Choppy Trading Likely To Persist On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to extend the lackluster performance seen in the previous session.

The futures remained little changed even after the Labor Department released a report showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended December 23rd.

The report said initial jobless claims climbed to 218,000, an increase of 12,000 from the previous week’s revised level of 206,000.

Economists had expected jobless claims to inch up to 210,000 from the 205,000 originally reported for the previous week.

While the data may add to optimism about the outlook for interest rates, traders may remain reluctant to make significant moves going into the end of the year.

Trading activity may pick back up next week, as the Labor Department is scheduled to release its more closely watched monthly jobs report next Friday.

Reports on manufacturing and service sector activity may also attract attention along with the minutes of the latest Federal Reserve meeting.

Stocks showed a lack of direction throughout the trading session on Wednesday, with the major averages spending the day bouncing back and forth across the unchanged line.

Despite the choppy trading, the Dow reached a new record closing high, and the Nasdaq and the S&P 500 ended the day at their best closing levels in almost two years.

The major averages eventually finished the day modestly higher. While the Dow rose 111.19 points or 0.3 percent to37,656.52, the Nasdaq edged up 24.60 points or 0.2 percent to 15,099.18 and the S&P 500 inched up 6.83 points or 0.1 percent to 4,781.58.

The uptick by stocks came as treasury yields moved notably lower over the course of the session, with the yield on the benchmark ten-year note falling to its lowest level in five months.

Treasury yield saw further downside after the Treasury Department revealed this month’s auction of $58 billion worth of five-year notes attracted average demand.

The decrease in treasury yields has added to optimism about the outlook for interest rates, generating renewed buying interest on Wall Street.

However, traders seemed somewhat reluctant to continue buying stocks following the recent strength in the markets.

At the same time, traders also appeared hesitant to cash in on the recent gains amid concerns about missing out on further upside.

Most of the major sectors showed only modest moves on the day, contributing to the lackluster close by the broader markets.

Tobacco stocks showed a strong move to the upside, however, with the NYSE Arca Tobacco Index climbing by 1.2 percent to its best closing level in well over seven months.

A sharp increase by the price of gold also contributed to strength among gold stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Gold Bugs Index. The index reached a five-month closing high.

Biotechnology and pharmaceutical stocks also saw some strength on the day, while energy stocks gave back ground along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are slumping $0.89 to $73.22 a barrel after tumbling $1.46 to $74.11 a barrel on Wednesday. Meanwhile, after jumping $23.30 to $2,093.10 an ounce in the previous session, gold futures are edging down $4.60 to $2,088.50 an ounce.

On the currency front, the U.S. dollar is trading at 140.83 yen versus the 141.83 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1104 compared to yesterday’s $1.1105.

Asia

Asian stocks rose on Thursday to hit five-month highs as the dollar eased and Treasury yields dipped to seven-month lows on bets for aggressive interest rate cuts by the Federal Reserve.

As inflation fears ebb, futures now imply an 88 percent chance of a 25 basis point Fed rate cut as early as March, followed by two consecutive 25 basis point cuts in May and June.

Gold climbed to a three-week high in Asian trading, while oil edged up slightly after having dropped nearly 2 percent on Wednesday as concerns over supplies eased.

Chinese shares posted strong gains, led by a rebound in online gaming stocks. The benchmark Shanghai Composite Index jumped 1.4 percent to 2,954.70, while Hong Kong’s Hang Seng Index soared 2.5 percent to 17,043.53.

Japanese shares slipped into the red on yen strength. The currency inched closer to a five-month peak it touched earlier this month as the dollar nursed steep losses against major currencies.

The Nikkei 225 Index dropped 0.4 percent to 33,539.62, while the broader Topix Index settled 0.1 percent lower at 2,362.02 after four straight sessions of gains.

Shipping firms led losses, while DIC Corp. topped the gainers list to close 6.7 percent higher at 2,694 yen.

Economic indicators garnered investor interest earlier in the day, with retail sales surging 5.3 percent year-over-year in November while industrial production declined 0.9 percent in the month.

Meanwhile, BOJ Governor Kazuo Ueda said in an interview published on Wednesday that he was in no rush to unwind the central bank’s ultra-loose monetary policy.

Seoul stocks rose for a third day, with the Kospi jumping 1.6 percent to 2,655.28, marking an almost five-month high on the back of strong foreign and institutional buying.

Data revealed earlier in the day that South Korea’s industrial output rebounded last month due to a double-digit increase in semiconductor production.

Battery shares, automakers and banks paced the gainers, with Hyundai Motor, Kia, Samsung SDI, Shinhan Financial Group and KB Financial Group rising 3-4 percent.

Australian markets closed near two-year highs as higher iron ore prices spurred a rally in the mining sector. Lower yields also boosted technology stocks.

The benchmark S&P ASX 200 Index climbed 0.7 percent to 7,614.30, while the broader All Ordinaries Index ended 0.7 percent higher at 7,852.10.

Europe

European stocks are subdued in lackluster trading on Thursday as the euro and pound both rise against the dollar on dovish Fed bets.

While the U.K.’s FTSE 100 Index is up by 0.1 percent, the German DAX Index is down by 0.2 percent and the French CAC 40 Index is down by 0.4 percent.

Economy-sensitive banks and automakers are mostly lower. BP Plc and Shell have also fallen as Benchmark Brent crude futures slipped back below $80 per barrel after major shipping companies began returning to the Red Sea.

Meanwhile, Skanska AB has risen. The Swedish engineering and construction company announced that it has secured a contract worth $147 million from the U.S. Navy acting on behalf of the National Oceanic and Atmospheric Administration.

Danish wind turbine maker Vestas Wind Systems has also advanced to extend gains for a sixth straight session after securing a 1,089 MW order in the United States.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits rose by more than expected in the week ended December 23rd, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims climbed to 218,000, an increase of 12,000 from the previous week’s revised level of 206,000.

Economists had expected jobless claims to inch up to 210,000 from the 205,000 originally reported for the previous week.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of November. Pending home sales are expected to jump by 1.0 percent in November after slumping by 1.5 percent in October.

The Energy Information Administration is due to release its report on oil inventories in the week ended December 22nd at 11 am ET. Crude oil inventories are expected to decrease by 2.6 million barrels after climbing by 2.9 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $40 billion worth of seven-year notes.