Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are pointing to a higher open on Thursday following the lack of direction seen over the two previous sessions. Tech stocks may help lead the advance, with the Nasdaq futures moving notably higher.

The markets may benefit from the Federal Reserve’s repeated assurances that monetary policy is likely to remain unchanged for the foreseeable future.

The minutes of the Fed’s March meeting reiterated that the central bank does not intend to change its ultra-loose monetary policy anytime soon.

The Fed stressed any changes to policy will be outcome-based, indicating interest rates will remain unchanged until the goals of maximum employment and inflation moderately above 2 percent for some time are achieved.

The minutes also showed officials are not concerned about the recent increase in Treasury yields, which the Fed attributed to investor optimism about the economic outlook and expectations of higher Treasury debt issuance.

Later in the day, Fed Chair Jerome Powell is scheduled to participate in a virtual International Monetary Fund debate on the global economy.

Following the lackluster performance seen during trading on Tuesday, stocks continued to experience choppy trading on Wednesday. The major averages once again spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the day mixed. While the Nasdaq edged down 9.54 points or 0.1 percent to 13,688.84, the Dow inched up 16.02 points or 0.1 percent to 33,446.26 and the S&P 500 rose 6.01 points or 0.2 percent to a new record closing high of 4,079.95.

The choppy trading on Wall Street came as traders remained reluctant to make significant moves as the wait for more clarity about the near-term outlook for the markets.

Strong economic data has helped lift stocks to record highs in recent sessions, but traders may be worried the markets are becoming overbought.

In his annual letter to shareholders, JPMorgan Chase chairman and CEO Jamie Dimon acknowledged valuations are “quite high” but noted a multi-year booming economy could justify current prices.

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon wrote. “This boom could easily run into 2023 because all the spending could extend well into 2023.

He added, “Equity markets look ahead, and they may very well be pricing in not only a booming economy but also the technical factor that lots of the excess liquidity will find its way into stocks.”

Traders also kept an eye on the minutes of the Federal Reserve’s latest monetary policy meeting, although the central bank only reiterated that it is unlikely to change its ultra-loose monetary policy anytime soon.

Participants in the March meeting acknowledged the improvement in the medium-term outlook for real GDP growth and employment but continued to see the uncertainty surrounding that outlook as elevated.

With measures of the economy still below pre-pandemic levels, the Fed reiterated that it would likely be “some time” before the central bank considers changing its monetary policy stance.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit widened more than expected in the month of February.

The Commerce Department said the trade deficit widened to $71.1 billion in February from a revised $67.8 billion in January.

Economists had expected the deficit to widen to $70.5 billion from the $68.2 billion originally reported for the previous month.

With the bigger than expected increase in February, the size of the U.S. trade deficit reached a new record high.

Most of the major sectors showed only modest moves on the day, contributing to the lackluster close by the broader markets.

Biotechnology stocks showed a substantial move to the downside, however, with the NYSE Arca Biotechnology Index plunging by 2.5 percent.

FibroGen (FGEN) led the biotech sector lower, plummeting by 43 percent after the biopharmaceutical company provided clarification of certain prior disclosures to the FDA regarding its kidney disease treatment roxadustat.

Significant weakness was also visible among chemical stocks, as reflected by the 1.8 percent drop by the S&P Chemical Sector Index. The index ended the previous session at a record closing high.

Gold and airline stocks also showed notable moves to the downside, while retail and natural gas stocks saw modest strength on the day.

Commodity, Currency Markets

Crude oil futures are slipping $0.21 to $59.56 a barrel after rising $0.44 to $59.77 a barrel on Wednesday. Meanwhile, after edging down $1.40 to $1,741.60 an ounce in the previous session, gold futures are rising $6.30 to $1,747.90 an ounce.

On the currency front, the U.S. dollar is trading at 109.06 yen versus the 109.85 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1884 compared to yesterday’s $1.1868.

Asia

Asian stocks rose broadly on Thursday after the minutes from the Federal Reserve’s March meeting indicated that officials have little concern over inflation despite rising longer-term government bond yields.

China’s Shanghai Composite Index finished marginally higher at 3,482.55, with healthcare firms gaining ground, buoyed by a ramp-up of vaccination efforts in the country amid the emergence of a new cluster of infections.

Hong Kong’s Hang Seng Index jumped 333.27 points, or 1.2 percent, to 29,008.07 after a survey showed the private sector in the country expanded at a slightly faster pace in March.

Japanese shares edged lower on concerns about a spike in domestic Covid infections and possible restrictions on economic activity.

Amid a sudden increase in coronavirus infections and the spread of a new variant of the virus, Tokyo Governor Yuriko Koike said she will ask the national government to designate the capital as an area requiring emergency measures.

The western city of Osaka is also set to declare a medical emergency after infections spiked to a record high.

The Nikkei 225 Index slipped 21.81 points, or 0.1 percent, to 29,708.98, while the broader Topix ended 0.8 percent lower at 1,951.86. Takeda Pharmaceutical lost 3.1 percent and Mitsubishi UFJ Financial Group gave up 2.5 percent.

Tech stocks turned in a mixed performance. Advantest declined 2.8 percent and Screen Holdings shed 1.3 percent, while Tokyo Electron rose 1.2 percent.

Japan posted a current account surplus of 2.916 trillion yen in February, the Ministry of Finance said today, down 4.7 percent year-on-year. That handily beat expectations for a surplus of 1.966 trillion yen following the 646.8 billion yen surplus in January.

Australian markets rose sharply to hit a fresh post-pandemic high. The benchmark S&P/ASX 200 Index rallied 70.80 points, or 1 percent, to finish at 6,998.80 after having hit as high as 7,012 earlier in the day. The broader All Ordinaries Index ended up 72.90 points, or 1 percent, at 7,250.30.

Robust iron ore prices boosted heavyweight mining stocks, with BHP, Fortescue Metals Group and Rio Tinto rising between 2.2 percent and 2.6 percent.

The big four banks gained between 0.7 percent and 1.3 percent, while energy stocks ended on a lackluster note.

EML Payments surged 5.7 percent to extend gains from the previous session after announcing it was buying a European subsidiary.

Seoul stocks extended gains for the sixth straight day on economic recovery hopes. The benchmark Kospi ended a choppy session up 5.85 points, or 0.2 percent, at 3,143.26, led by auto and bio stocks.

Top automaker Hyundai Motor gained 0.7 percent, while its smaller affiliate Kia advanced 2.1 percent. Market heavyweight Samsung Electronics dropped more than 1 percent.

Europe

European stocks have risen on Thursday to hover near record highs after the Federal Reserve minutes from the March meeting indicated that officials were united on the need to see more progress on the recovery before scaling back their massive bond-buying program.

The day’s economic data has also supported hopes for a swift economic recovery from the pandemic.

Data from Destatis revealed that German factory orders growth accelerated in February, driven by domestic demand.

Factory orders grew 1.2 percent month-on-month in February, faster than the 0.8 percent increase in January and matching economists’ expectations.

On a yearly basis, growth in industrial orders improved notably to 5.6 percent from 1.4 percent a month ago.

The U.K. construction sector grew at the fastest pace since 2014 in March, underpinned by strong rises in house building, commercial work and civil engineering, survey data from IHS Markit showed.

The corresponding index rose to 61.7 from 53.3 in February. This was the fastest expansion since September 2014.

While the German DAX Index has inched up by 0.1 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are up by 0.4 percent and 0.5 percent, respectively.

Holland-based technology investor Prosus NV has moved to the upside after completing a sale of a parcel of Tencent shares.

Norwegian telecom company Telenor ASA has also risen. The company and Axiata Group are in advanced discussions regarding a deal to merge their Malaysian mobile operations Digi and Celcom.

Swiss engineering company ABB has also moved notably higher after launching a new share buyback program.

AstraZeneca shares have also advanced despite reports that several European countries are considering restricting the use of the company’s Covid-19 vaccine in younger people.

Johnson Matthey shares have also rallied. The chemicals company said it expects group operating performance for 2020/21 to be around the top end of market expectations.

Volvo Group shares have risen, while those of SSAB have fallen after they have signed a collaboration agreement on research, development, serial production and commercialization of vehicles to be made of fossil-free steel.

Gerresheimer has dropped despite reporting an increase in first quarter earnings and confirming its 2021 outlook.

Aareal Bank has also declined after the company rejected the demand by Petrus Advisers Ltd for a partial replacement of Supervisory Board members.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits unexpectedly increased in the week ended April 3rd, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims edged up to 744,000, an increase of 16,000 from the previous week’s revised level of 728,000.

Jobless claims rose for the second straight week after falling to a one-year low of 658,000 in the week ended March 20th.

The continued increase surprised economists, who had expected jobless claims to drop to 680,000 from the 719,000 originally reported for the previous month.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds.

St. Louis Federal Reserve President James Bullard is also due to speak via Zoom to Southern Illinois University’s Paul Simon Public Policy Institute at 11 am ET.

At 12 pm ET, Federal Reserve Chair Jerome Powell is scheduled to participate in a virtual International Monetary Fund debate on the global economy.

Minneapolis Federal Reserve President Neel Kashkari is due to speak in an Economic Club of New York virtual fireside chat on monetary policy and expectations for the U.S. economy at 2 pm ET.

Stocks In Focus

Shares of Resources Connection (RGP) are seeing significant pre-market strength after the business consulting firm reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Video game retailer GameStop (GME) is also likely to move to the upside after announcing its Board of Directors intends to elect Chewy (CHWY) co-founder Ryan Cohen as Chairman following its annual meeting on June 9th.

On the other hand, shares of Apogee Enterprises (APOG) may come under pressure after the glass products company reported better than expected fiscal fourth quarter earnings but provided disappointing guidance.

Weight loss company WW International (WW) is also likely to see initial weakness after Morgan Stanley downgraded its rating on the company’s stock to Equal-Weight from Overweight.