U.S. Stocks May Lack Direction Following Recent Weakness

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 after trending lower over the past few sessions.

While crude oil prices and treasury yields are giving back ground after a recent surge, traders may be reluctant to get back into the markets amid lingering concerns about the conflict in the Middle East.

Iran launched missile and drone attacks towards U.S.-linked sites in Bahrain, Jordan and Kuwait earlier today after the U.S. launched a wave of strikes against Iranian military targets on Tuesday.

The attacks by Iran came in defiance of a warning from U.S. Donald President Trump that any retaliation would see Iran “hit much harder” and that the U.S. is still holding out on “the biggest attack of them all.”

Despite the renewed exchange of attacks, U.S. crude oil futures are sliding by 0.8 percent after soaring by more than 8 percent over the two previous sessions.

Treasury yields are giving back ground along with crude oil prices, with the yield on the benchmark ten-year note pulling back off its highest closing level in almost three years.

The pullbacks in crude oil prices and treasury yields may keep any selling pressure subdued, although traders may stick to sidelines ahead of the release of the Labor Department’s monthly jobs report on Friday.

With the more closely watched government report looming, payroll processor ADP released a report showing private sector employment in the U.S. increased by less than expected in the month of August.

ADP said private sector employment rose by 38,000 jobs in August after climbing by an upwardly revised 46,000 jobs in July.

Economists had expected private sector employment to grow by 48,000 jobs compared to the addition of 44,000 jobs originally reported for the previous month.

After moving moderately lower over the two previous sessions, stocks showed a more significant move to the downside during trading on Tuesday. The major averages all moved notably lower, with the tech-heavy Nasdaq leading the way.

The major averages ended the day off their lows of the session but still firmly negative. The Nasdaq slumped 271.11 points or 1 percent to 26,099.77, the Dow slid 419.02 points or 0.8 percent to 52,766.88 and the S&P 500 fell 54.67 points or 0.7 percent to 7,631.47.

The continued weakness on Wall Street came after U.S. Central Command announced a fresh wave of attacks against Iran, striking Islamic Revolutionary Guard Corps targets.

Centcom said the strikes follow recent attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and against American service members deployed to the region.

In a post on Truth Social, President Donald Trump warned Iran would be “hit again at a much harder and higher level” if they retaliate for the latest attack.

“But it will not be the biggest attack of them all, that is waiting in the wings and, when it is over, there will be very little left of the Islamic Republic of Iran!” Trump said.

Crude oil prices have surged in reaction to the latest attack, with U.S. crude oil futures spiking by more than 5 percent, renewing concerns about inflation and the outlook for interest rates.

Sharply higher crude oil prices weighed on the markets early in the session, but stocks regained some ground after the Institute for Supply Management released a report showing a slowdown in the pace of growth in U.S. manufacturing activity.

The ISM said its manufacturing PMI dipped to 54.6 in August from 55.6 in July, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 55.2.

Ahead of the release of the more closely watched monthly jobs report on Friday, traders may feel signs of economic weakness could keep the Federal Reserve from raising interest rates later this month.

Gold stocks moved sharply lower along with the price of the precious metal, resulting in a 4.2 percent nosedive by the NYSE Arca Gold Bugs Index.

Substantial weakness was also visible among networking stocks, as reflected by the 2.6 percent plunge by the NYSE Arca Networking Index.

Transportation stocks also showed a significant move to the downside, dragging the Dow Jones Transportation Average down by 2.5 percent.

Software, housing and semiconductor stocks also saw considerable weakness, while oil producer and pharmaceutical stocks bucked the downtrend.

Commodity, Currency Markets

Crude oil futures are falling $0.60 to $89.62 a barrel after soaring $4.46 to $90.22 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $4,382.10, down $14.30 compared to the previous session’s close of $4,396.40. On Tuesday, gold dove $85.10.

On the currency front, the U.S. dollar is trading at 159.66 yen compared to the 160.17 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1577 compared to yesterday’s $1.1592.

Asia

Asian stocks fell sharply on Wednesday as escalating U.S.-Iran tensions pushed oil prices and global bond yields higher.

The U.S. dollar was steady near a two-week high, while gold prices fell toward $4,300 an ounce after Federal Reserve Governor Michael Barr said in a speech that he would back a rate hike if inflation doesn’t cool quickly.

According to the CME FedWatch Tool, the chance of a quarter-point rate hike at the Fed’s September 15-16 meeting now stands at 68.2 percent.

With inflation still running above the Fed’s 2 percent target, Friday’s U.S. payrolls report along with the release of August CPI data on September 11 may offer additional clues on the Fed’s rate trajectory going forward.

Brent crude futures rose toward $95 a barrel, extending gains for a third consecutive session to reach the highest level in nearly six weeks as escalating fighting between the U.S. and Iran heightened concerns over further disruptions to energy flows through the Strait of Hormuz.

Tehran launched missile and drone attacks towards U.S.-linked sites in Bahrain, Jordan and Kuwait in defiance of a warning from U.S. President Trump that any retaliation would see Iran “hit much harder” and that the U.S. is still holding out on “the biggest attack of them all.”

China’s Shanghai Composite Index slumped 1 percent to 3,941.39 after Beijing introduced measures to reduce developers’ reliance on presale funds. Hong Kong’s Hang Seng Index finished marginally lower at 25,311.21.

At the G20 meeting, U.S. Treasury Secretary Scott Bessent slammed China’s export-driven economic model and confirmed that “the country with the world’s largest and unsustainable current account surplus” was the sole dissenter from his chairman’s statement.

Japanese markets tumbled on concerns over the U.S.-Iran war and rising energy costs. The Nikkei 225 Index plunged 2.9 percent to 64,325.64, extending losses for a third consecutive session. The broader Topix Index closed 2.4 percent lower at 4,081.60.

Tech stocks paced the decliners, with SoftBank Group losing 6.4 percent and Advantest falling 2.5 percent. Sumitomo Metal Mining plummeted 11.6 percent after gold prices hit a four-week low amid hawkish Federal Reserve expectations.

Seoul stocks plunged in a broad market sell-off in the wake of oil-driven inflation fears. The Kospi Index plummeted 4 percent to 6,562.72 as finance minister nominee Lee Hyoung-il vowed to make price stability a top priority.

Market bellwether Samsung Electronics tumbled 4 percent and its chip-making rival SK Hynix gave up 4.7 percent while automaker Hyundai Motor slumped 5.6 percent.

Australian markets fell sharply on expectations of an RBA rate hike later this month as Q2 GDP data beat forecasts and the 10-year government bond yield hit a five-month high above 5.1 percent amid a broad selloff in global bond markets.

The benchmark S&P/ASX 200 Index slid 1 percent to 8,978.40, extending losses for a third consecutive session. The broader All Ordinaries Index settled 1.1 percent lower at 9,160.30.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index jumped 1 percent to 13,930.57 after the Reserve Bank of New Zealand raised its key interest rate for a second straight meeting and warned that risks for higher inflation remain in play for the economy.

Europe

European stocks have fallen near one-month low son Wednesday due to concerns over rising oil prices and bond yields.

Brent crude prices rose toward $95 a barrel after the U.S. military hit targets in Iran and Tehran retaliated by firing missiles and drones at various sites across the region, heightening fears of supply disruptions and threatening commercial shipping through the Strait of Hormuz.

Eurozone government bond yields rose further following similar moves in U.S. and Asian bonds overnight.

With Eurozone inflation reaching a nearly three-year high in August and unlikely to return to target over the medium term, a 25-basis point ECB rate hike on September 10 looks almost certain.

While the French CAC 40 Index is down by 0.1 percent, the U.K.’s FTSE 100 Index is down by 0.3 percent and the German DAX Index is down by 0.4 percent.

British insurer Prudential was slightly lower despite announcing that it would buy back up to $1.472 billion of shares by December 18, 2026, under its existing share buyback program.

Energy giant BP Plc has also moved to the downside after appointing Ian Tylr as its new chair.

Meanwhile, Halma, a leader in life-saving technology, has risen after it agreed to acquire Pyxis, a U.S.-based water quality monitoring specialist, for an initial $170 million.

Low-cost airline Wizz Air Holdings has also moved to the upside after reporting strong August performance.

U.S. Economic News

A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by less than expected in the month of August.

ADP said private sector employment rose by 38,000 jobs in August after climbing by an upwardly revised 46,000 jobs in July.

Economists had expected private sector employment to grow by 48,000 jobs compared to the addition of 44,000 jobs originally reported for the previous month.

The modest increase in August reflected the slowest pace of job creation since private sector employers added just 11,000 jobs in January.

At 10 am ET, the Commerce Department is due to release its report on factory orders in the month of July. Factory orders are expected to increase by 0.5 percent in July after falling by 0.3 percent in June.

The Energy Information Administration is scheduled to release its report on crude oil inventories in the week ended August 28th at 10:30 am ET. Crude oil inventories are expected to decrease by 1.1 million barrels.

At 2 pm ET, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.