Continued Faith In AI Trade May Lead To Early Rebound On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks likely to move back to the upside after coming under pressure over the course of the previous session.

Stocks may benefit from continued optimism about the artificial intelligence trade, which has helped lead the markets to record highs.

A rebound by shares of Nvidia (NVDA) may generate some early buying interest, with the AI darling and market leader climbing by 0.4 percent in pre-market trading after tumbling by 2.8 percent on Tuesday.

U.S.-listed shares of Alibaba (BABA) are also surging by 8.8 percent in pre-market trading after Chief Executive Officer Eddie Wu said the company plans to increase spending on AI models and infrastructure development.

The Chinese tech company also unveiled new AI products and updates at Alibaba Cloud's annual flagship technology conference.

On the other hand, shares of Micron (MU) are seeing modest pre-market weakness even though the chipmaker reported better than expected fiscal fourth quarter earnings and forecast first quarter revenue above market estimates on AI demand.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of closely watched consumer price inflation data on Friday.

Stocks moved mostly lower over the course of the trading day on Tuesday, giving back ground after trending higher over the past few sessions. The major averages all moved to the downside, pulling back off Monday's record closing highs.

The tech-heavy Nasdaq led the way lower, slumping 215.50 points or 1.0 percent to 22,573.47. The S&P 500 slid 36.83 points or 0.6 percent to 6,656.92, while the narrower Dow dipped 88.76 points or 0.2 percent to 46,292.78.

The weakness that emerged on Wall Street may partly reflected concerns stocks are overvalued following comments by Federal Reserve Chair Jerome Powell.

Speaking at an event Rhode Island, Powell described equity prices as "fairly highly valued" following the recent run to record highs.

Powell also addressed the outlook for monetary policy, noting the Fed is facing a "challenging situation" as near-term risks to inflation are tilted to the upside and risks to employment to the downside.

"Two-sided risks mean that there is no risk-free path," Powell said. "If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation."

"If we maintain restrictive policy too long, the labor market could soften unnecessarily," he continued. "When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate."

A pullback by shares of Nvidia also weighed on the Nasdaq, with the chipmaker tumbling by 2.8 percent after surging nearly 4 percent to a new record closing high on Monday.

The rally in Monday's session came after Nvidia and OpenAI announced a strategic partnership to deploy at least 10 gigawatts of Nvidia systems for OpenAI's next-generation AI infrastructure.

Retail stocks showed a significant move to the downside on the day, dragging the Dow Jones U.S. Retail Index down by 1.2 percent.

Notable weakness also emerged among software stocks, as reflected by the 1.2 percent loss posted by the Dow Jones U.S. Software Index.

On the other hand, energy stocks continued to turn in a strong performance amid a sharp increase by the price of crude oil, with the Philadelphia Oil Service Index surging by 3.5 percent and the NYSE Arca Oil Index climbing by 1.6 percent.

Commodity, Currency Markets

Crude oil futures are climbing $0.93 to $64.34 a barrel after jumping $1.13 to $63.41 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $3,799.20, down $16.50 compared to the previous session's close of $3,815.70. On Tuesday, gold surged $40.60.

On the currency front, the U.S. dollar is trading at 148.55 yen compared to the 147.64 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1745 compared to yesterday's $1.1815.

Asia

Asian stocks ended mixed on Wednesday after several Federal Reserve officials, including Fed Chair Jerome Powell reiterated caution over further policy easing.

China's Shanghai Composite Index jumped 0.8 percent to 3,853.64, buoyed by gains by tech stocks amid renewed enthusiasm for artificial intelligence and semiconductors. Hong Kong's Hang Seng Index rallied 1.4 percent to 26,518.65.

Japanese markets ended slightly higher as traders returned to their desks after a public holiday. The Nikkei 225 Index rose 0.3 percent to a record high of 45,630.31, reversing early losses. The broader Topix Index edged up by 0.2 percent to 3,170.45.

Industrial manufacturer IHI soared 9.7 percent and tech investor SoftBank Group surged 6 percent, while utility Tokyo Electric Power gave up 4.9 percent.

Investors shrugged off data that showed Japanese manufacturing activity shrank more than expected in September to hit a six-month low.

Seoul stocks ended lower due to profit taking following Powell's comments suggesting stock prices are overvalued. The Kospi slipped 0.4 percent to 3,472.14.

Defense stocks bucked the weak trend, with Hanwha Aerospace surging 5.4 percent on U.S. President Donald Trump's hawkish remarks against Russia.

Australian markets ended sharply lower after data showed consumer prices rose at the fastest annual pace in a year in August to the top of the Reserve Bank's 2-3 percent target, reducing the likelihood of further policy easing.

The benchmark S&P/ASX 200 Index slid 0.9 percent to 8,764.50, marking its steepest one-day decline in three weeks. The broader All Ordinaries Index closed 0.9 percent lower at 9,057.60.

Financials paced the declines, with the big four banks ending down between 1.4 percent and 3.2 percent.

Across the Tasman, New Zealand's benchmark S&P/NZX 50 Index rose 0.3 percent to 13,181.31 following the appointment of Swedish national Anna Breman as the new Governor of the Reserve Bank of New Zealand.

Europe

European stocks are turning in a mixed performance on Wednesday after Federal Reserve Chair Jerome Powell in a speech last night said that equity prices are fairly highly valued by many measures.

While the German DAX Index is up by 0.1 percent, the U.K.'s FTSE 100 Index is down by 0.1 percent and the French CAC 40 Index is down by 0.7 percent.

Among individual stocks, German wind turbine maker Nordex has moved to the upside after it secured an order for 50MW from Spanish company Abei Energy.

Atos has also jumped in Paris after securing a major European Commission cybersecurity contract for technical operation services.

Defense stocks have also surged after U.S. President Donald Trump said he believed Ukraine could retake all its land occupied by Russia and that Kyiv should act now.

"I think Ukraine, with the support of the European Union, is in a position to fight and WIN all of Ukraine back in its original form," the president said in a post on his Truth Social platform.

Meanwhile, buy and build group SDI has tumbled after saying it expects to deliver full-year results in line with market expectations.

U.S. Economic News

The Commerce Department is due to release its report on new home sales in the month of August at 10 am ET. New home sales are expected to slip by 0.3 percent to an annual rate of 650,000 in August after falling by 0.6 percent to an annual rate of 652,000 in July.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on crude oil inventories in the week ended September 19th.

The Treasury Department is due to announce the results of this month's auction of $70 billion worth of five-year notes at 1 pm ET.

At 4:10 pm ET, San Francisco Federal Reserve President Mary Daly is scheduled to speak on the economic outlook before the annual Spencer Fox Eccles Convocation presented by the National Association of Corporate Directors, Utah Chapter.