Powell Remarks After The Close May Keep Traders On The Sidelines

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 in early trading.

Traders may be reluctant to make significant moves as they look ahead to remarks by Federal Reserve Chair Jerome Powell, which are set to kick off just as the markets close.

Powell is scheduled host a town hall with educators in Washington, D.C. and nationwide via webcast, with the Fed chief set to respond to questions from the in-person audience and virtual participants from across the country.

While Powell may not specifically address the outlook for monetary policy, traders will still be looking for clues amid recent concerns about additional interest rate hikes.

A report due to be released Friday morning includes readings on inflation said to be preferred, and traders may also be reluctant to make significant moves ahead of the data.

Following the sell-off seen during Tuesday’s session, stocks saw substantial volatility over the course of the trading day on Wednesday. The major averages spent the day showing wild swings back and forth across the unchanged line.

The major averages eventually ended the day narrowly mixed. While the Dow slipped 68.61 points or 0.2 percent to a new three-month closing low of 33,550.27, the S&P 500 crept up 0.98 points or less than a tenth of a percent to 4,274.51 and the Nasdaq rose 29.24 points or 0.2 percent to 13,092.85.

The volatility on Wall Street came as some traders made another attempt at bargain hunting following yesterday’s sell-off but concerns about the outlook for interest rates continue to hang over the markets.

Recent comments from the likes of JPMorgan Chase (JPM) CEO Jamie Dimon and Minneapolis Federal Reserve President Neel Kashkari have led to worries the Federal Reserve may raise rates higher than previously anticipated.

In U.S. economic news, the Commerce Department released a report unexpectedly showing a modest rebound in new orders for U.S. manufactured durable goods in the month of August.

The Commerce Department said durable goods orders crept up by 0.2 percent in August after plunging by a revised 5.6 percent in July.

The uptick surprised economists, who had expected durable goods orders to fall by 0.5 percent compared to the 5.2 percent nosedive that had been reported for the previous month.

Excluding a modest decrease in orders for transportation equipment, durable goods orders rose by 0.4 percent in August after inching up by a downwardly revised 0.1 percent in July.

Economists had expected ex-transportation orders to edge up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month.

“A positive surprise with durable goods data was initially viewed as good news for the economy and possibly stocks, but good news is actually bad news for equities,” said Edward Moya, senior market analyst at OANDA.

“Signs of economic resilience will move the needle in possibly making the Fed deliver more rate hikes,” he added. “Also weighing on equities is the harsh reality that a tight oil market is not going away and that will be a major headache for the economy.”

While most of the major sectors showed only modest moves on the day, energy stocks saw substantial strength amid a sharp increase by the price of crude oil.

With crude for November delivery soaring $3.29 to $93.68 a barrel amid concerns about tight supplies, the Philadelphia Oil Service Index spiked by 3.4 percent and the NYSE Arca Oil Index surged by 2.4 percent.

A significant increase in the price of natural gas also contributed to strength among associated stocks, driving the NYSE Arca Natural Gas Index up by 1.6 percent.

On the other hand, gold stocks saw considerable weakness, dragging the NYSE Arca Gold Bugs Index down by 3.3 percent to a ten-month closing low.

The sell-off by gold stocks came amid a sharp drop by the price of the precious metal, with gold for December delivery tumbling $28.90 to $1,890.90 an ounce.

Notable weakness was also visible among interest rate-sensitive utilities stocks, as reflected by the 1.5 percent loss posted by the Dow Jones Utility Average. With the drop, the average fell its lowest closing level in over two years.

Commodity, Currency Markets

Crude oil futures are falling $0.50 to $93.18 a barrel after soaring $3.29 to $93.68 a barrel on Wednesday. Meanwhile, after tumbling $28.90 to $1,890.90 an ounce in the previous session, gold futures are inching up $4.40 to $1,895.30 an ounce.

On the currency front, the U.S. dollar is trading at 149.45 yen versus the 149.63 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0529 compared to yesterday’s $1.0503.

Asia

Asian stocks ended mostly lower on Thursday, as investors remained concerned about further interest rates hikes in the U.S. China’s property woes and uncertainty before a key U.S. inflation reading due on Friday also kept investors on tenterhooks.

The dollar rally paused in Asian trading and bond yields took a breather, helping keep gold prices steady after a significant drop.

Oil prices continued to climb, with U.S. crude oil futures rising to their highest in more than a year after data showed a surprise drop in crude inventories.

Chinese shares ended slightly higher, with the Shanghai Composite Index edging up 0.1 percent to 3,110.48 ahead of a long holiday beginning on Friday.

Hong Kong’s Hang Seng Index slumped 1.4 percent to 17,373.03 ahead of purchasing managers’ index data from China due over the weekend.

Trading in China Evergrande Group shares was halted after reports that its chairman had been placed under police watch amid mounting liquidation risk.

Japanese shares tumbled, as rising Treasury yields on expectations that the Fed could raise rates further weighed on heavyweight technology stocks. Speculation around government intervention to deter further yen depreciation also dented sentiment.

The Nikkei 225 Index dove 1.5 percent to 31,872.52, while the broader Topix Index closed 1.4 percent lower at 2,345.51. Tokyo Electron fell 1.2 percent and SoftBank Group lost 1.6 percent.

Toyota Motor declined 0.6 percent despite reporting a rise in global sales in August to a record high, but Mitsubishi Motors soared 4 percent on a Nikkei report that the company will end production in China.

The South Korean market was closed for a holiday. Australian markets ended marginally lower after a choppy session. Consumer stocks fell broadly after August retail sales figures missed estimates.

Gold miners Newcrest and Northern Star Resources plunged 5 percent and 2.1 percent, respectively, as bullion prices lingered near a six-month low.

Washington H Soul Pattinson and Co. gave up 6 percent after reallocating about A$1 billion in capital away from equity markets.

Europe

European stocks are turning in a mixed performance on Thursday amid persistent fears of higher U.S. interest rates and concerns over China’s beleaguered property market.

Spanish inflation accelerated for a second straight month in September due mainly to higher electricity and fuel prices, preliminary data showed earlier in the day.

A measure of Eurozone Economic Sentiment dropped slightly from 93.6 to 93.3 in September, extending declines for the fifth month.

While the U.K.’s FTSE 100 Index is down by 0.2 percent, while the German DAX Index is up by 0.3 percent and the French CAC 40 Index is up by 0.5 percent.

Airline Ryanair has moved notably lower as it announced a number of cuts to its winter schedule due to delays in the delivery of Boeing aircraft.

Discount retailer Pepco Group N.V. has also shown a significant move to the downside after cutting its profit outlook for the second time in a month.

888 Holdings, a betting and gaming company, has also plunged after trimming its full-year earnings guidance.

Insurer Phoenix Group Holdings has also slumped after reporting a narrow pre-tax loss for the first half of 2023.

Meanwhile, Spanish bank Banco Santander has advanced after an announcement that it is going to buy back around 1.3 billion euros worth of shares.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed a slight increase in first-time claims for U.S. unemployment benefits in the week ended September 23rd.

The Labor Department said initial jobless claims crept up to 204,000, an increase of 2,000 from the previous week’s revised level of 202,000.

Economists had expected jobless claims to rise to 215,000 from the 201,000 originally reported for the previous week.

Meanwhile, the report said the less volatile four-week moving average dipped to 211,000, a decrease of 6,250 from the previous week’s revised average of 217,250.

The Commerce Department also released a report showing the pace of U.S. economic growth in the second quarter of 2023 was unrevised from the previous estimate.

The Commerce Department said real gross domestic product increased by 2.1 percent in the second quarter, unrevised from the estimate provided last month. The unrevised reading matched economist estimates.

The unrevised GDP growth in the second quarter still reflects a slight slowdown compared to the 2.2 percent growth in the first quarter.

At 9 am ET, Chicago Federal Reserve President Austan Goolsbee is scheduled to deliver a speech before the Peterson Institute for International Economics.

The National Association of Realtors is due to release its report on pending home sales in the month of August at 10 am ET. Pending home sales are expected to decrease by 0.8 percent in August after climbing by 0.9 percent in July.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $37 billion worth of seven-year notes.

Federal Reserve Board Governor Lisa Cook is also due to give closing remarks before a hybrid Minorities in Banking Forum hosted by the Federal Reserve Bank of Dallas at 1 pm ET.

At 4 pm ET, Federal Reserve Chair Jerome H. Powell is scheduled host a town hall with educators in Washington, D.C. and nationwide via webcast. Powell will respond to questions from the in-person audience and virtual participants from across the country.

Richmond Federal Reserve President Thomas Barkin is due to speak on the economy and monetary policy before the Money Marketeers of New York University at 7 pm ET.

Stocks In Focus

Shares of GameStop (GME) are moving sharply higher in pre-market trading after the video game retailer announced billionaire activist investor Ryan Cohen as its President and Chief Executive Officer, effective immediately.

Exercise equipment and media company Pelton (PTON) is also seeing significant pre-market strength after announcing a five-year strategic global partnership with athletic apparel retailer Lululemon (LULU).

On the other hand, shares of CarMax (KMX) are likely to come under pressure after the used car retailer reported fiscal second quarter earnings that missed analyst estimates.

Chipmaker Micron (MU) may also move to the downside after reporting better than expected fiscal fourth quarter results but providing disappointing guidance.