S&P 500 Called Lower as Recession Fears Take Hold of Market Sentiment

The U.S. stock market faces another day of selling pressure based on the pre-market trade on Wednesday, putting it in an early position to post a fourth straight session of losses.

There are no major economic releases today but investors are getting their guidance from worries that the Federal Reserve will raise higher and longer than previously anticipated. Furthermore, recession fears are also increasing following comments from three prominent banking officials on Tuesday.

At 13:00 GMT, Dow Jones Industrial Average futures are trading 33494, down 139 or -0.41%. The S&P 500 Index futures contract is at 3919.50, down 25.50 or -0.65% and the NASDAQ Composite futures contract is trading 11445.75, down 120.25 or -1.04%.

Recession Fears Rising

Fears of a U.S. recession in 2023 have been increasing since Monday, following the release of a stronger-than-expected ISM Services PMI report. When combined with last Friday’s red-hot U.S. jobs report, traders are now pricing in a higher terminal rate for Fed rate hikes, essentially meaning that they believe the central bank is going to have to cause a recession in order to stop inflation from climbing further.

The idea of a recession was addressed on Tuesday by Bank of America CEO Brian Moynihan who told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” in the first part of 2023, but the contraction will be “mild.”

With so many economists now forecasting a recession in 2023, the next debate will be how long will it last and whether it will be mild or hard. Furthermore, we’re likely to hear about it from the Fed after next week’s meeting.

Although Fed Chairman Jerome Powell has mentioned a “soft-landing” several time over the past year, he has also told consumers to expect more pain and he once called inflation “transitory” so investors are going to have to brace themselves for the possibility of a “hard-landing”.

The current sell-off in the stock market could be investors pricing in a recession. The market is down four days since reaching a peak on Dec. 1 after Powell made less-hawkish comments about rate hikes. The size and duration of this current sell-off could give us clues as to the type of recession investors are expecting.

Campbell Soup Outperforming after Releasing Solid Quarterly Results

Campbell Soup shares were up more than 2% during Wednesday’s premarket after posting a top and bottom line beat for the recent fiscal quarter, CNBC is reporting.

The company posted earnings of $1.02 a share on $2.58 billion in revenue, surpassing analysts’ expectations of 88 cents a share on revenues of $2.45 billion.

Campbell slightly upped its guidance for the fiscal year, saying that it expects earnings per share to range between $2.90 and $3.00. Previous estimates called for earnings to fall between $2.85 and $2.95 a share.

The company also expects revenue growth to range between 7% and 9% year over year, up from previous expectations of 4% to 6% growth.

Short-Term Outlook

With no major reports until Friday’s producer price data and next Tuesday’s consumer inflation report, it’s going to take a major effort to turn the stock market higher on Wednesday. But it is possible due to short-term oversold technical conditions.

Nonetheless, were looking for investors to continue to trim positions due to the uncertainty surrounding the Federal Reserve’s interest rate announcement on Dec. 14.