U.S. Stocks May See Further Downside Following Yesterday’s Sell-Off

Stocks are likely to move to the downside in early trading on Wednesday, extending the sell-off seen over the course of the previous session. The major index futures are currently pointing to a lower open for the markets, with the S&P 500 futures down by 0.3 percent.

Concerns about the outlook for interest rates may continue to weigh on the markets ahead of the Federal Reserve’s monetary policy announcement this afternoon.

While the Fed is widely expected to leave rates unchanged, traders will pay close to the wording of the accompanying statement along with Fed Chair Jerome Powell’s post-meeting press conference.

“Yesterday’s late selloff characterized a shift in the market’s mindset from hopes of monetary accommodation to acceptance that higher rates will persist,” said John Lynch, Chief Investment Officer for Comerica Wealth Management.

“Consequently, today’s big news will likely come from Treasury’s refunding announcement rather than the FOMC,” he added. “Any signs of increased liquidity should enable economic demand, and risk assets, to regain their footing.”

Despite the downward momentum for the broader markets, shares of Amazon (AMZN) are likely to see initial strength after the online retail giant reported better than expected first quarter results.

In U.S. economic news, payroll processor ADP released a report showing private sector employment increased by more than expected in the month of April.

ADP said private sector employment shot up by 192,000 jobs in April after jumping by an upwardly revised 208,000 jobs in March.

Economists had expected private sector employment to climb by 175,000 jobs compared to the addition of 184,000 jobs originally reported for the previous month.

“Hiring was broad-based in April,” said ADP chief economist Nela Richardson. “Only the information sector – telecommunications, media, and information technology – showed weakness, posting job losses and the smallest pace of pay gains since August 2021.”

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of April. The ISM’s manufacturing PMI is expected to edge down to 50.0 in April from 50.3 in March.

The Commerce Department is also due to release its report on construction spending in the month of March. Construction spending is expected to rise by 0.3 percent in March after falling by 0.3 percent in February.

Additionally, the Labor Department is scheduled to release its report on job openings in the month of March. Job openings are expected to decrease to 8.690 million in March from 8.756 million in February.

Stock prices went down south on Wall Street on Tuesday, sliding lower and lower after a weak start, as concerns about inflation and uncertainty about the Fed’s interest rate moves rendered the mood bearish. Investors digested a mixed batch of earnings updates and some disappointing economic data.

The major averages all ended sharply lower, with the Nasdaq suffering a more pronounced loss. The Dow ended down by 570.17 points or 1.5 percent at 37,815.92. The S&P 500 dropped 80.48 points or 1.6 percent to 5,035.69, while the Nasdaq tumbled 325.26 points or 2.0 percent to settle at 15,657.82.

In overseas trading, Japanese and Australian stocks moved lower on Wednesday, with most markets in the Asia-Pacific region closed for Labor Day. Japan’s Nikkei 225 Index dipped by 0.3 percent, while Australia’s S&P/ASX 200 Index slumped by 1.2 percent.

With most major European markets also closed on the day, U.K. stocks are little changed. The U.K.’s FTSE 100 Index is currently up by less than a tenth of a percent.

In commodities trading, crude oil futures are tumbling $1.38 to $80.55 a barrel after sliding $0.70 to $81.93 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,306.60, up $3.70 compared to the previous session’s close of $2,302.90 Tuesday, gold plunged $54.80.

On the currency front, the U.S. dollar is trading at 157.78 yen compared to the 157.80 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0681 compared to yesterday’s $1.0666.