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James Hyerczyk
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US Stock Market

The major U.S. stock futures contracts are moving higher during the premarket session on Wednesday, clawing back some of the previous session’s losses. Although the “technical bounce” in the market is a welcome sight following the current downdraft, investors are still facing potential headwinds in the form of worries about the state of the economic recovery and the next policy move by the Federal Reserve.

At 08:54 GMT, the benchmark December E-mini S&P 500 Index futures are trading 4445.75, up 11.00 or +0.25%. The blue chip December E-mini Dow Jones Industrial Average is at 34529, up 65 or +0.19% and the tech-heavy December E-mini NASDAQ-100 Index is trading 15426.25, up 46.50 or +0.30%.

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Are Stocks Entering a Correction Phase?

According to CNBC, “The Dow, S&P and the small-cap Russell 2000 have now traded in the red for six of the last seven days. Tuesday marked the fifth straight day of losses for the NASDAQ. September has historically been a down month for the markets, which have seen an average decline of 0.56% in the month since 1945, according to CFRA. And after eight months of straight gains, strategists say a major pullback could be imminent.”

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Professional Investors Eyeing the S&P’s 50-Day Moving Average

The S&P 500 has continued to move higher throughout the year, dipping below the 50-day moving average only once, according to Fundstrat. Mike Wilson, chief investment officer at Morgan Stanley, told CNBC’s “Fast Money” that could be just the beginning.

“The midcycle transition always ends with a correction in the index,” he said of the S&P 500. “Maybe it’ll be this week, maybe a month from now. I don’t think we’ll get done with this year, however, with the 50-day moving average holding up throughout the year because that’s the pattern we typically see in this part of the recovery phase.”

Early Thoughts on Next Week’s Federal Reserve Monetary Policy Decision

Tuesday’s soft U.S. consumer inflation report has turned investor attention back to the Fed’s September 21-22 monetary policy decision. Earlier in the week, investors were betting the central bank would reveal its timeline for the start of tapering on the back of a robust U.S. producer price index report. After Tuesday’s U.S. consumer inflation report (CPI) showed a flattening of the data, however, investors are now uncertain about the timing of the Fed’s tapering of asset purchases.

“The Federal Reserve will probably delay slowing its purchase of Treasury and mortgage-backed securities despite slight indications that the price increase in durable goods is transitory, as illustrated by the reduction in used car prices,” said Dawit Kebede, senior economist at Credit Union National Association. “This is because we are far from maximum employment,” one of the Fed’s two goals of its dual mandate.

For a look at all of today’s economic events, check out our economic calendar.
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