Upward Momentum May Lead To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Thursday, with stocks likely to move back to the upside after giving back ground in the previous session.

Recent upward momentum may contribute to a rebound on Wall Street, with stocks extending the recovering from their June lows seen over the past two months.

Positive sentiment may also be generated in reaction to upbeat earnings news Cisco Systems (CSCO), as the networking giant is surging by 4.8 percent in pre-market trading.

The jump by Cisco comes after the company reported better than expected fiscal fourth quarter results and provided upbeat guidance for the current quarter.

Early trading may also be impacted by reaction to the latest U.S. economic data, including a report from the Labor Department unexpectedly showing a modest pullback in first-time claims for U.S. unemployment benefits in the week ended August 13th.

After coming under pressure early in the session, stocks staged a recovery attempt in afternoon trading on Wednesday but still ended the day firmly in negative territory. The major averages all moved to the downside following the mixed performance seen on Tuesday.

The major averages pulled back well off their recovery highs going into the close. The Dow fell 171.69 points or 0.5 percent to 33,98.32, the Nasdaq slumped 164.43 points or 1.3 percent to 12,938.12 and the S&P 500 slid 31.16 points or 0.7 percent at 4,274.04.

The failed recovery attempt came after the Federal Reserve released the minutes of its latest monetary policy meeting, which some traders seemed to interpret as pointing to a slowdown in the pace of interest rate hikes.

The Fed minutes reaffirmed the central bank’s plans to continue raising interest rates in an effort to return inflation to its 2 percent objective.

The minutes did not provide specific guidance regarding the pace of future rate hikes, noting that the extent of future policy tightening would depend on the implications of incoming data for the economic outlook and risks to the outlook.

The Fed did reveal that meeting participants believed it would be necessary to move to a “restrictive stance of policy” due to inflation remaining well above the Fed’s objective.

At the same time, the Fed said participants judged that it would eventually become appropriate to slow the pace interest rate hikes in order to assess the impacts of higher rates on economic activity and inflation.

The minutes showed some participants also expressed concerns the Fed could tighten the stance of policy by more than necessary to restore price stability.

“While that suggests the Fed is eyeing up a smaller 50bp move in September, and will be cautious about raising rates too far above neutral, we doubt officials will commit themselves either way when there is still another employment and inflation report due out before that meeting,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

The early pullback on Wall Street partly reflected profit taking, as some traders cashed in on the recent strength in the markets amid lingering concerns about the economy, inflation and interest rates.

While the Nasdaq edged lower on Tuesday, the Dow and the S&P 500 reached their best closing levels in almost four months.

A notable drop by shares of Target (TGT) also weighed on Wall Street, with the discount retailer slumping by 2.7 percent on the day.

The pullback by Target came after the company reported second quarter earnings that fell well short of analyst estimates, as it cut prices in an effort to reduce excess inventory.

Traders were also reacting to a Commerce Department report showing U.S. retail sales came in flat in July amid pullbacks in gas station and auto sales.

The Commerce Department said retail sales were virtually unchanged in July after climbing by a downwardly revised 0.8 percent in June.

Economists had expected retail sales to inch up by 0.1 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding gas station and auto sales, however, retail sales rose by 0.7 percent in July, matching the increase seen in the previous month.

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 3.5 percent. The sell-off by gold stocks came amid a decrease by the price of the precious metal.

Considerable weakness was also visible among airline stocks, as reflected by the 2.7 percent nosedive by the NYSE Arca Airline Index. The index continued to give back ground after reaching a two-month closing high on Monday.

Semiconductor stocks also saw significant weakness on the day, resulting in a 2.5 percent slump by the Philadelphia Semiconductor Index.

Steel, tobacco and biotechnology stocks also showed notable moves to the downside on the day, while oil service bucked the downtrend amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are jumping $1.48 to $89.59 a barrel after surging $1.58 to $88.11 a barrel a barrel on Wednesday. Meanwhile, after falling $13 to $1,776.70 an ounce in the previous session, gold futures are rising $6.40 to $1,783.10 an ounce.

On the currency front, the U.S. dollar is trading at 135.08 yen versus the 135.05 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0163 compared to yesterday’s $1.0180.

Asia

Asian stocks ended Thursday’s session on a subdued note after minutes from the Federal Reserve’s July meeting pointed to rates staying higher for longer.

China’s Shanghai Composite Index closed 0.5 percent lower at 3,277.54, with property developers falling sharply after Country Garden Holdings Co. warned that first-half earnings probably tumbled by as much as 70 percent. Hong Kong’s Hang Seng Index fell 0.8 percent to settle at 19,763.91.

Japanese stocks tumbled, dragged down by weakness in the tech sector. The Nikkei 225 Index lost 1 percent to close at 28,942.14, while the broader Topix ended 0.8 percent lower at 1,990.50.

Advantest, Tokyo Electron and Screen Holdings fell 1-2 percent. Sony, Fanuc and Olympus all gave up around 2 percent. Nintendo gained 0.9 percent on hopes for strong sales in the year-end shopping period.

Seoul stocks ended modestly lower after the Fed minutes hinted at more aggressive rate hikes to control inflation. The Kospi dipped 0.3 percent to 2,508.05.

Large-cap stocks led losses, with SK Hynix, Korean Airlines and Hyundai Motor falling 1-2 percent. Market bellwether Samsung Electronics Co. rose 1.8 percent to 61,500 won.

Australian markets ended slightly lower after employment data painted a mixed picture of the economy. Unemployment unexpectedly dropped in July, giving the Reserve Bank scope for a more flexible approach in its tightening cycle.

The S&P/ASX 200 Index slipped 0.2 percent to 7,112.80 while the broader All Ordinaries Index closed 0.3 percent lower at 7,357.70.

Gold miners led losses, with sector major Newcrest Mining declining 2.9 percent. Technology stocks tracked their U.S. peers lower, while energy stocks rebounded after three days of losses.

Europe

European stocks are mostly higher on Thursday, reversing initial losses after final Eurostat data showed eurozone inflation surged 8.9 percent year-on-year in July, matching estimates.

Eurozone government bond yields rose after ECB board member Isabel Schnabel said consumer prices could still accelerate in the short term, suggesting she favors another large interest-rate hike next month.

While the German DAX Index has risen by 0.5 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

HELLA GmbH & Co. KgaA shares have rallied. The German automotive part supplier posted a decline in earnings for the fiscal 2021-22 but achieved record order intake.

Meanwhile, Dutch payments group Adyen has moved sharply higher after reporting deteriorating margins in the second quarter.

Rank Group shares have also fallen. The British gambling company warned of difficult times after reporting a turnaround to profit for the fiscal 2022.

Marshalls has also moved lower. The specialist landscape products group reported that its first-half profit before tax declined to 23.9 million pounds from last year’s 38.9 million pounds.

Made.com has also plunged. The struggling online furniture retailer confirmed that it is considering a potential equity capital raise.

U.S. Economic Reports

A report released by the Labor Department on Thursday unexpectedly showed a modest pullback in first-time claims for U.S. unemployment benefits in the week ended August 13th.

The Labor Department said initial jobless claims edged down to 250,000, a decrease of 2,000 from the previous week’s revised level of 252,000.

Economists had expected jobless claims to inch up to 265,000 from the 262,000 originally reported for the previous week.

The report showed the less volatile four-week moving average also dipped to 246,750, a decrease of 2,750 from the previous week’s revised average of 249,500.

The Federal Reserve Bank of Philadelphia also released a report showing regional manufacturing activity unexpectedly returned to growth in the month of August.

The Philly Fed said its diffusion index for current activity jumped to a positive 6.2 in August from a negative 12.3 in July, with a positive reading indicating growth. Economists had expected the index to rebound to a negative 5.0.

Looking ahead, the Philly Fed said the survey’s future indexes rose slightly but continue to suggest that firms expect overall declines six months from now.

At 10 am ET, the National Association of Realtors is scheduled to release its report in existing home sales in the month of July. Economists expect existing home sales to tumble by 2.7 percent to an annual rate of 4.98 million in July after plunging by 5.4 percent to a rate of 5.12 million in June.

The Conference Board is also due to release its report on leading economic indicators in the month of July at 10 am ET. The leading economic index is expected to decrease by 0.5 percent in July after falling by 0.8 percent in June.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Kansas City Federal Reserve President Esther George is due to speak on the economic outlook before the Fairfax Industrial Association of Kansas City, Kansas at 1:20 pm ET.

At 1:45 pm ET, Minneapolis Federal Reserve President Neel Kashkari is scheduled to participate in a Q&A session at a Young Presidents Organization Gold Twin Cities Chapter luncheon.

Stocks In Focus

Shares of BJ’s Wholesale (BJ) are seeing significant pre-market strength after the warehouse retailer reported better than expected second quarter results and boosted its full-year outlook.

Semiconductor company Wolfspeed (WOLF) is also likely to show a strong move to the upside after reporting a narrower than expected fiscal fourth quarter loss on revenues that exceeded analyst estimates.

Meanwhile, shares of Bed Bath & Beyond (BBBY) may give back ground following recent strength after investor Ryan Cohen filed a notice of intent to sell 7.78 million shares of the housewares retailer.

Department store chain Kohl’s (KSS) may also come under pressure after reporting better than expected second quarter results but lowering its full-year guidance.