Stocks open lower on Wednesday as market rebound fizzles

U.S. stock index futures fell Wednesday, putting the major averages on track to give up some of the previous session's sharp gains.

Futures contracts tied to the Dow Jones Industrial Average fell 462 points, or 1.5%, while S&P 500 futures declined 1.7%. Nasdaq 100 futures dropped 1.8%.

Those moves come as growing fears of an economic recession continued to weigh on investors. Federal Reserve Chair Jerome Powell will appear before Congress on Wednesday, kicking off two days of testimony, where he is expected to speak on the central bank's plans to tamp down inflation, which has surged to 40-year highs.

Last week, the Federal Reserve hiked interest rates by three-quarters of a percentage point, or its largest rate increase since 1994.

"[While] a mild recession seems priced in, equities & cyclicals may struggle to form a bottom until estimates are reset lower," Barclays said in a Wednesday note to clients.

Energy stocks took a hit in the premarket as oil prices dropped on recession concerns. Brent crude futures dropped 5.6% to $108.21 per barrel. West Texas Intermediate, the U.S. oil benchmark, declined 6.2% to $102.71 per barrel.

Shares of Marathon Oil and ConocoPhillips dropped more than 5% in premarket trading. Shares of Occidental Petroleum and Phillips 66 fell more than 4% in premarket trading. Shares of Exxon Mobil dipped more than 3% in premarket trading.

On Wednesday, President Joe Biden is expected to ask Congress to suspend federal gasoline and diesel taxes for three months. The effort is meant to ease pressures at the pump for consumers during an election year.

Meanwhile, some Wall Street banks raised their odds of a recession as investors deliberated whether the central bank can navigate a soft landing.

Citigroup increased its odds of a global recession to 50%, pointing to data that consumers are starting to pull back on spending.

"The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the aggregate probability of recession as now approaching 50%," read a note from Citigroup.

Goldman Sachs believes a recession is becoming increasingly likely for the U.S. economy, saying that the risks of a recession are "higher and more front-loaded."

"The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply," the firm said in a note to clients.

Meanwhile, UBS said Tuesday in a note to clients that it does not expect a U.S. or global recession in 2022 or 2023 in its base case, "but it's clear that the risks of a hard landing are rising."

"Even if the economy does slip into a recession, however, it should be a shallow one given the strength of consumer and bank balance sheets," UBS added.

On Tuesday, the Dow surged 641 points, or 2.15%. The S&P 500 added 2.45%, turning in its best day since May 4. The jump comes after the benchmark index slumped 5.79% last week in its worst weekly performance since March 2020.

The Nasdaq Composite advanced 2.51% on Tuesday, following its tenth week of losses in the last 11 weeks.

On the earnings front, KB Home will post results after the market closes on Wednesday.