The equity market continues to be affected by negative sentiment due to uncertainty about interest rate changes. Stock futures indicate a mixed start for Wednesday. Key market events include a labor market report, service sector activity data, and Federal Reserve speeches. Falling oil prices may impact energy stocks. Political uncertainty following the removal of Kevin McCarthy as House Speaker could also contribute to risk aversion. If yields decrease, bargain hunting could lead to a rebound in stock averages.
On Tuesday, high bond yields and higher-than-expected job openings in August contributed to market weakness. The major averages opened lower, fell sharply in the morning session, and closed lower for the day. The Russell 2000 Index ended at its lowest point since March. Selling affected various sectors, with utility stocks gaining while real estate, financial, IT, consumer discretionary, and communication services stocks were hit hardest.
Analysts are concerned about the impact of interest rates on the market and view a stronger wage environment as a potential cause for concern. Congressional turmoil is also affecting investor sentiment.
Premarket trading on Wednesday shows slightly lower performance for the Nasdaq 100 and Russell 2000, while the S&P 500 and Dow show slight gains. Key economic data releases include private payroll survey results, service sector surveys, and non-manufacturing PMI. Several speeches by Federal Reserve officials are also scheduled. A number of companies are set to report quarterly results before the market opens.
In other markets, crude oil futures dropped in early European trading, reversing the previous day’s gains. The yield on the 10-year Treasury note increased, while the iShares 20+ Year Treasury Bond ETF continues to decrease. Asian markets closed lower, with Japan’s Nikkei 225 and South Korea’s Kospi leading the decline. The Chinese market remains closed for a holiday. The Reserve Bank of New Zealand kept interest rates unchanged. European stocks saw modest gains by late morning.