U.S. index futures signal a downward opening on Wednesday as stocks might retrace Tuesday’s gains. An anticipated slip in tech shares, led by market reactions to earnings reports from Alphabet and Advanced Micro Devices (AMD), is a key factor influencing this shift. Alphabet’s shares plummeted 7.6% pre-market despite surpassing fourth-quarter earnings expectations, primarily due to cloud revenues missing forecasts. Similarly, AMD saw its stock decline by 9.9% in pre-market trading; while their earnings and revenue exceeded projections, data center sales did not meet anticipations.
Disney, too, experiences pre-market softness. Despite better-than-expected fiscal first-quarter earnings, they have cautioned about a potential decrease in Disney+ subscribers for the current quarter. Concerns regarding the Federal Reserve maintaining interest rates for an extended period are also impacting the market, following an ADP report showing greater-than-expected growth in private sector employment for January. ADP reported a rise of 183,000 jobs, exceeding economists' expectations of 150,000, facilitated by an upward revision of December's figures.
Tuesday saw stocks mostly rising, offsetting earlier losses with strong movements across major averages, particularly by the tech-dominated Nasdaq. The session closed with the Nasdaq up by 262.06 points (1.4%) to 19,654.02, the S&P 500 gaining 43.31 points (0.7%) to 6,037.88, and the Dow increasing by 134.13 points (0.3%) to 44,556.04. This strength was partially due to reduced fears of a global trade war, following President Trump's temporary suspension of 25% tariffs on Mexican and Canadian imports.
Optimism was further fueled by a Labor Department report showing a steep decline in U.S. job openings for December. Job openings fell to 7.6 million from 8.2 million in November, outperforming economist predictions of a dip to 8.0 million. This data fostered positive sentiment regarding future interest rates, ahead of the Labor Department's monthly jobs report. Meanwhile, traders largely overlooked China's retaliatory tariffs on U.S. imports, including coal, liquefied natural gas, crude oil, and certain goods, effective February 10.
Notably, oil stocks surged despite a dip in crude oil prices, pushing the NYSE Arca Oil Index up by 3.0%. Computer hardware stocks showed significant strength as well, with the NYSE Arca Computer Hardware Index increasing by 2.5%. Steel, retail, and networking stocks also experienced solid gains across major sectors.
**Commodity, Currency Markets**
In commodities, crude oil futures decreased by $0.84 to $71.86 per barrel, following a $0.46 drop from Tuesday’s $72.70. Gold prices rose by $13.40 to $2,889.20 an ounce after Tuesday’s $18.70 gain. In the currency market, the U.S. dollar is weaker at 152.96 yen compared to 154.34 yen on Tuesday. Against the euro, the dollar stands at $1.0412, slightly down from $1.0379.
**Asia**
In Asia, markets closed mixed on Wednesday amid ongoing tariff concerns and slower growth in Chinese services according to a private survey. Disappointing results from Alphabet and AMD kept investors wary. Chinese authorities set a stronger yuan rate against the U.S. dollar than anticipated, contradicting beliefs that the People’s Bank of China might lower the yuan rate this year to counteract new U.S. tariffs. In contrast, the Japanese yen appreciated following positive wage and services data, heightening expectations of more rate hikes by the Bank of Japan.Gold prices have surged to an unprecedented level, driven by escalating U.S.-China trade tensions and in anticipation of crucial U.S. economic indicators, such as the forthcoming payrolls report. This report, due on Friday, is expected to provide further insights into the state of the U.S. economy.
In contrast, the oil market is witnessing continued declines. This is attributed to plans by OPEC+ to gradually ramp up oil production starting in April, adding an element of uncertainty to the global energy sector.
The Shanghai Composite Index in China experienced a decline of 0.7%, settling at 3,229.49. This downturn is linked to rising trade tensions marked by the U.S. Postal Service's temporary halt on parcel shipments from China and Hong Kong. Meanwhile, Hong Kong's Hang Seng Index saw a 0.9% decrease, closing at 20,597.09, largely affected by losses in the real estate and technology sectors.
In Japan, stock markets closed on a slightly positive note, with export-focused stocks gaining despite a stronger yen. The Nikkei 225 Index inched up by 0.1% to 38,831.48 after a volatile trading session, while the broader Topix Index recorded a 0.3% increase, reaching 2,745.51.
Among Japanese companies, SoftBank Group witnessed a 1.5% increase. Toyota's stock rose by 3.1% following an upgrade to its annual profit outlook. Nintendo saw a 2.9% gain after confirming its commitment to its original Nintendo Switch console.
Honda Motor shares surged 8.2%, whereas Nissan stocks fell 4.9%, following reports that joint management discussions between the two automakers might be halted.
In Seoul, the stock market closed notably higher, with the Kospi Index jumping 1.1% to 2,509.27, as investors dismissed data indicating a rise in South Korean consumer inflation to a six-month high in January.
Australian markets posted gains, driven by mining and gold-related stocks in response to China's controlled reaction to U.S. tariffs. The S&P/ASX 200 Index increased by 0.5%, landing at 8,416.90, and the broader All Ordinaries Index saw a 0.6% hike to 8,683.40.
Insignia Financial, a wealth management firm, skyrocketed by 6.9% after Brookfield Asset Management matched offers from competitors in a high-stakes bid for the company.
Across the Tasman Sea, New Zealand's S&P/NZX-50 Index dropped by 0.5% to 12,844.59, influenced by data showing a rise in the nation's unemployment rate to a four-year high at the close of last year.
**Europe Analysis**
European markets are displaying a subdued performance, primarily due to a decline in tech stocks, which counters the gains observed in the healthcare and financial sectors.
Economic updates revealed that private sector activity in the eurozone rose in January, according to S&P Global's report. The composite Purchasing Managers’ Index (PMI) edged up to 50.2 from December's 49.6.
In terms of specific indices, the U.K.'s FTSE 100 Index rose by 0.2%, whereas the German DAX Index hovered just below neutral, and France's CAC 40 Index decreased by 0.2%.
ASML and Infineon Technologies experienced declines after Advanced Micro Devices (AMD) reported lower-than-expected 2024 data center sales. Conversely, Future Plc advanced significantly after affirming its financial guidance for fiscal year 2025.
GSK achieved significant gains, driven by a strong performance in 2024 and an uplift in its long-term sales forecast.
TotalEnergies, the French oil giant, observed an increase in its stock price after announcing a dividend increase and continued share buybacks, despite a drop in fourth-quarter earnings.
Credit Agricole, a key lending institution, reported better-than-forecasted earnings buoyed by increased revenue in the last quarter of 2024. Similarly, Banco Santander of Spain reported a 14% rise in 2024 attributable profit, prompting a positive market reaction.
Novo Nordisk, a leading pharmaceutical company, surged following fourth-quarter earnings that exceeded expectations.
**U.S. Economic Update**
ADP, a leading payroll processor, released a report indicating that private sector employment in the U.S. rose more than anticipated in January. Specifically, employment increased by 183,000 jobs, following a revised rise of 176,000 jobs in December. This growth surpassed economists' predictions of a 150,000 job increase, compared to the initially reported 122,000 for the prior month.
Additionally, the Commerce Department revealed a substantial widening in the U.S. trade deficit for December, attributed to a spike in imports and a drop in exports. The deficit expanded to $98.4 billion from a revised $78.9 billion in November, exceeding economists' expectations of a $96.6 billion deficit, up from the previously reported $78.2 billion.The significant widening of the trade deficit is attributed to a 3.5 percent surge in imports, reaching $364.9 billion, while exports declined by 2.6 percent to $266.5 billion.
The Institute for Supply Management is set to release its report on the service sector's performance in January at 10 a.m. ET. The ISM services PMI is projected to slightly rise to 54.3, up from 54.1 in December, with any reading above 50 signifying growth.
The Energy Information Administration will publish its weekly report on oil inventories at 10:30 a.m. ET for the week ending January 31. Crude oil inventories are anticipated to rise by 3.2 million barrels, following a 3.5 million increase in the prior week.
At 3 p.m. ET, Federal Reserve Governor Michelle W. Bowman will deliver a presentation on Bank Regulation at the 2025 Kansas Bankers Association Harold A. Stones Government Relations Conference.
Federal Reserve Vice Chair Philip N. Jefferson is scheduled to discuss "Do Non-Inflationary Economic Expansions Promote Shared Prosperity?" in a lecture at Swarthmore College in Swarthmore, Pennsylvania, at 7:30 p.m. ET.
