Bargain Hunting May Contribute To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move back to the upside after moving notably lower over the two previous sessions.

Bargain hunting may contribute to initial strength on Wall Street, as recent weakness has dragged the Nasdaq and S&P 500 down to their lowest levels in over a month.

Buying interest may also be generated in reaction to earnings news from Walmart (WMT), as the retail giant reported better than expected quarterly results and raised its full-year guidance.

“Now that we heard from Walmart, it is clear that the U.S. consumer is still willing to spend,” said Edward Moya, senior market analyst at OANDA. “Expectations for robust consumer spending in Q3 have been confirmed and that should keep growth estimates trending higher.”

He added, “With COVID savings still expected to be used over the next couple of months and a lag with how student debt repayments go, confidence in continued business momentum should remain.”

U.S. stocks closed lower on Wednesday, extending losses from the previous session, amid indications the Federal Reserve will continue to hold interest rates higher for longer to contain inflation.

Prospect of a possible downgrade of several U.S. lenders by Fitch Ratings weighed as well.

In addition to the minutes from the Federal Reserve’s latest policy meeting, investors also digested the latest batch of economic data.

The major averages all ended firmly down in negative territory, with the Nasdaq suffering a sharper loss.

The Dow ended with a loss of 180.65 points or 0.52 percent at 34,765.74. The S&P 500 shed 33.53 points or 0.76 percent, as it settled at 4,404.33, while the Nasdaq dropped 156.42 points or 1.15 percent to 13,474.63.

The minutes from the Federal Reserve’s meeting on July 25 & 26, released this afternoon, showed “most of the central bank officials continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”

The minutes also showed that a few participants were hesitant to embrace further hikes, on concerns that the tightening in financial conditions since the beginning of last year could “prove more substantial than anticipated.”

The central bank lifted its benchmark rate to a range of 5.25 to 5.5 percent last month, the highest level in 22 years.

A report from the Commerce Department showed new residential construction in the U.S. saw a substantial rebound in the month of July.

The Commerce Department said housing starts surged 3.9 percent to an annual rate of 1.452 million in July after plunging by 11.7 percent to a revised rate of 1.398 million in June. Economists had expected housing starts to increase to a rate of 1.448 million from the 1.434 million originally reported for the previous month.

Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.442 million after tumbling by 3.7 percent to a revised rate of 1.441 million in June. Building permits, an indicator of future housing demand, were expected to climb to a rate of 1.463 million from the 1.440 million originally reported for the previous month.

The Federal Bank’s report said industrial production in the U.S. fell by 0.2 percent in July, extending the 0.4% drop in the previous month. Manufacturing production in the U.S. decreased 0.7 percent in July, compared to the same month last year.

Intel ended down by 3.6 percent. Walgreens Boots Alliance, P&G, Caterpillar, McDonald and Boeing shed 1 to 1.5 percent.

Meta Platforms ended down nearly 2.5 percent. Apple, Alphabet, IBM, Goldman Sachs, Cisco Systems, Walt Disney and Salesforce.com also closed weak.

Travelers Companies shares climbed about 1.25 percent. Home Depot ended modestly higher.

Commodity, Currency Markets

Crude oil futures are climbing $0.69 to $80.07 a barrel after plunging $1.61 to $79.38 a barrel on Wednesday. Meanwhile, after sliding $6.90 to $1,928.30 an ounce in the previous session, gold futures are inching up $1 to $1,929.30 an ounce.

On the currency front, the U.S. dollar is trading at 145.76 yen versus the 146.35 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0909 compared to yesterday’s $1.0879.

Asia

Asian stocks declined on Thursday amid mounting China worries and on hawkish Fed minutes.

China’s offshore yuan hit a fresh nine-month low against the dollar on renewed concerns over a Chinese economic slowdown and fears of a debt meltdown in the country’s property sector.

Fears of further rate hikes weighed on risk appetite after the minutes of the Fed’s July meeting showed a number of officials still saw the need for more interest rates to curb stubborn inflation.

Chinese shares reversed course to end higher despite a warning from Fitch Ratings that it may reconsider China’s A+ sovereign credit score.

China’s Shanghai Composite index ended 0.43 percent higher at 3,163.74 as investors hoped for more stimulus including a potential interest rate cut next week.

Hong Kong’s Hang Seng index ended little changed at 18,326.63 after a sharp decline to a nine-month low earlier in the day.

Japanese shares closed lower as rising yields and speculation for the government’s intervention to curb the yen’s weakness dented investors’ appetite for risk.

Japan’s core machinery orders rose 2.7 percent in June from the previous month, while the country’s exports shrank for the first time in more than two years, separate reports showed earlier today.

The Nikkei average closed down 0.44 percent at 31,626, after having hit its lowest since early June. The broader Topix index dropped 0.34 percent to 2,253.06.

Steelmaker Kobe Steel, healthcare equipment maker Terumo and cosmetics maker Shiseido fell 1-3 percent.

Seoul stocks fell for a fifth consecutive session, with the Kospi average settling 0.23 percent lower at 2,519.85 on U.S. rate uncertainty and mounting concerns about the Chinese economy.

Samsung Biologics, SK Hynix and Naver shed 1-2 percent while leading batter maker LG Energy Solution jumped 2.7 percent.

South Korea’s export and import prices both rose last month following a rise in global oil prices, according to data released by the Bank of Korea today.

Australian markets fell notably as new data pointed to some cooling in the country’s jobs market.

Employment unexpectedly fell in July to end two months of very strong growth and the jobless rate ticked higher, raising speculation the Reserve Bank of Australia might be done hiking interest rates.

The benchmark S&P ASX 200 settled down 0.68 percent at 7,146 while the broader All Ordinaries index shed 0.64 percent to close at 7,364.40.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 index fell 0.95 percent to 11,651.58.

Europe

European stocks slipped into the red on Thursday amid worries over China’s sluggish economic recovery and uncertainty over the Federal Reserve’s interest-rate path.

On a light day on the economic front, Eurostat reported that the euro area recorded a trade surplus of 23 billion euros in June, against a deficit of 27.1 billion euros a year ago.

The pan European STOXX 600 was down 0.4 percent at 453.69 after ending marginally lower on Wednesday.

The German DAX, France’s CAC 40 and the U.K.’s FTSE 100 were down between 0.2 percent and 0.3 percent.

The dollar hovered around a two-month high after the minutes of the Federal Open Market Committee (FOMC) meeting held on July 25-26 showed that Fed officials remain concerned about upside risks to inflation.

In corporate news, Swiss plumbing supplies maker Geberit plummeted 5 percent after slashing its full-year outlook.

Aegon lost 3.6 percent after the Dutch insurer swung to a net loss for the first half of 2023.

Danish hearing aid manufacturer GN Store Nord plunged 19 percent after it warned of challenging market conditions.

BAE Systems slumped nearly 4 percent in London after the defense firm said it had agreed to buy Ball Corp’s aerospace business for about $5.55 billion in cash.

Rank Group advanced 1.6 percent. The gambling group posted a 5.9 percent increase in revenue in its 2022-23 financial year, though increased impairment costs led to a statutory net loss.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits saw a modest decline in the week ended August 12th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims slipped to 239,000, a decrease of 11,000 from the previous week’s revised level of 250,000.

Economists had expected jobless claims to dip to 240,000 from the 248,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 234,250, an increase of 2,750 from the previous week’s revised average of 231,500.

At 10 am ET, the Conference Board is due to release its report on leading economic indicators in the month of July. The leading economic index is expected to decrease by 0.4 percent in July after falling by 0.7 percent in June.

The Treasury Department is scheduled to announce the details of this month’s twenty-year bond auction at 11 am ET.