downturn. The Nasdaq dropped 278.81 points or 1.5 percent to 17,910.36, the S&P 500 fell 53.73 points or 0.9 percent to 5,708.75, and the Dow declined 173.18 points or 0.4 percent to 42,156.97. Both the Dow and the S&P 500 retreated from their record closing highs set on Monday.
The downturn on Wall Street coincided with escalating Middle East tensions after Iran's missile attack on Israel. Iran’s Islamic Revolutionary Guard Corps indicated that the attack was a response to the recent Israeli airstrikes that led to the death of Hezbollah leader Hassan Nasrallah and others. This attack followed Israel's ground operations against the Iranian-backed militia group Hezbollah in southern Lebanon. Israel Defense Forces spokesperson Rear Admiral Daniel Hagari cautioned that Iran's attack "will have consequences." Additionally, a senior White House official noted that the U.S. had evidence that Iran was preparing to launch a ballistic missile attack on Israel, contributing to the early sell-off in stocks.
Despite the initial reaction, selling pressure subsided following the actual attack, with traders hopeful that cooler heads would prevail and prevent a larger regional conflict. The developments in the Middle East overshadowed reports indicating continued contraction in U.S. manufacturing activity in September and an unexpected increase in U.S. job openings in August.
Concerns also arose from the economic impact of a strike by dockworkers at U.S. East and Gulf Coast seaports, which further weighed on Wall Street. Around 45,000 dockworkers went on strike after the United States Maritime Alliance and the International Longshoremen's Association failed to reach an agreement on a new Master Contract.
Semiconductor stocks experienced a substantial decline, with the Philadelphia Semiconductor Index dropping by 2.9 percent. Significant weakness was also visible in computer hardware stocks, as evidenced by the 2.6 percent plunge in the NYSE Arca Computer Hardware Index. Banking stocks suffered as well, resulting in a 1.9 percent drop in the KBW Bank Index. Software, airline, and telecom stocks likewise saw notable declines, whereas energy stocks surged along with the price of crude oil.
**Commodity and Currency Markets**
Crude oil futures are soaring, with prices up $2.04 to $71.87 a barrel, following a $1.66 increase to $69.83 a barrel on Tuesday. In contrast, gold prices are dropping, with an ounce trading at $2,666.60, down $23.70 from the previous session's close of $2,690.30. On Tuesday, gold had spiked by $30.90.
In the currency markets, the U.S. dollar is trading at 145.27 yen, up from 143.57 yen at Tuesday's New York close. Against the euro, the dollar is slightly decreased, trading at $1.1055 compared to $1.1068 in the previous session.
**Asia**### Asian Markets
Asian stocks mostly closed lower on Wednesday, despite continued momentum in Hong Kong shares driven by stimulus optimism. Market sentiment remained cautious following Tehran's swift but short-lived reprisal against Israel for its recent offenses in Lebanon.
The dollar strengthened on safe-haven demand, which in turn sent gold prices lower during Asian trading. Oil prices extended their overnight rally, fueled by concerns that rising tensions in the Middle East might disrupt crude production from the region.
Markets in mainland China remained closed in observance of Golden Week holidays.
Hong Kong's Hang Seng Index surged 6.2% to 22,443.73 as trading resumed after a holiday on Tuesday. Real estate and technology stocks led the gains, buoyed by Beijing's recent array of stimulus measures.
In Japan, markets experienced a significant downturn amid concerns regarding the BoJ's policy outlook. The Nikkei 225 Index dropped 2.2% to a closing low of 37,808.76, the lowest in over a week, while the broader Topix Index fell 1.4% to 2,651.96.
Japanese technology stocks followed their U.S. counterparts lower after a nearly 3% decline in the Philadelphia Semiconductor Index overnight. Advantest decreased by 4.9%, Screen Holdings by 3.8%, and Tokyo Electron by 3.7%.
AI-focused startup investor SoftBank Group fell 2.4%, while Uniqlo parent company Fast Retailing slipped 4%.
South Korea's Kospi index declined 1.2% to 2,561.69 as geopolitical tensions in the Middle East escalated.
Recent data revealed that South Korean inflation cooled more than anticipated, reaching a 43-month low in September. This development strengthens the case for monetary easing by the central bank in their upcoming policy meeting next week.
Samsung Electronics shares dipped below 60,000 won for the first time in 18 months before recovering most of the losses, closing 0.3% lower at 61,300 won.
Korea Zinc shares surged 3.6% after a South Korean court allowed the company to repurchase its own shares amidst a public tender offer by Young Poong and private equity firm MBK Partners.
Australian markets ended the day slightly lower despite robust gains in the energy sector, with Woodside Energy and Santos climbing between 2% and 3%.
The benchmark S&P/ASX 200 edged down 0.1% to 8,198.20, while the broader All Ordinaries Index closed with a similar 0.1% decline at 8,469.90.
Auric Mining plummeted 12.7% after reporting that its second gold milling campaign from the Jeffreys Find Gold Mine in Western Australia generated $23.5 million in sales.
Qantas dropped 2.7% following the announcement of its plan to acquire a 25% stake in Virgin Australia from a U.S. private equity firm.
Across the Tasman Sea, New Zealand's benchmark S&P/NZX-50 Index closed 0.1% lower at 12,451.69.
### European Markets
European stocks showed mixed performance on Wednesday. Energy stocks surged as oil prices continued their overnight rally, driven by concerns that Middle East tensions might disrupt crude production.
In economic news, the Eurozone's unemployment rate remained steady at 6.4% in August, in line with expectations.
The U.K.'s FTSE 100 Index increased by 0.1%, while France's CAC 40 Index dipped by 0.1%. Germany's DAX Index fell by 0.6%.
In Paris, TotalEnergies rallied after announcing the final investment decision for the GranMorgu development on offshore Block 58 in the Republic of Suriname, involving a total investment of around $10.5 billion.
Germany's GEA Group shares jumped after the company reported ahead-of-schedule achievement of its mid-term financial goals under its Mission 26 growth strategy.
Construction firm Skanska AB also saw a rise after securing a supplemental award to build additional data halls at a data center in Georgia, USA, with an existing client.
On the flip side, JD Sports declined despite the British sportswear retail chain reporting record sales for the 26 weeks ending in August and reaffirming its FY25 guidance. Wizz Air Holdings also saw a sharp decline after reporting a drop in load factors for September.
Swedish telecommunications company Telia fell after announcing the appointment of Alexandra Furst as its new Chief Technology and Information Officer (CTIO).
### U.S. Economic Reports
Private sector employment in the U.S. increased more than expected in September, according to a report by payroll processor ADP. Private sector employment climbed by 143,000 jobs in September, following an upwardly revised increase of 103,000 jobs in August.
Economists had anticipated an increase of 120,000 jobs, compared to the originally reported 99,000 jobs added in the previous month.Job creation experienced a notable resurgence following a five-month slowdown, with the information sector being the only one to report job losses, according to ADP.
Cleveland Federal Reserve President Beth Hammack is set to deliver the opening remarks at the 2024 Minorities in Banking Forum at 9:00 AM ET.
At 10:05 AM ET, St. Louis Federal Reserve President Alberto Musalem will address attendees at the 2024 Community Banking Research Conference.
The Energy Information Administration is expected to publish its report on crude oil inventories for the week ending September 27th at 10:30 AM ET. Projections indicate a 2.1 million barrel decrease in crude oil inventories, following a sharp decline of 4.5 million barrels the previous week.
At 11:00 AM ET, Federal Reserve Board Governor Michelle Bowman will give the keynote address at the 2024 Community Banking Research Conference.
Richmond Federal Reserve President Thomas Barkin is scheduled to discuss the national economic outlook during his speech at the 2024 WilmingtonBiz Conference and Expo at 12:15 PM ET.
