Looming Monthly Jobs Report May Lead To Light Trading On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Thursday, with stocks likely to regain some ground after ending the previous session mostly lower.

Continued optimism about the economic outlook may lead an early rebound on Wall Street, although trading activity is likely to be somewhat subdued ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect the report to show employment surged up by 870,000 jobs in July after jumping by 850,000 jobs in June. The unemployment rate is expected to dip to 5.7 percent from 5.9 percent.

With the monthly jobs report looming, the Labor Department released a report this morning showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 31st.

The report said initial jobless claims slipped to 385,000, a decrease of 14,000 from the previous week’s revised level of 399,000.

Economists had expected jobless claims to dip to 384,000 from the 400,000 originally reported for the previous week.

A separate report from the Commerce Department showed the U.S. trade deficit widened by more than expected in the month of June, reaching a new record high.

Stocks moved mostly lower during trading on Wednesday, although the tech-heavy Nasdaq bucked the downtrend. The Dow slid firmly into negative territory, while the S&P 500 pulled back off Tuesday’s record closing high.

The Dow slumped 323.73 points or 0.9 percent to 34,792.67 and the S&P 500 fell 20.49 points or 0.5 percent to 4,402.66. Meanwhile, the Nasdaq spent most of the day lingering near the unchanged line before closing up 19.24 points or 0.1 percent at 14,780.53.

The weakness on Wall Street partly reflect renewed concerns about the pace of U.S. economic growth after payroll processor ADP released a report showing private sector employment increased by much less than expected in the month of July.

ADP said private sector employment rose by 330,000 jobs in July after surging by a downwardly revised 680,000 jobs in June.

Economists had expected private sector employment to spike by 695,000 jobs compared to the jump of 692,000 jobs originally reported for the previous month.

A steep drop by shares of General Motors (GM) also weighed on Wall Street, with the auto giant plunging by 8.9 percent to a five-month closing low.

The decline by GM came after the company reported second quarter earnings missed analyst estimates, although the automaker still raised its full-year guidance.

The negative sentiment was partly offset by a report from the Institute for Supply management showing growth in U.S. service sector activity accelerated much more than expected in July.

The ISM said its services PMI jumped to an all-time high of 64.1 in July after pulling back to 60.1 in June, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 60.4.

Oil service stocks showed a substantial move to the downside on the day, resulting in a 6.4 percent nosedive by the Philadelphia Oil Service Index. The index ended the session at its lowest closing level in over three months.

The sell-off by oil service stocks came as the price of crude oil for September delivery plunged following the release of a report showing an unexpected weekly increase in crude oil inventories.

The drop in crude oil prices also weighed on oil producer stocks, with the NYSE Arca Oil Index tumbling by 3.6 percent.

Airline stocks also saw significant weakness on the day, as reflected by the 2.4 percent slump by the NYSE Arca Airline Index.

Housing, tobacco and telecom stocks also showed notable moves to the downside, while strength among biotechnology and semiconductor stocks contributed to the uptick by the Nasdaq.

Commodity, Currency Markets

Crude oil futures are climbing $0.57 to $68.72 a barrel after plunging $2.41 to $68.15 a barrel on Wednesday. Meanwhile, after inching up $0.40 to $1,814.50 an ounce in the previous session, gold futures are edging down $0.40 to $1,814.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.59 yen versus the 109.48 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1835 compared to yesterday’s $1.1837.

Asia

Asian stocks ended mixed on Thursday as the latest private payrolls data from the U.S. disappointed and China’s state media once again took aim at the video game sector, calling for higher taxes on the gaming industry.

Chinese shares retreated as the country tightened overseas travel restrictions for its citizens as part of efforts to contain the fast-spreading Delta variant of the coronavirus.

The benchmark Shanghai Composite Index dipped 10.67 points, or 0.3 percent, to 3,466.55, while Hong Kong’s Hang Seng Index fell 221.86 points, or 0.8 percent, to 26,204.69.

Japanese shares advanced as a slew of upbeat earnings results helped offset investor concerns about a surge in coronavirus cases amid the Olympic Games.

The Nikkei 225 Index rose 144.04 points, or 0.5 percent, to 27,728.12, while the broader Topix ended the day 0.4 percent higher at 1,928.98.

Nippon Yusen soared 12.7 percent, Kikkoman Corp surged 9.9 percent and Hitachi Zozen climbed 6.8 percent after delivering better than expected earnings.

Rakuten Group added 8.4 percent after the electronic commerce company entered a partnership to build a new mobile network in Germany.

Australian markets ended modestly higher as trade balance figures came in above forecasts and Sydney reported its worst day of the COVID-19 pandemic.

The benchmark S&P/ASX 200 Index inched up 7.90 points, or 0.1 percent, to 7,511.10, while the broader All Ordinaries Index ended marginally higher at 7,779.60.

Tech stocks finished broadly higher, with Xero climbing 2.2 percent and Nuix adding 2.8 percent. Commonwealth Bank of Australia gained 1.2 percent and National Australia Bank rose 0.8 percent ahead of their earnings results next week.

Energy stocks such as Oil Search, Santos, Woodside Petroleum and Origin Energy lost 1-2 percent after oil prices fell for a third day in a row to a two-week low on Wednesday on a surprise build in U.S. crude stockpiles.

Miners BHP, Rio Tinto, Mineral Resources and Fortescue Metals Group declined 2-3 percent. Resolute Mining jumped 4.5 percent after the gold miner said it would sell its Bibiani mine in Ghana to Canada’s Asante Gold Corp for $90 million.

Seoul stocks ended slightly lower as investors locked in profits from a three-day rally. The benchmark Kospi slipped 4.25 points, or 0.1 percent, to settle at 3,276.13 as daily new coronavirus cases stayed in the 1,700s for the second straight day despite the toughest-ever virus restrictions.

Yonhap News reported that the toughest restrictions in the greater Seoul area are “highly likely to be extended again” as cases remain persistently high.

Tech heavyweight Samsung Electronics lost 1 percent and No. 2 chipmaker SK Hynix shed 0.8 percent, while healthcare firm Samsung Biologics gained 1 percent, internet portal operator Naver rallied 2.2 percent and battery maker Samsung SDI jumped 3.5 percent.

Europe

European stocks are turning in a lackluster performance on Thursday as investors digest a slew of mixed earnings updates as well as the Bank of England’s latest monetary policy decision.

The Bank of England left its interest rate and quantitative easing unchanged but raised its inflation outlook, citing higher energy prices.

While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the German DAX Index is up by 0.2 percent and the French CAC 40 Index is up by 0.4 percent.

Swisscom has shown a notable move to the upside after the telecommunications company raised its earnings guidance for 2021.

German automation company Siemens has also moved notably higher after raising profit guidance for the third time this year.

WPP has also rallied. The advertising group said its revenues had returned to pre-pandemic levels a year sooner than it had expected.

Paper and packaging group Mondi is also seeing significant strength after reporting a stable set of results for the first half.

Troubled engineering group Rolls Royce Holdings has also soared after it moved back into the black in the first half of the year.

Meanwhile, Continental AG has fallen as the automotive supplier cut its growth forecast for the production of passenger and light commercial vehicles in 2021.

Drug maker Bayer has also slumped as it reported a second quarter loss and announced a deal to buy U.S. biotech company Vividion Therapeutics Inc. for as much as $2 billion.

Sportswear maker Adidas has also moved sharply lower despite the company raising its outlook for full-year sales and profitability.

Online fashion retailer Zalando has also plummeted. After reporting a 34 percent increase in second quarter sales, the company said it expects 2021 operating profit to come in at the upper end of its forecast range.

Credit Agricole shares have also moved lower. The French lender said its second quarter net income more than doubled from the same period last year as provisions declined reflecting an improving economy.

Glencore has also fallen in London. The commodity trading and mining company raised expectations for its trading division, but lowered full-year guidance for nickel and coal, citing output disruptions.

Gold mining company Centamin has also tumbled after its net profit for the first half of the year fell 20 percent, reflecting weaker gold production and higher unitary costs.

Real estate investment trust company Hammerson has also moved to the downside after releasing mixed half-year results.

In economic news, data showed German factory orders grew more than expected in June, underpinned by strong domestic demand.

Factory orders advanced 4.1 percent month-on-month in June, reversing a 3.2 percent fall in May, Destatis reported. On a yearly basis, manufacturing orders advanced sharply by 26.2 percent, but down from 54.9 percent in May.

The recovery in U.K. construction output lost momentum in July, with slower growth seen in all three main categories of work, survey results from IHS Markit showed.

The Chartered Institute of Procurement & Supply construction Purchasing Managers’ Index fell to 58.7 in July from June’s 24-year high of 66.3. The reading was forecast to fall to 64.0. The latest reading signaled the slowest overall increase in construction output since February.

U.S. Economic Reports

The Labor Department released a report on Thursday showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 31st.

The report said initial jobless claims slipped to 385,000, a decrease of 14,000 from the previous week’s revised level of 399,000.

Economists had expected jobless claims to dip to 384,000 from the 400,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also edged down to 394,000, a decrease of 250 from the previous week’s revised average of 394,250.

The U.S. trade deficit widened by more than expected in the month of June, according to a separate report released by the Commerce Department on Thursday.

The Commerce Department said the trade deficit widened to $75.7 billion in June from a revised $71.0 billion in May.

Economists had expected the trade deficit to widen to $74.1 billion from the $71.2 billion originally reported for the previous month.

The wider than expected trade deficit came as the value of imports jumped by 2.1 percent to $283.4 billion, while the value of exports rose by 0.6 percent to $207.7 billion.

At 10 am ET, Federal Reserve Board Governor Christopher Waller is scheduled to speak on “Central Bank Digital Currency” before a virtual American Enterprise Institute event.

Stocks In Focus

Shares of Score Media and Gaming (SCR) are soaring in pre-market trading after the digital media and sports betting company agreed to be acquired by Penn National Gaming (PENN) for approximately $2.0 billion in cash and stock.

Online home goods retailer Wayfair (W) is also likely to see initial strength after reporting second quarter adjusted earnings well above analyst estimates.

On the other hand, shares of Fastly (FSLY) are moving sharply lower in pre-market trading after the cloud software company reported mixed second quarter results and said a June network outage would impact its third quarter and full-year outlook.

Online crafts marketplace operator Etsy (ETSY) may also come under pressure after reporting second quarter earnings and revenues that beat analyst estimates but weaker than expected user growth.