U.S. Stocks May Lack Direction In Early Trading

(RTTNews) - The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the weakness seen in the previous session.

The futures remained little changed even after payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of January.

ADP said private sector employment rose by 22,000 jobs in January after climbing by a downwardly revised 37,000 jobs in December.

Economists had expected private sector employment to grow by 45,000 jobs compared to the addition of 41,000 jobs originally reported for the previous month.

Nonetheless, tech stocks may see further downside after a rotation out of the sector contributed to the weakness in Tuesday's session.

A steep drop by Advanced Micro Devices (AMD) is likely to weigh on the sector, with the chipmaker plunging by 10.1 percent in pre-market trading.

AMD is under pressure after reporting better than expected fourth quarter results but providing first quarter guidance that disappointed some analysts.

On the other hand, shares of Super Micro Computer (SMCI) are surging by 9.5 percent in pre-market trading after the company reported fiscal second quarter results that exceeded estimates and raised its full-year revenue forecast.

Stocks moved notably lower during trading on Tuesday, more than offsetting the strength seen in the previous session. The major averages all moved to the downside on the day, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages climbed well off their worst levels in the latter part of the session but remained in negative territory. The Nasdaq slumped 336.92 points or 1.4 percent to 23,255.19, the S&P 500 slid 58.63 points or 0.8 percent to 6,917.81 and the Dow fell 166.67 points or 0.3 percent to 49,240.99.

The weakness on Wall Street was largely due to a rotation out of technology stocks, as reflected by the steep drop by the Nasdaq.

Software stocks turned in some of the tech sector's worst performances, dragging the Dow Jones U.S. Software Index down by 3.5 percent to its lowest closing level in over nine months.

The weakness in the sector came despite a surge by shares of Palantir Technologies (PLTR), which shot up by 6.9 percent after the AI-powered software provider reported better than expected fourth quarter results and provided upbeat guidance.

Substantial weakness was also visible among semiconductor stocks, with the Philadelphia Semiconductor Index tumbling by 2.1 percent.

Shares of NXP Semiconductors (NXPI) plunged by 4.5 percent even though the Dutch chipmaker reported fourth quarter results that exceeded analyst estimates on the top and bottom lines.

Meanwhile, some stocks benefited from the rotation out of tech, including retail giant Walmart (WMT), which surged by 2.9 percent and surpassed a $1 trillion market capitalization.

"It would be hard to find a better illustration of the market's recent rotation away from tech than Walmart achieving a $1 trillion valuation for the first time," said AJ Bell head of markets Dan Coatsworth.

He added, "This bastion of Main Street joins a club which has previously only been populated by technology businesses and Warren Buffett's Berkshire Hathaway vehicle.

Gold stocks also saw considerable strength amid a significant rebound by the price of the precious metal, with the NYSE Arca Gold Bugs Index spiking by 4.4 percent.

Steel, energy and housing stocks also moved notably higher on the day, helping to limit the downside for the broader markets.

Commodity, Currency Markets

Crude oil futures are rising $0.18 to $63.39 a barrel after surging $1.07 to $63.21 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $5,070.70, up $135.70 compared to the previous session's close of $4,935. On Tuesday, gold soared $282.40.

On the currency front, the U.S. dollar is trading at 156.72 yen compared to the 155.73 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1820 compared to yesterday's $1.1818.

Asia

Asian stocks ended mixed on Wednesday as software stocks followed their U.S. peers lower on fears over artificial intelligence affecting future business growth.

Anthropic, the AI developer known for its Claude chatbot, rolled out new legal tools for its Cowork product, leading investors worldwide to cut exposure to traditional IT services.

Gold prices were up nearly 3 percent at $5,080 an ounce in Asian trading and oil extended overnight gains after the U.S. Navy shot down an Iranian drone headed toward an aircraft carrier in the Arabian Sea.

China's Shanghai Composite Index advanced 0.9 percent to 4,102.20 as solar shares jumped following reports that teams from SpaceX and Tesla Inc. had visited domestic companies.

Hong Kong's Hang Seng Index finished marginally higher at 26,847.32 as precious metals continued to gain ground after a recent sell-off.

Japanese markets fell notably, with software names leading the drop after fresh AI headlines. The Nikkei 225 Index slid 0.8 percent to 54,293.36, while the broader Topix Index settled 0.3 percent higher at 3,655.58.

IT service management company TIS plunged 15.8 percent, while NS Solutions and Trend Micro both slumped by 7.4 percent. Chip-linked bellwethers like Advantest and Tokyo Electron fell over 2 percent each.

Seoul stocks hit a new peak on strong buying by institutional investors. The Kospi surged 1.6 percent to 5,371.10 after the ruling Democratic Party's floor leader vowed to swiftly push forward with capital market reform measures.

Australian markets advanced as a rebound in copper and gold prices boosted mining stocks. The benchmark S&P/ASX 200 Index climbed 0.8 percent to 8,927.80, while the broader All Ordinaries Index closed 0.6 percent higher at 9,204.60.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index ended up 0.3 percent at 13,467.29.

Europe

European stocks are turning in a mixed performance on Wednesday following the release of closely watched Eurozone inflation data.

Eurozone inflation dropped below the 2 percent target in January on falling energy prices and a stronger euro, official data showed on Wednesday.

The harmonized index of consumer prices rose 1.7 percent on a yearly basis in January, as expected, following December's 2.0 percent increase, flash data from Eurostat revealed.

Excluding volatile prices of energy, food, alcohol and tobacco, core inflation slowed marginally to 2.2 percent from 2.3 percent a month ago.

Regional government bond yields eased slightly as new surveys showed the Eurozone economy's growth slowed for a second consecutive month in January.

The euro area private sector logged its slowest growth in January due to the weakening of growth in services activity, final data from S&P Global showed on Wednesday.

The final composite output index posted 51.3 in January, the lowest score since last September. The score remained below the initial estimate and the December's level of 51.5.

However, the score above 50.0 indicates that the sector expanded for the thirteenth successive month

The European Central Bank announces its monetary policy decision on Thursday, with no change in interest rates expected. The focus will be on the central bank's views on growth and inflation outlook.

The Bank of England is also expected to hold rates steady on Thursday, with updated economic projections unlikely to show major changes from the Bank's previous forecasts.

While the German DAX Index is down by 0.4 percent, the French CAC 40 Index is up by 0.9 percent and the U.K.'s FTSE 100 Index is up by 1.2 percent.

In corporate news, Novo Nordisk has plummeted in Copenhagen after CEO Mike Doustdar highlighted the headwinds of significantly lower U.S. pricing on its best-selling weight loss drug Wegovy.

Swiss drug maker Novartis has also moved to the downside after it forecast a profit decline for this year.

Spanish bank Banco Santander has also tumbled after it agreed to acquire Webster Financial Corp. in a $12 billion deal.

French lender Credit Agricole has also slumped after reporting a 39 percent decrease in fourth-quarter profit.

Infineon Technologies has also fallen. The German chipmaker said it would ramp up spending on its technology for data centers to meet growing demand for artificial intelligence solutions.

Meanwhile, U.K. pharma giant GSK has moved to the upside after reporting better-than-expected profit in the fourth quarter.

Beazley shares have soared as Zurich Insurance Group reached an agreement in principle on the key financial terms of a possible cash offer for the London-based specialty insurer.

U.S. Economic News

Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by much less than expected in the month of January.

ADP said private sector employment rose by 22,000 jobs in January after climbing by a downwardly revised 37,000 jobs in December.

Economists had expected private sector employment to grow by 45,000 jobs compared to the addition of 41,000 jobs originally reported for the previous month.

The modest increase in private sector employment largely reflected a jump in employment in the education and health services sector, which added 74,000 jobs.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of January.

The ISM's services PMI is expected to dip to 53.5 in January from 54.4 in December, but a reading above 50 would still indicate growth.

The Energy Information Administration is due to release its report on crude oil inventories in the week ended January 30th at 10:30 am ET. Crude oil inventories are expected to decrease by 2.0 million barrels.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month's auction of three-year and ten-year notes and thirty-year bonds.

Richmond Federal Reserve President Thomas Barkin is due to speak before the Rotary Club of Aiken Economic Symposium at 12 pm ET.

At 6:30 pm ET, Federal Reserve Governor Lisa Cook is due to speak on monetary policy and the economic outlook before the Economic Club of Miami.