Monetary Policy Uncertainty May Lead To Choppy Trading On Wall Street

The major U.S. index futures are pointing to a mixed open on Thursday, with stocks likely to extend the relatively lackluster performance seen over the past couple sessions.

Traders may remain reluctant to make significant moves as they continue to look ahead to a closely watched reading on inflation on Friday.

The reading on inflation included in the Commerce Department’s report on personal income and spending is said to be preferred by the Federal Reserve and could have a significant impact on the outlook for monetary policy.

Traders are also digesting a report from the Labor Department showing first-time claims for U.S. unemployment benefits fell by more than expected in the week ended May 22nd and once again hit their lowest level in over a year.

The continued decrease in jobless claims paints a positive picture of the labor market but may also raise concerns that the Fed will move closer to tapering its asset purchases in the near future.

While a separate report from the Commerce Department showed an unexpected pullback in durable goods orders in April, the decrease was largely due to a steep drop in orders for transportation equipment.

Stocks moved mostly higher over the course of the trading day on Wednesday, partly offsetting the modest weakness seen on Tuesday. The major averages all closed in positive territory, although the tech-heavy Nasdaq outperformed its counterparts.

After ending Tuesday’s trading marginally lower, the Nasdaq climbed 80.82 points or 0.6 percent to 13,738.00. The S&P 500 also edged up 7.86 points or 0.2 percent to 4,195.99, while the narrower Dow inched up 10.59 points or less than a tenth of a percent to 34,323.05.

The modest strength on Wall Street partly reflected continued economic optimism as the country continues to reopen following the coronavirus pandemic.

Shares of Royal Caribbean (RCL) saw notable strength after the cruise operator became the first to receive approval from the Centers for Disease Control and Prevention to begin test sailing in U.S. waters.

Norwegian Cruise Line Holdings (NCLH) also moved to the upside after announcing the next phase of its planned resumption of cruising across its three cruise lines, revealing plans for eight additional ships to relaunch beginning this fall.

The news from the cruise lines comes amid other signs of the steady reopening of the economy as an increasing number of Americans receive a coronavirus vaccine.

Upbeat earnings news from retailers such as Dick’s Sporting Goods (DKS), Urban Outfitters (URBN) and Abercrombie & Fitch (ANF) added to the positive sentiment.

Nonetheless, buying interest remained somewhat subdued as traders continue to look ahead to a closely watched reaching on inflation on Friday.

Reflecting optimism about the economy reopening, airline stocks showed a strong move to the upside, driving the NYSE Arca Airline Index up by 3 percent.

Significant strength was also visible among oil service stocks, as reflected by the 2.1 percent jump by the Philadelphia Oil Service Index. The rally by oil service stocks came as the price of crude oil turned higher over the course of the day.

Housing stocks also turned in a strong performance, resulting in a 1.6 percent advance by the Philadelphia Housing Sector Index.

Luxury homebuilder Toll Brothers (TOL) posted a standout gain after reporting better than expected fiscal second quarter results.

Computer hardware, steel and brokerage stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.48 to $65.73 a barrel after inching up $0.14 to $66.21 a barrel on Wednesday. Meanwhile, after rising $3.20 to $1,901.20 an ounce in the previous session, gold futures are falling $4 to $1,897.20 an ounce.

On the currency front, the U.S. dollar is trading at 109.34 yen versus the 109.15 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is unchanged compared to yesterday’s $1.2192.

Asia

Asian stocks ended Thursday’s trading on a mixed note, with the benchmark indexes in Tokyo, Hong Kong, Seoul and Wellington closing in the red. While China’s Shanghai Composite Index gained moderately, the S&P ASX 200 Index in Sydney closed almost flat.

The mood was sober as U.S. stock futures traded lower as traders waited for closely watched data on inflation, growth and jobs.

China’s Shanghai Composite Index touched a three-month high and closed at 3,608.85, a gain of 0.4 percent in today’s trading, amidst a rising yuan, general dollar weakness and an improving sentiment in Sino-U.S. relations.

Japan’s benchmark Nikkei 225 Index shed 0.3 percent to close at 28,549.01 amidst continuing worries about coronavirus cases and the extension of restrictions. Japan Steel Works and Ana Holdings both gained more than 3 percent. Japan Exchange Group as well as Fujitsu lost more than 2 percent.

Hong Kong’s Hang Seng Index lost 0.2 percent in the day’s trading and settled at 29,113.20. The day’s trading range was tight between 28,989 and 29,199.

Risk taking remained muted on the Korean stock market amid anxieties regarding fresh coronavirus cases and the benchmark Kospi ended at 3,165.51, a loss of 0.1 percent.

The Australian benchmark S&P ASX 200 Index closed nearly flat today at 7,094.90 by adding just 0.03 percent to its previous close. Mining company Galaxy Resources was the lead gainer with a rally of 8.68 percent. Financial services company AMP added 8.45 percent to yesterday’s levels.

Horticulture company Costa group was heavily beaten down and suffered a 24.1 percent drop in a single day following disappointing 2021 earnings guidance. Sigma Healthcare suffered a 6.2 percent decline.

New Zealand’s benchmark NZX 50 Index closed 0.8 percent lower to end at 12,243.34. Transport company Mainfreight bucked the weak trend and gained 4 percent, while Fonterra Shareholders Fund rallied by 3.4 percent.

Healthcare devices maker Fisher Paykel Healthcare declined by 5.4 percent despite upbeat results. Rest home operator Ryman Healthcare trailed yesterday’s levels by 5 percent.

Europe

European stocks are mixed on Thursday, as yields rebound amid bets on higher rates and investors await a key U.S. inflation reading to gauge whether inflationary pressures were transient or signaled a more durable turn.

In economic releases, German consumer confidence is set to improve in June, market research group GfK said earlier today.

The forward-looking consumer confidence index rose to -7.0 in June from revised -8.6 in May. Nonetheless, the reading was weaker than the economists’ forecast of -5.2.

Separately, U.K car production increased sharply in April compared to the pandemic hit month in 2020 but remained below its 2019 level, the Society of Motor Manufacturers and Traders said.

While the French CAC 40 Index has advanced by 0.8 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 0.2 percent.

Plane maker Airbus has surged after signaling confidence in the recovery of the aviation industry from the pandemic. Rolls-Royce Holding and Melrose Industries have also jumped.

Alstom has also moved higher. The train maker has received an order from Hessische Landesbahn GmbH (HLB) to supply 32 Coradia Continental electric multiple units.

On the other hand, German sportswear firm Puma has moved to the upside after France’s Kering said it is selling a 5.9 percent stake in the company.

Bayer shares have also slumped. A federal judge rejected the company’s $2 billion Roundup settlement, saying it would not adequately address the concerns of families who may later be diagnosed with non-Hodgkin’s lymphoma.

Home improvement superstore operator Hornbach Group has also come under pressure after saying it expects adjusted EBIT to fall short of the prior year level in fiscal 2022.

HSBC Holdings has edged down slightly in London after the lender said it will exit its U.S. domestic mass market retail banking business and retail business banking through a number of divestitures and wind-down of the residual branch network.

Food and beverages group Tate & Lyle has also moved sharply lower after warning that earnings will take a hit in the year ahead.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits fell by more than expected in the week ended May 22nd.

The Labor Department said initial jobless claims slid to 406,000, a decrease of 38,000 from the previous week’s unrevised level of 444,000. Economists had expected jobless claims to dip to 425,000.

Jobless claims decreased for the fourth consecutive week, once again falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Reflecting a steep drop in orders for transportation equipment, the Commerce Department released a report on Thursday showing an unexpected decrease in new orders for U.S. manufactured durable goods in the month of April.

The report showed durable goods orders tumbled by 1.3 percent in April after jumping by an upwardly revised 1.3 percent in March.

The pullback surprised economists, who had expected durable goods orders to climb by 0.7 percent compared to the 0.8 percent increase that had been reported for the previous month.

Excluding a 6.7 percent slump in orders for transportation equipment, however, durable goods orders shot up by 1.0 percent in April after spiking by 3.2 percent in March. Economists had expected 0.8 percent growth.

The Commerce Department released a separate report showing the pace of U.S. economic growth in the first quarter was unrevised from the advance estimate.

The report showed real gross domestic product spiked by 6.4 percent in the first quarter, unchanged from the estimate provided last month. Economists had expected a modest upward revision in the pace of GDP growth to 6.5 percent.

Upward revisions to consumer spending and non-residential fixed investment were offset by downward revisions to exports and private inventory investment, the Commerce Department said.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of April. Pending home sales are expected to increase by 0.8 percent.

The Treasury Department is due to announce the results of this month’s auction of $62 billion worth of seven-year notes at 1 pm ET.

Stocks In Focus

Shares of Dollar Tree (DLTR) are moving sharply lower in pre-market trading after the discount retailer reported better than expected fiscal first quarter results but provided disappointing full-year earnings guidance.

Cosmetics company e.l.f. Beauty (ELF) is also seeing pre-market weakness despite reporting fiscal fourth quarter results that exceeded analyst estimates.

On the other hand, shares of Best Buy (BBY) are likely to see initial strength after the consumer electronics retailer reported better than expected fiscal first quarter results and raised its full-year sales guidance.

Cookware and home furnishings retailer Williams-Sonoma (WSM) may also move to the upside after reporting fiscal first quarter results that beat expectations.