Rebound By Treasury Yields May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to move back to the downside following the rebound seen in the previous session.

Traders remain focused on activity in the bond market, with a rebound by treasury yields weighing on the stock futures.

Treasury yields are showing a modest move back to the upside after pulling back off their highest levels in over sixteen years on Wednesday.

Trading activity may be somewhat subdued, however, as traders look ahead to the release of the Labor Department’s closely monthly jobs report on Friday.

Economists expect employment to increase by 170,000 jobs in September after climbing by 187,000 jobs in August, while the unemployment rate is expected to edge down to 3.7 percent from 3.8 percent.

The jobs data could have a significant impact on the outlook for interest rates, as the Federal Reserve has warned about the impact of tight labor market conditions.

Ahead of the monthly jobs report, the Labor Department released a report this morning showing a slight uptick in first-time claims for U.S. unemployment benefits in the week ended September 30th.

After turning in a lackluster performance early in the session, stocks moved mostly higher over the course of the trading day on Wednesday. The major averages all moved to the upside on the day, bouncing off their lowest closing levels in four months.

The major averages all finished the day firmly positive, with the tech-heavy Nasdaq leading the way higher. The Nasdaq jumped 176.54 points or 1.4 percent to 13,236.01, the S&P 500 advanced 34.30 points or 0.8 percent to 4,263.75 and the Dow rose 127.17 points or 0.4 percent to 33,129.55.

Trading on Wall Street was largely driven in reaction to activity in the bond market, with treasury yields fluctuating over the course of the session.

The higher close by stocks came as yields finished the day firmly in negative territory, giving back ground after reaching their highest levels in sixteen years.

Treasury yields closed lower following the release of a report from payroll processor ADP showing private sector job growth slowed by much more than expected in the month of September.

ADP said private sector employment rose by 89,000 jobs in September after climbing by an upwardly revised 180,000 jobs in August.

Economists had expected private sector employment to advance by 153,000 jobs compared to the addition of 177,000 jobs originally reported for the previous month.

The increase in September reflected the slowest pace of job growth since January 2021, when private employers shed jobs.

The Institute for Supply Management released a separate report showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of September.

The ISM said its services PMI edged down to 53.6 in September from 54.5 in August, although a reading above 50 still indicates growth. The modest decrease matched economist estimates.

Airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 2.7 percent after ending the previous session at a nine-month closing low.

Significant strength also emerged among housing stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Housing Sector Index. The index bounced off its lowest closing level in almost four months.

Software and semiconductor stocks also showed strong moves to the upside as the day progressed, contributing to the surge by the tech-heavy Nasdaq.

While commercial real estate and retail stocks also moved notably higher, substantial weakness remained visible among energy stocks amid a steep drop by the price of crude oil.

With crude for November delivery plummeting $5.01 to $84.22 a barrel, the Philadelphia Oil Service Index plunged by 4.5 percent and the NYSE Arca Oil Index tumbled by 3.6 percent.

Commodity, Currency Markets

Crude oil futures are falling $0.58 to $83.64 a barrel after plummeting $5.01 to $84.22 a barrel on Wednesday. Meanwhile, after slipping $6.70 to $1,834.80 an ounce in the previous session, gold futures are edging down $1.20 to $1,833.60 an ounce.

On the currency front, the U.S. dollar is trading at 149.06 yen versus the 149.12 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0502 compared to yesterday’s $1.0504.

Asia

Asian stocks advanced on Thursday after oil prices tumbled and bond yields on both sides of the Atlantic fell from their highest levels for more than a decade amid signs U.S. economic growth is slowing.

As concerns around inflation and interest rates ease, investors looked ahead to the release of key U.S. nonfarm payrolls data on Friday for further direction.

The dollar fell against its major rivals as the bond sell-off abated. Crude prices saw modest gains in Asian trading after plunging more than $5 a barrel on Wednesday.

Mainland Chinese markets remained closed for the Golden Week holiday. Hong Kong’s Hang Seng Index finished 0.1 percent higher at 17,213.87 as investors hunted bargains following a recent string of losses. Tencent Holdings and Baidu both rose about 1 percent.

Japanese shares rallied to snap a five-day losing streak after U.S. Treasury yields retreated. The Nikkei 225 Index jumped 1.8 percent to 31,075.36, while the broader Topix Index settled 2.0 percent higher at 2,263.76.

Among the top gainers, chip-testing equipment maker Advantest soared 5.1 percent. Automakers Honda Motor, Nissan and Toyota surged 3-5 percent.

Seoul stocks fluctuated before ending on a flat note. The Kospi ended marginally lower at 2,403.60 after data showed inflation accelerated in September due to higher energy and food prices.

Market bellwether Samsung Electronics gave up 1.2 percent, while No. 2 chipmaker SK Hynix rallied 4.2 percent on expectations that memory chip prices will go up in the fourth quarter. LG Chem, LG Energy Solution and Samsung Biologics jumped 3-5 percent.

Australian markets closed higher to snap a three-day losing streak, with tech and real estate stocks leading the rebound. Miners and energy stocks bucked the uptrend.

The benchmark S&P ASX 200 Index rose 0.5 percent to 6,925.50, while the broader All Ordinaries Index gained half a percent to close at 7,117.50.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index climbed 0.7 percent to 11,309.10.

Europe

European stocks are mostly higher during trading on Thursday, with easing concerns about interest rates inspiring traders to pick up stocks at reduced levels following recent weakness.

While the U.K.’s FTSE 100 Index is up by 0.6 percent, the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.2 percent.

Data from the federal statistics office showed German exports fell 1.2 percent in August from the previous month, compared with a 0.4 percent decline forecast by analysts and a downward-revised 1.9 percent fall in July.

Germany’s construction sector contracted more sharply in September amid a near-record fall in new work, according to S&P Global.

Elsewhere, French industrial production fell in August from the previous month. Retail sales also came in weak, pointing to a weakening of the economy in the third quarter.

Another survey showed that Britain’s construction industry experienced the biggest slide in activity in more than three years last month.

In corporate news, jewelry retailer Pandora has shown a substantial move to the upside on the day after raising its growth targets.

RM Plc., a supplier of technology and resources to the education sector, has also risen in London after it has agreed to sell an additional portion of its Internet Protocol v4 addresses to Hilco Streambank, an intellectual property advisory firm, for $2.2 million in cash.

Imperial Brands has also jumped. The maker of John Player Special cigarettes reaffirmed its forecast and announced a $1.3 billion share buyback.

SMA Solar Technology shares have also soared. The German solar energy equipment supplier raised its guidance for full year 2023, citing a very positive revenue and earnings development in the Large Scale & Project Solutions and Commercial & Industrial Solutions segments.

Wind turbine maker Nordex SE has also advanced after bagging an order for 45 MW wind turbines from Enerfin, a renewable energy unit of Spanish engineering company, Elecnor Group.

Meanwhile, Thales Group shares have fallen in Paris. The defense equipment maker has signed a contract with Polska Grupa Zbrojeniowa, a Polish arms holding company, to deliver multiple combat systems for the Polish Navy.

Alstom shares have plunged after the train manufacturer slashed its free cash flow target due to a ramp-up in production and delays in some orders.

U.S. Economic Reports

Initial jobless claims inched slightly higher in the week ended September 30th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims crept up to 207,000, an increase of 2,000 from the previous week’s revised level of 205,000.

Economists had expected jobless claims to rise to 210,000 from the 204,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average edged down to 208,750, a decrease of 2,500 from the previous week’s revised average of 211,250.

A report released by the Commerce Department on Thursday showed the U.S. trade deficit narrowed much more than expected in the month of August.

The Commerce Department said the trade deficit shrank to $58.3 billion in August from a revised $64.7 billion in July.

Economists had expected the trade deficit to decrease to $62.3 billion from the $65.0 billion originally reported for the previous month.

The narrower than expected trade deficit came as the value of exports jumped by 1.6 percent to $256.0 billion, while the value of imports fell by 0.7 percent to $314.3 billion.

At 9 am ET, Cleveland Federal Reserve President Loretta Mester is scheduled to give brief opening remarks before the Chicago Payments Symposium.

The Treasury Department is due 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 11:30 am ET, Richmond Federal Reserve President Thomas Barkin is scheduled to speak before the 2023 WilmingtonBiz Conference & Expo.

San Francisco Federal Reserve President Mary Daly is due to participate in a conversation-style interview on the economy, monetary policy and the Fed’s role in fostering economic growth before a hybrid Economic Club of New York luncheon at 12 pm ET.

At 12:15 pm ET, Federal Reserve Vice Chair for Supervision Michael Barr is scheduled to discuss “Cyber Risk in the Banking Sector” at the Large and Foreign Banking Organizations Cyber Conference.

Stocks In Focus

Shares of Rivian (RIVN) are moving sharply lower in pre-market trading after the electric vehicle maker provided disappointing third quarter revenue guidance and announced a $1.5 billion convertible bond sale.

Consumer products giant Clorox (CLX) may also come under pressure after forecasting fiscal first quarter results below analyst estimates due the impact of a previously announced cybersecurity attack.

On the other hand, shares of Orchard Therapeutics (ORTX) are skyrocketing in pre-market trading after the gene therapy company agreed to be acquired by Japanese pharmaceutical company Kyowa Kirin for approximately $478 million.