US open: Strong open as investors seemingly shrug off Italian concerns

Wall Street trading got off to a positive start on Wednesday, as stocks looked set to rebound following concerns surrounding political instability in Italy which had pushed markets into the red a day earlier.

At 1510 BST, the Dow Jones Industrial Average and Nasdaq were both up 0.57% to 24,499.87 and 7,438.85, respectively, while the S&P 500 had picked up 0.63% to 2,706.86.

Fiona Cincotta, a senior market analyst at City Index, said: "Although Italy's domestic political strife is still taking pole position in the markets the concerns seem to have eased slightly. The news flow does not particularly merit this but nevertheless the Italian market opened higher this morning, the euro rebounded and even the embattled Italian bonds are responding with lower yields."

"The tensions in Italy have been rising for months as the country hasn't been able to form a government since an election in March only for things to come to a head this week after the country's president rejected the nomination of a eurosceptic. Instead he asked former International Monetary Fund official Carlo Cottarelli to form a government but Cottarelli is now considering giving up the mandate, which would pave the way for elections before the end of July," Cincotta added.

US relations with China were also in focus again after the President renewed his threat to impose $50bn worth of tariffs on Chinese imports "shortly" after mid-June, with a final list of the specific imports due to be published on 15 June.

In addition, restrictions on Chinese investments will be announced on 30 June.

Analysts at Rabobank said, "This move is somewhat of a surprise since the US and China have been in talks about reaching a trade deal, which appeared to be progressing well. Perhaps President Trump caved to the mounting criticism on the contents of the agreement. Either way, the chances of no tariffs being raised at all seem slimmer at this point."

China's Commerce Ministry responded by saying: "This is obviously contrary to the consensus reached between the two sides in Washington not long ago."

In corporate news, shares of Michael Kors dropped 11.74% after posting a disappointing outlook and DSW tumbled 10.93% after its full-year profit guidance fell short.

Salesforce collected 1.55% after outperforming the market yet again.

On the data front, private sector employment in the US grew less than expected in May, according to the latest figures from ADP.

Employers added 178,000 jobs this month, missing expectations for a 190,000 increase but up from a revised 163,000 gain in April. This was revised down from 204,000.

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said: "The hot job market has cooled slightly as the labour market continues to tighten. Healthcare and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labour market as well."

Elsewhere, the US economy grew at a softer pace than originally reported throughout the first quarter of the year, according to the Commerce Department, principally because of a slower buildup in inventories.

Gross domestic product was trimmed to an annual 2.2% pace from 2.3%, just lower than analysts' projections of a flat reading.

In other news, core PCE, which strips out volatile food and energy prices and is the Fed's preferred inflation metric, increased 2.3%, down from the initial estimate of 2.5%.

Lastly, growth US April preliminary wholesale inventories came in unchanged at 0.0% versus a month-on-month gain of 0.5% projected by analysts, while the Goods Trade Balance deficit shrunk to $68.19bn in April, which was below economists' forecasts.