Futures Pointing To Roughly Flat Open On Wall Street

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 moving sharply lower over the two previous sessions.

Traders may be reluctant to make significant moves amid uncertainty about the near-term outlook for the markets following recent volatility.

Stocks started off the week on a strong note on Monday, but pulled back sharply on Tuesday and Wednesday amid concerns about the outlook for monetary policy.

With the Federal Reserve’s next monetary policy meeting almost a month away, traders are likely to keep a close eye on the latest economic data for clues about how aggressive the central bank will be.

The Labor Department released a report this morning showing a modest decrease by first-time claims for unemployment benefits in the week ended April 2nd.

The economic calendar is relatively quiet for the rest of this week but will pick up next week with the release of reports on consumer and producer price inflation, retail sales and industrial production.

Stocks moved mostly lower during trading on Wednesday, extending the significant downward move seen in Tuesday’s session. The major averages all moved to the downside, with the tech-heavy Nasdaq showing another particularly steep drop.

After tumbling by 2.3 percent during trading on Tuesday, the Nasdaq plunged 315.35 points or 2.2 percent to 13,888.82. The S&P 500 also slumped 43.97 points or 1 percent to 4,481.15, while the narrower Dow posted a more modest loss, falling 144.67 points or 0.4 percent to 34,496.51.

Worries about the outlook for monetary policy continued to weigh on Wall Street amid concerns the Federal Reserve plans to tighten monetary policy more aggressively than previously anticipated.

Fed Governor Lael Brainard’s comments from Tuesday continued to generate selling pressure, as she predicted the Fed would start reducing its balance sheet at a “rapid pace” as soon as the May meeting.

Philadelphia Fed President Patrick Harker also weighed in on the outlook for monetary policy in remarks to the Delaware State Chamber of Commerce.

Harker said he is “acutely concerned” about the elevated rate of inflation and forecast a series of “deliberate, methodical” interest rate hikes this year.

Stocks fluctuated late in the session after the Fed released the minutes of its March meeting, which showed that the meeting featured a continued discussion about reducing the size of the central bank’s balance sheet.

Staff presented a range of possible options for reducing the Fed’s securities holdings over time in a predictable manner, with all of the options featuring a more rapid pace of balance sheet runoff than in 2017-2019.

The Fed said participants generally agreed reducing the central bank’s holdings by about $95 billion per month would likely be appropriate, reflecting monthly caps of about $60 billion for Treasury securities and about $35 billion for agency mortgage-backed securities.

The minutes showed that there was also general agreement that the caps could be phased in over a period of three months or modestly longer if market conditions warrant.

Participants agreed reducing the size of the Fed’s balance sheet would play an important role in firming the stance of monetary policy and that the process could begin as soon as the next meeting in May.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted the balance sheet reduction outlined in the minutes is double the pace of the run-off between 2017 and 2019 but said it is still a “little smaller than we were expecting, particularly in light of the more hawkish post-meeting comments from various officials.”

At the March meeting, the Fed announced its widely expected decision to raise interest by 25 basis points to a range of 0.25 to 0.5 percent, marking the first rate hike since December 2018.

The minutes showed many participants would have preferred a 50 basis point increase due to rate of inflation being well above the Fed’s objective and facing risks to the upside.

However, a number of these participants felt a 25 basis point increase would be appropriate in light of the greater near-term uncertainty associated with Russia’s invasion of Ukraine.

Many participants noted that one or more 50 basis point increases could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified, the Fed said.

The Fed’s next monetary policy meeting scheduled for May 3-4, with CME Group’s FedWatch Tool currently indicating a 78.8 percent chance of a 50 basis point rate hike.

The continued weakness on Wall Street also comes amid concerns about the impact of additional sanctions against Russia.

Citing Russian atrocities in Ukraine, the White House announced a ban on new investment in Russia, severe financial sanctions on Russia’s largest bank and sanctions on Russian elites and their family members, including President Vladimir Putin’s adult children.

Airline stocks turned some of the market’s worst performances on the day, resulting in a 3.5 percent nosedive by the NYSE Arca Airline Index.

Shares of JetBlue (JBLU) moved sharply lower after Spirit Airlines (SAVE) said it has received a $3.6 billion cash takeover offer from the discount airline.

Spirit previously agreed to be acquired by Frontier Airlines parent Frontier Group (ULCC), which also posted a steep loss on the day.

Considerable weakness was also visible among brokerage stocks, as reflected by the 3.1 percent slump by the NYSE Arca Broker/Dealer Index.

Networking stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Networking Index down by 2.7 percent.

Semiconductor, housing and computer hardware stocks also saw notable weakness, while pharmaceutical and utilities stocks bucked the downtrend.

Commodity, Currency Markets

Crude oil futures are jumping $1.61 to $97.84 a barrel after plunging $5.73 to $96.23 a barrel on Wednesday. Meanwhile, after dipping $4.40 to $1,923.10 an ounce in the previous session, gold futures are climbing $8.20 to $1,931.20 an ounce.

On the currency front, the U.S. dollar is trading at 123.91 yen versus the 123.80 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0911 compared to yesterday’s $1.0896.

Asia

Asian stocks fell on Thursday after minutes from the Fed’s March meeting revealed discussions on reducing the size of the central bank’s balance sheet over time in a predictable manner.

Participants generally agreed to beginning to reduce the balance sheet as early as May. The monthly roll-off would consist of $95 billion worth of Treasuries and mortgage bonds.

The dollar and yields gained, while gold prices fell on speculation the U.S. central bank will raise interest rates by a hefty 50 basis points at its meetings in May and June.

A slew of Fed officials, including St. Louis Fed President James Bullard, Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans are scheduled to speak at separate events later in the day.

Chinese shares lost ground despite the country’s cabinet pledging to use monetary policy tools at an “appropriate time” to boost the economy amid a Covid outbreak and property-market woes.

The benchmark Shanghai Composite Index tumbled 1.4 percent to 3,236.70, while Hong Kong’s Hang Seng Index ended down 1.2 percent at 21,808.98.

Japanese shares fell the most in a month on worries over the war in Ukraine and Covid-19 lockdowns in China. The Nikkei 225 Index slumped 1.7 percent to 26,888.57. Chipmakers and auto companies led losses, with Advantest, Tokyo Electron and Honda losing 4-5 percent.

Australian markets ended lower after export figures for February came in largely flat and a measure of services activity dropped in March. The benchmark S&P ASX 200 Index fell 0.6 percent to 7,442.80, with tech companies and banks pacing the decliners. Struggling theme park operator Ardent Leisure soared 6.2 percent on a deal to offload its U.S. division.

Seoul stocks tumbled, dragged down by technology stocks after the Nasdaq 100 posted its worst two-day loss in almost a month overnight. The Kospi plunged 1.4 percent to 2,695.86 amid selling by both foreign investors and institutions.

Market heavyweight Samsung Electronics gave up 0.7 percent despite its earnings guidance that showed its best first quarter earnings in four years.

Europe

European stocks have advanced on Thursday, even as a cautious undertone prevails following hawkish Federal Reserve minutes and Washington’s new sanctions against Russia.

While the U.K.’s FTSE 100 Index has bucked the uptrend and edged down by 0.1 percent, the German DAX Index is up by 0.5 percent and the French CAC 40 Index is up by 0.7 percent.

Shares of Electrolux AB have jumped in Sweden after the home appliances giant said that it expects to report a positive non-recurring item of $70.5 million or 656 million Swedish kronor in the first quarter.

Gerresheimer has also surged. The German manufacturer of primary packaging products for medication and drug delivery devices raised its revenue guidance for 2022 after delivering double-digit growth in both revenue and adjusted EBITDA in the first quarter.

Meanwhile, British sports betting giant Entain has moved to the upside percent after publishing its first quarter trading update.

Energy giant Shell has also fallen after an announcement that it would write off between $4 and $5 billion in the value of its assets after pulling out of Russia.

Miners Anglo American, Antofagasta and Glencore have also dropped on concerns over the impact of aggressive monetary policy tightening in the United States.

In economic news, Eurozone retail sales rose 0.3 percent month-on-month in February, slightly faster than the 0.2 percent increase in January, data published by Eurostat showed. However, sales growth was slower than the expected 0.6 percent.

U.K. house prices gained 1.4 percent in March from February, when prices were up 0.8 percent, survey data from the Lloyds Bank subsidiary Halifax revealed. This was the fastest growth since September. Average property price reached another new record high of GBP 282,753.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits saw a modest decrease in the week ended April 2nd, according to a report released by the Labor Department on Thursday.

The report showed initial jobless claims dipped to 166,000, a decrease of 5,000 from the previous week’s revised level of 171,000.

Economists had expected jobless claims to edge down to 200,000 from the 202,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also slipped to 170,000, a decrease of 8,000 from the previous week’s revised average of 178,000.

At 9 am ET, St. Louis Federal Reserve President James Bullard is due to give a presentation on the U.S. economy and monetary policy before an event hosted by the University of Missouri.

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 at 11 am ET.

At 2 pm ET, Chicago Federal Reserve President Charles Evans and Atlanta Federal Reserve President Raphael Bostic are due to participate in a virtual conversation hosted by the Federal Reserve Bank of Chicago Economic Mobility Project

The Federal Reserve is scheduled to release its report on consumer credit in the month of February at 3 pm ET. Consumer credit is expected to increase by $16.7 billion.

At 4:05 pm ET, New York Federal Reserve President John Williams is due to give closing remarks before the Expanding Opportunity: Investing in Employment Social Enterprise event organized by the New York Fed and the Roberts Enterprise Development Fund.

Stocks In Focus

Shares of HP Inc. (HPQ) are moving sharply higher in pre-market trading after Warren Buffett’s Berkshire Hathaway (BRK.B) revealed an 11.4 percent stake in the personal computer and printer maker.

Automotive retail technology company CDK Global (CDK) is also seeing significant pre-market strength after agreeing to be acquired by Brookfield Business Partners for $54.87 per share in cash.

On the other hand, shares of Rite Aid (RAD) are plunging in pre-market trading after Deutsche Bank downgraded its rating on the drugstore operator to Sell from Hold.

Online personal finance company SoFi Technologies (SOFI) may also come under pressure after lowering its full-year guidance to reflect President Biden’s extension of the federal student loan payment moratorium.