U.S. Stocks May See Further Downside In Early Trading

Stocks are likely to move to the downside in early trading on Wednesday, extending the significant drop seen in 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 0.9 percent.

Lingering worries about the outlook for monetary policy are likely to weigh on the markets amid concerns the Federal Reserve plans to tighten monetary policy more aggressively than previously anticipated.

Fed Governor Lael Brainard’s comments from Tuesday may continue to generate selling pressure, as she predicted the Fed would start reducing its balance sheet at a “rapid pace” as soon as the May meeting.

Early trading activity may be somewhat subdued, however, with traders awaiting the release of the minutes of the Fed’s March meeting.

The Fed minutes, which are scheduled to be released at 2 pm ET, may shed additional light on the central bank’s thinking about the outlook for interest rates.

At the meeting, the Fed decided to raise interest rates for the first time since December 2018 and forecast rates would reach 1.9 percent by the end of the year.

A number of media outlets have said the forecast points to six quarter-point rate hikes this year, but recent comments from Fed officials have suggested the central bank could opt to raise rates by 50 basis points at upcoming meetings.

CME Group’s FedWatch tool is currently indicating a 76.6 percent chance the Fed will raise rates by 50 basis points next month.

Stocks moved significantly lower over the course of the trading day on Tuesday, offsetting the upward move seen over the two previous sessions. The major averages all moved to the downside, with the tech-heavy Nasdaq posting a particularly steep loss.

Selling pressure intensified in the final hour of trading, dragging the major averages down to new lows for the session. While the Nasdaq plunged 328.39 points or 2.3 percent to 14,204.17, the S&P 500 tumbled 57.52 points or 1.3 percent to 4,525.12 and the Dow slid 280.70 points or 0.8 percent to 34,641.18.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong’s Hang Seng Index plunged by 1.9 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index has fallen by 0.4 percent, the German DAX Index is down by 1.8 percent and the French CAC 40 Index is down by 2.1 percent.

In commodities trading, crude oil futures are jumping $1.24 to $103.20 a barrel after slumping $1.32 to $101.96 a barrel a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,929.60, up $2.10 compared to the previous session’s close of $1,927.50. On Tuesday, gold fell $6.50.

On the currency front, the U.S. dollar is trading at 123.75 yen compared to the 123.60 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0935 compared to yesterday’s $1.0905.

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