Wall Street was set for a stronger open on Wednesday, as U.S. stock futures indicated a rebound after hawkish comments from new Federal Reserve Chairman Jerome Powell sent markets into a spin the prior day.
For the month, the main indexes were looking at losses, with the S&P and Dow on track for their first monthly loss since March last year.
How are stock indexes performing?
Futures for the Dow Jones Industrial Average YMH8, +0.18% rose 67 points, or 0.3%, to 25,497, while those for the S&P 500 index ESH8, +0.14% added 6 points, or 0.2%, to 2,753.75. Futures for the Nasdaq-100 index NQH8, +0.14% climbed 12.75 points, or 0.2%, to 6,927.50.
The small gains come after steep losses on Tuesday, when the Dow industrials DJIA, -1.16% lost almost 300 points and the S&P 500 SPX, -1.27% and Nasdaq Composite Index COMP, -1.23% closed more than 1% lower.
That selloff set the three main benchmarks up for notable February declines, with the Dow and S&P on track for a 2.8% monthly slump as of Thursday’s close and the Nasdaq set for a 1.1% drop. U.S. stocks earlier in February briefly dipped into correction territory — defined as a more than 10% drop from a recent high — as concerns over stronger-than-expected inflation stoked fears of an aggressive pace of Fed interest-rate hikes.
What is driving the market?
Wednesday’s snap-back comes as investors dip their toes back into the market again after comments from new Fed boss Powell sparked a selloff on Tuesday. The central bank chairman offered an optimistic outlook on the U.S. economy, seen as an indication the Fed may raise interest rates four times in 2018, and not three as it has previously signaled.
Those hawkish comments helped send U.S. Treasury yields and the dollar firmly higher. The yield on 10-year notes TMUBMUSD10Y, +0.13% rose above 2.9%, while the ICE U.S. Dollar Index DXY, +0.11% rose to its highest level since Feb. 9.
On Wednesday, the 10-year yield eased back below 2.9%, but the greenback continued higher and helped the ICE index gain 0.1% to 90.457.
After the moves prompted by Powell’s remarks, investors are now looking ahead to his next appearance on Capitol Hill, in front of a Senate committee on Thursday.
Read: 4 financial-market takeaways from Fed chief Jerome Powell’s debut
Also see: Forget inflation — worry about what happens when this ‘Goldilocks’ era ends, says Ray Dalio
What are strategists saying?
“On his hawkish tone, when asked the million-dollar question about 3 hikes or 4, Powell was quick to point out the improvements in the economy and his optimism that inflation will reach the bank’s 2% target, in what can only be described as a hawkish response, which to many signaled 4 hikes could be on the cards in 2018,” said Jasper Lawler, head of research at London Capital Group.
“Powell’s comments unleashed a wave of anxiety among equity traders, who rushed to sell out of holdings,” Lawler said in a note out early Wednesday.
“Overnight, U.S. treasury yields have eased back and U.S. futures are trading slightly higher (at the time of writing). This could suggest that market participants are (slowly) becoming more relaxed about the prospect of further Fed tightening,” he added.
Which stocks are in focus?
Shares of Etsy Inc. ETSY, -0.43% jumped 15% ahead of the bell after the online crafts marketplace late Tuesday reported results and outlook that topped Wall Street estimates.
Booking Holdings Inc. BKNG, -0.03% rallied 7.6% in Wednesday’s premarket action after the company formerly known as Priceline Group Inc. late Tuesday reported earnings and sales above forecasts.
On a downbeat note, Celgene Corp. CELG, -0.74% lost 6.3% after biotech drug maker late Tuesday said the Food and Drug Administration would not accept a drug marketing application for a multiple sclerosis treatment.
Hertz Global Holdings Inc. HTZ, -3.80% fell 7% after earnings from the car-rental company out late Tuesday came in below expectations.
On the earnings docket Wednesday, Lowe’s Cos. LOW, -1.76% , Valeant Pharmaceuticals International Inc. VRX, -1.96% , Mylan NV MYL, -1.60% and TJX Cos. TJX, -1.95% are slated to report ahead of the bell. After the market closes, Salesforce.com Inc. CRM, -0.15% , Box Inc. BOX, +0.46% and L Brands Inc. LB, -0.76% are expected to report.
What economic data are coming up?
The second estimate for fourth-quarter U.S. gross domestic product comes out at 8:30 a.m. Eastern Time, with economists polled by MarketWatch expected to see 2.5% growth. The first estimate showed growth of 2.6%.
At 9:45 a.m. Eastern, the Chicago PMI for February is due out, followed by a reading on pending home sales for January at 10 a.m. Eastern.
There were no Fed speakers scheduled to speak on Wednesday.
What are other markets doing?
Stocks in Asia closed sharply lower, catching up with the selloff in the U.S. after the Powell comments.
In Europe, stocks were also falling, with the Stoxx Europe 600 index SXXP, -0.32% down 0.2%.
Oil prices CLJ8, -0.11% slipped, while gold GCJ8, +0.20% rose 0.1%.