Buying Interest May Resurface After Two Lackluster Sessions

The major U.S. index futures are pointing to a higher open on Thursday, with stocks likely to move the upside after showing a lack of direction over the two previous sessions.

Traders may look to resume the markets‘ recent run to record highs after seemingly taking a breather for two straight days.

The markets may continue to benefit from upward momentum amid optimism about additional stimulus and largely upbeat earnings news.

A slowdown in the rate of coronavirus infections and accelerated vaccine rollouts may also generate continued buying interest.

Nonetheless, traders may be somewhat reluctant to make substantial moves amid concerns the markets are becoming overbought.

The futures remained positive following the release of a report from the Labor Department showing jobless claims decreased from an upwardly revised level but came in above estimates.

Traders have recently looked at disappointing jobs data as a positive, as it is expected to put increased pressure on lawmakers to pass more stimulus.

Following the lackluster performance seen on Tuesday, stocks continued to show a lack of direction over the course of the trading day on Wednesday. The major averages hit new record intraday highs in early trading but spent the rest of the day bouncing back and forth across the unchanged line.

Eventually, the major averages ended the day mixed, with the Dow inching up to a new record closing high. The Dow rose 61.96 points or 0.2 percent to 31,437.80, while the Nasdaq fell 35.16 points or 0.3 percent to 13,972.53 and the S&P 500 edged down 1.35 points or less than a tenth of a percent to 3,909.88.

Stocks initially moved to the upside on the heels of upbeat earnings news from big-name companies like Twitter (TWTR), Coca-Cola (KO), and Lyft (LYFT), with the major averages reaching new record intraday highs.

Buying interest waned shortly after the start of trading, however, as traders expressed some uncertainty about the near-term outlook for the markets.

The major averages subsequently pulled back sharply, with the tech-heavy Nasdaq leading the way lower amid weakness among stocks like Amazon (AMZN) and Apple (AAPL).

Traders may be worried that the markets have become overbought as a new fiscal stimulus bill continues to slowly work its way through Congress.

Negotiations over the previous bipartisan bill took months to complete, and it remains to be seen if Democrats will be able to keep their caucus together and pass a relief package through the reconciliation process.

Stocks saw some strength in afternoon trading as Federal Reserve Chair Jerome Powell appeared to express support for more stimulus, as he said maintaining “patiently accommodative monetary policy” will be important to returning to a strong labor market but argued more needs to be done.

“It will require a society-wide commitment, with contributions from across government and the private sector,” Powell said during remarks at a virtual Economic Club of New York event.

He added, “I am confident that with our collective efforts across the government and the private sector, our nation will make sustained progress toward our national goal of maximum employment.”

In economic news, the Labor Department released a report showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Labor Department said its consumer price index rose by 0.3 percent in January after edging up by a revised 0.2 percent in December.

Economists had expected consumer prices to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Excluding food and energy prices, core consumer prices came in unchanged for the second consecutive month. Core prices were expected to rise by 0.2 percent.

Despite the lack of direction shown by the broader markets, airline stocks showed a strong move back to the upside following the pullback seen in the previous session.

After slumping by 1.6 percent on Tuesday, the NYSE Arca Airline Index soared by 2.4 percent to its best closing level in almost a year.

Significant strength was also visible among energy stocks, which moved higher amid a continued increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 2.1 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index both climbed by 1.6 percent.

On the other hand, tobacco stocks gave back ground following recent strength, dragging the NYSE Arca Tobacco Index down by 1.1 percent. The index ended the previous session at its best closing level in well over a year.

Commodity, Currency Markets

Crude oil futures are slipping $0.31 to $58.37 a barrel after rising $0.32 to $58.68 a barrel on Wednesday. Meanwhile, after climbing $5.20 to $1,842.70 an ounce in the previous session, gold futures are inching up $2.60 to $1,845.30 an ounce.

On the currency front, the U.S. dollar is trading at 104.66 yen versus the 104.59 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2144 compared to yesterday’s $1.2118.

Asia

Asian stocks ended mixed on Thursday, with many markets including South Korea, Taiwan and China closed for the Lunar New Year holidays. The Japanese markets were also shuttered in observance of National Foundation Day.

U.S. stimulus hopes offered some support after a Labor Department report showed tame consumer price inflation in January and Federal Reserve Chair Jerome Powell said that the U.S. is still “very far” from a strong labor market.

Australian shares fluctuated before finishing little changed. The benchmark S&P/ASX 200 Index ended marginally lower at 6,850.10, while the broader All Ordinaries index closed 0.2 percent lower at 7,122.10.

Mining heavyweights BHP and Rio Tinto rose about 1 percent, while gold miner Newcrest Mining surged 4 percent and Northern Star Resources advanced 1.7 percent.

Newcrest reported an underlying profit for the half-year period that almost doubled from last year. The company also affirmed its full-year gold as well as copper forecast.

Telecom company Telstra rallied 2.5 percent despite weak fiscal half-year results.

Energy stocks ended broadly lower as oil prices gave up some of their recent gains on dollar strength and profit taking.

Wealth manager AMP plunged 11 percent after it reported a nearly 33 percent slump in underlying net profit for the full year and said it will not pay a final dividend.

New Zealand shares ended lower amid rising bond yields and valuation concerns. The benchmark NZX-50 Index dropped 68.90 points, or 0.5 percent, to 12,761.13, extending losses for the third straight session. Meridian Energy shares slumped 4.4 percent and A2 Milk Company lost 1.1 percent.

Hong Kong’s Hang Seng Index climbed 0.5 percent to 30,173.57, while India’s Sensex rose 0.4 percent.

Europe

European stocks are broadly higher on Thursday as the outlook for more global stimulus got a major boost overnight from a surprisingly soft reading on core U.S. inflation and dovish comments by Federal Reserve chairman Jerome Powell.

Powell said he wanted to see inflation at 2 percent or more before even thinking about tapering the bank’s super-easy policies.

Currently, the pan-European STOXX 600 Index is rising by 0.4 percent. While the German DAX Index has also advanced by 0.7 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are lingering near the unchanged line.

Life insurance company Aegon has moved notably higher after its underlying earnings before tax for the second half of fiscal 2020 rose 7 percent.

French food company Danone has also rallied after U.S. investment group Artisan Partners added its voice to calls for structural change at the company.

Crédit Agricole S.A. has also jumped. The bank reported lower provisions and a larger-than-expected return to dividends.

Schneider Electric has also advanced. The electrical equipment group proposed a dividend increase despite posting a decline in 2020 net profit.

British drug maker AstraZeneca has also moved to the upside after it reported a 10 percent increase in product sales for 2020.

Postal service company Royal Mail has also soared. The company reported a strong increase in parcel revenues over the Christmas period and said it expects full-year group adjusted profit to be “well in excess” of £500 million.

Meanwhile, beverage company Pernod Ricard has fallen after reporting lower sales and earnings in the first half of its fiscal year.

German lender Commerzbank has also plummeted after its net loss deepened to $3.3 billion in the fourth quarter.

Unibail-Rodamco shares have also plunged. After posting a full-year net loss, the mall operator said it will not pay a dividend for three years.

Italian lender UniCredit has also moved to the downside after posting a bigger than expected quarterly loss.

Clariant has also declined. After reporting lower sales for 2020, the Swiss specialty chemicals maker said the effects of the coronavirus pandemic are likely to continue into 2021.

Total SE, BP Plc and Royal Dutch Shell have also moved lower as oil prices took a breather after enjoying the longest winning streak in two years.

In economic news, U.K. house prices continued to increase while there was a general weaker trend in sales market at the start of the year, the Royal Institution of Chartered Surveyors said.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits dipped from an upwardly revised level in the week ended February 6th.

The Labor Department said initial jobless claims edged down to 793,000, a decrease of 19,000 from the previous week’s revised level of 812,000.

Economists had expected jobless claims to drop to 757,000 from the 779,000 originally reported for the previous week.

The report said the less volatile four-week moving average also slid to 823,000, a decrease of 33,500 from the previous week’s revised average of 856,500.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auction of twenty-year bonds.

The Treasury Department is also due to announce the results of its auction of $27 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of Zillow Group (Z) are soaring in pre-market trading after the online real estate company reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Roomba maker iRobot (IRBT) is also likely to see initial strength after reporting better than expected fourth quarter results.

Shares of Tempur Sealy (TPX) are also showing a strong move to the upside in pre-market trading after reporting fourth quarter results that beat estimates, initiated a cash dividend and increased its share repurchase authorization.

On the other hand, shares of Molson Coors (TAP) may come under pressure after the brewer reported fourth quarter results that missed analyst estimates.