U.S. Stocks May Lack Direction After Yesterday’s Rally

Following the rally seen in the previous session, stocks may show a lack of direction in early trading on Thursday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures down by just 12 points.

Uncertainty about the near-term outlook for the markets may keep some traders on the sidelines following the significant rebound seen on Wednesday.

Yesterday’s rally lifted the major averages well off their worst levels in over a month, although worries about interest rates and the global economic outlook continue to hang over the markets.

Traders are likely to keep a close eye on comments by Federal Reserve Chair Jerome Powell, who is due to participate in a virtual discussion at the Cato Institute’s 40th Annual Monetary Conference not long before the start of trading.

Powell’s remarks are likely to maintain the same tone as his speech at last month’s Jackson Hole economic symposium, which helped trigger the recent round of weakness on Wall Street.

Meanwhile, the futures have not shown much reaction to the European Central Bank’s decision to raise interest rates by 75 basis points.

The ECB said the aggressive rate hike “frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target.”

The central bank also said it expects to continue to raise interest rates in an effort to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.

On the U.S. economic front, the Labor Department released a report unexpectedly showing a modest decrease in initial jobless claims in the week ended September 3rd.

The report showed initial jobless claims edged down to 222,000, a decrease of 6,000 from the previous week’s revised level of 228,000

Economists had expected jobless claims to inch up to 240,000 from the 232,000 originally reported for the previous week.

Stocks moved sharply higher over the course of the trading day on Wednesday, regaining ground following the notable downward move seen over the past several sessions. The major averages all showed strong moves to the upside, with the tech-heavy Nasdaq snapping a seven-session losing streak.

The major averages finished the session just off their best levels of the day. The Dow jumped 435.98 points or 1.4 percent to 31,581.28, the Nasdaq soared 246.99 points or 2.1 percent to 11,791.90 and the S&P 500 surged 71.68 points or 1.8 percent to 3,979.87.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index spiked by 2.3 percent, while China’s Shanghai Composite Index dipped by 0.3 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the German DAX Index has slid by 0.6 percent, the U.K.’s FTSE 100 Index is down by 0.1 percent and the French CAC 40 Index is just below the unchanged line.

In commodities trading, crude oil futures are rising $0.57 to $82.51 a barrel after plummeting $4.94 to $81.94 a barrel a barrel on Wednesday. Meanwhile, after climbing $14.90 to $1,727.80 an ounce in the previous session, gold futures are inching up $3.70 to $1,731.50 an ounce.

On the currency front, the U.S. dollar is trading at 143.79 yen versus the 143.74 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0004 compared to yesterday’s $1.0006.