Traders May Take A Breather Following Recent Run To Record Highs

The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction after trending higher over the past several sessions.

Uncertainty about the near-term outlook for the markets may keep some traders on the sidelines after the major averages once again reached new record closing highs on Wednesday.

Traders also continue to digest the Federal Reserve’s latest monetary policy announcement, with the central bank announcing plans to scale back its asset purchases but signaling it won’t be in a hurry to begin raising interest rates.

However, it is worth noting, stocks have started out the past several sessions on a lackluster note before moving higher over the course of the session.

A batch of largely positive earnings news has contributed to the recent upward momentum on Wall Street despite lingering concerns about inflation and supply chain issues.

Stocks moved mostly higher over the course of the trading day on Wednesday, as traders reacted positively to the Federal Reserve’s monetary policy announcement. With the continued upward move, the major averages once again reached new record closing highs.

The major averages all closed in positive territory after a strong move to the upside late in the session. The Dow rose 104.95 points or 0.3 percent to 36,157.58, the Nasdaq jumped 161.98 points or 1 percent to 15,811.58 and the S&P 500 climbed 29.92 points or 0.7 percent to 4,660.57.

The late-day advance on Wall Street came after the Fed announced its widely expected decision to begin scaling back its asset purchases later this month.

The Fed said it plans to reduce its $120 billion in monthly bond purchases by $15 billion per month, citing the substantial further progress the economy has made toward its goals of maximum employment and price stability.

After reducing asset purchases by $15 a month this month and next, the Fed expects similar reductions in the pace of net asset purchases will likely be appropriate each month but said it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.

The accompanying statement continuing to describe elevated inflation as “transitory” as well as comments from Fed Chair Jerome Powell seemed to alleviate fears the central bank would be in a hurry to begin raising interest rates.

In his post-meeting press conference, Powell stressed that the decision to begin tapering asset purchases does not reflect a direct signal regarding interest rate policy.

“We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate,” Powell said.

Powell argued there is still ground to cover to reach maximum employment both in terms of employment and participation.

Earlier in the day, payroll processor ADP released a report showing private sector employment in the U.S. increased by more than expected in the month of October.

ADP said private sector employment jumped by 571,000 jobs in October after surging by a revised 523,000 jobs in September.

Economists had expected private sector employment to climb by 400,000 jobs compared to the addition of 568,000 jobs originally reported for the previous month.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to jump by 425,000 jobs in October after rising by 194,000 jobs in September, while the unemployment rate is expected to edge down to 4.7 percent from 4.8 percent.

A separate report released by the Institute for Supply Management showed growth in U.S. service sector activity accelerated to a new record high in the month of October.

The ISM said its services PMI climbed to 66.7 in October from 61.9 in September, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 62.0.

Networking stocks extended the rally seen in the previous session, with the NYSE Arca Networking Index climbing by 1.8 percent to a new record closing high.

Significant strength was also visible among tobacco stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Tobacco Index.

Retail stocks also turned in a strong performance on the day, driving the Dow Jones U.S. Retail Index up by 1.5 percent to a record closing high.

Financial, chemical and software stocks also saw notable strength, while oil, transportation, and computer hardware stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are jumping $1.72 to $82.58 a barrel after plummeting $3.05 to $80.86 a barrel on Wednesday. Meanwhile, after tumbling $25.50 to $1,763.90 an ounce in the previous session, gold futures are spiking $25.80 to $1,789.70 an ounce.

On the currency front, the U.S. dollar is trading at 113.97 yen versus the 114.01 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1560 compared to yesterday’s $1.1612.

Asia

Asian stocks rose broadly on Thursday after the U.S. Federal Reserve announced its widely expected decision to begin tapering its bond purchases in November with plans to end them in 2022.

In his post-meeting press conference, Fed Chair Jerome Powell stressed that the end of bond buying would not mean a rush to raise interest rates.

Chinese markets climbed, with consumer staple stocks surging after the government urged people to keep stores of basic goods in case of emergencies.

The benchmark Shanghai Composite Index gained 28.33 points, or 0.8 percent, to finish at 3,526.87, while Hong Kong’s Hang Seng Index ended up 200.44 points, or 0.8 percent, at 25,225.19.

Japanese shares rose sharply after a survey showed the country’s services sector activity grew for the first time in 21 months in October.

The Nikkei 225 Index advanced 273.47 points, or 0.9 percent, to 29,794.37, while the broader Topix closed 1.2 percent higher at 2,055.56.

Mitsubishi Motors jumped 3.3 percent ahead of its earnings release later in the day, while Toyota Motor rose 0.7 percent after upgrading its full-year profit forecast.

Nintendo declined 1.7 percent on reports that the gaining giant would make 20 percent fewer Switch consoles in the year to March.

Australian markets rose as banks and tech stocks advanced, offsetting weakness in the energy sector. The benchmark S&P/ASX 200 Index climbed 35.30 points, or 0.5 percent, at 7,428, while the broader All Ordinaries Index ended up 33.30 points, or 0.4 percent, at 7,746.30.

Insurer NIB Holdings jumped 5.8 percent after its premium revenue rose in the first quarter. Energy companies such as Oil Search, Woodside Petroleum, Santos and Beach Energy lost 3-5 percent as oil extended declines on concerns over increased global supply.

Australian retail volumes fell a record 4.4 percent in September, reflecting the COVID-19 situation in parts of the east coast, data showed earlier in the day.

Seoul stocks rose modestly after the U.S. Federal Reserve signaled “patience” in raising interest rates. The Kospi inched up 7.51 points, or 0.3 percent, to 2,983.22. Internet portal operator Naver rallied 2.2 percent and Hyundai Motor, the country’s largest carmaker, added 2.6 percent

Europe

European shares have hit new highs for the fourth straight session on Thursday after the U.S. Federal Reserve announced its widely expected decision to begin tapering its bond purchases in November but signaled “patience” in raising interest rates.

Meanwhile, the Bank of England decided to maintain its record low interest rate and quantitative easing in a split vote.

Seven members of the Monetary Policy Committee voted to leave the key interest rate unchanged at 0.10 percent, while Dave Ramsden and Michael Saunders sought a 15 basis point rate hike, the bank said in a statement on Thursday.

Ramsden and Saunders said the economic outlook warranted a tightening in the monetary policy stance at this meeting.

Further, the MPC voted 6-3 to retain the existing stock of corporate bond purchases at 20 billion pounds and the government bond purchases target at 875 billion pounds.

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

Drug maker Roche has rallied after buying back its nearly one-third voting stake from rival Novartis for $20.7 billion. Novartis shares have also risen.

Dutch bank ING Group has also moved to the upside after its third-quarter earnings beat forecasts.

BT Group shares have soared in London. The telecommunications company confirmed its outlook for this year after reporting a 3 percent decline in first-half revenue.

Medical products maker Smith & Nephew has also rallied. The medical technology group said it would bring its orthopaedics and sports medicine franchises under one leadership team.

Societe Generale has also advanced. The French lender posted better than expected earnings for the third quarter and also appointed a new financial chief.

Shares of Veolia Environnement has also jumped. The resource management firm confirmed its fiscal 2021 EBITDA view after reporting higher third quarter results.

German real estate investment trust Alstria Office has also spiked after it announced a takeover bid from Canada-based Brookfield Asset Management..

Commerzbank has also soared after the lender said it expects a profit this year, defying analysts’ predictions for a 2021 loss.

On the other hand, shares of supermarket grocer Sainsbury’s have moved sharply lower after the company warned of price pressures.

Technology company Aixtron has also shown a notable move to the downside after reaffirming its revenue guidance.

In economic news, investors have shrugged off data from a purchasing mangers’ survey showing that growth in the euro zone services sector slowed in October.

The final reading for the Eurozone’s services PMI came in at 54.6 in October, well below the 56.4 registered in September and marginally lower than the 54.7 preliminary estimate.

German factory orders recovered in September but at a slower than expected pace, figures from Destatis revealed.

New orders grew 1.3 percent month-on-month in September, reversing an 8.8 percent decrease in August. However, this was slower than the 2 percent expansion expected by economists.

On a yearly basis, new order growth eased to 9.7 percent from 10.4 percent in August.

U.S. Economic Reports

A day ahead of the release of the closely watched monthly jobs report, the Labor Department released a report on Thursday showing another modest decrease in first-time claims for U.S. unemployment benefits in the week ended October 30th.

The report said initial jobless claims dipped to 269,000, a decrease of 14,000 from the previous week’s revised level of 283,000.

Economists had expected initial jobless claims to edge down to 277,000 from the 281,000 originally reported for the previous week.

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

A separate report released by the Labor Department on Thursday showed a steep drop in U.S. labor productivity in the third quarter.

The Labor Department said labor productivity tumbled by 5.0 percent in the third quarter after surging by an upwardly revised 2.4 percent in the second quarter.

Economists had expected labor productivity to decrease by 1.5 percent compared to the 2.1 percent jump that had been reported for the previous quarter.

Meanwhile, the report showed unit labor costs spiked by 8.3 percent in the third quarter after climbing by a downwardly revised 1.1 percent in the second quarter.

Labor costs were expected to shoot up by 5.2 percent compared to the 1.3 percent increase that had been reported for the previous quarter.

Reflecting a sharp pullback in the value of exports, the Commerce Department also released a report on Thursday showing the U.S. trade deficit widened much more than expected in the month of September.

The Commerce Department said the trade deficit widened to $80.9 billion in September from a revised $72.8 billion in August.

Economists had expected the deficit to widen to $74.1 billion from the $73.3 billion originally reported for the previous month.

The wider than expected trade deficit came as the value of exports tumbled by 3.0 percent to $207.6 billion, while the value of imports rose by 0.6 percent to $288.5 billion.

At 1:50 pm ET, Federal Reserve Governor Randal Quarles is due to participate in a Financial Stability Board Panel Discussion before the Portuguese Securities Market Commission 2021 Annual Conference.

Stocks In Focus

Shares of Qualcomm (QCOM) are moving sharply higher in pre-market trading after the chipmaker reported better than expected fiscal fourth quarter results and provided upbeat guidance.

Cloud computing services provider Fastly (FSLY) is also likely to see initial strength after reporting a narrower than expected third quarter loss on revenues that exceeded analyst estimates.

On the other hand, shares of Moderna (MRNA) may come under pressure after the drug maker reported third quarter results that missed expectations and lowered its full-year sales forecast for its COVID-19 vaccine.

Video-streaming device maker Roku (ROKU) is also likely to move to the downside after reporting third quarter earnings that beat analyst estimates but weaker than expected sales. Roku also provided disappointing revenue guidance.