Futures Pointing To Mixed Open On Wall Street

The major U.S. index futures are currently pointing to a mixed open on Thursday, with the Dow futures up by 0.2 percent and the Nasdaq futures down by 0.4 percent. The S&P 500 futures are nearly unchanged.

Renewed uncertainty about the outlook for interest rates may continue to weigh on the markets following the release of the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday.

Potentially adding to recent concerns the Fed may not begin lowering rates as soon as expected, payroll processor ADP released a report showing private sector employment in the U.S. increased by more than expected in the month of December.

ADP said private sector employment climbed by 164,000 jobs in December after rising by a downwardly revised 101,000 jobs in November.

Economists had expected private sector employment to grow by 115,000 jobs compared to the addition of 103,000 jobs originally reported for the previous month.

A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended December 30th.

The Labor Department said initial jobless claims declined to 202,000, a decrease of 18,000 from the previous week’s revised level of 220,000.

Economists had expected jobless claims to edge down to 216,000 from the 218,000 originally reported for the previous week.

On Friday, the Labor Department is scheduled to release its more closely watched report on the employment situation in the month of December.

After kicking off the new year on a downbeat note, stocks saw further downside over the course of the trading session on Wednesday. The major averages all fell on the day, with the tech-heavy Nasdaq closing lower for the fourth consecutive session.

The major averages dropped to new lows for the session going into the close of trading. The Nasdaq slumped 173.73 points or 1.2 percent to 14,592.21, the Dow slid 284.85 points or 0.8 percent to 37,430.19 and the S&P 500 fell 38.02 points or 0.8 percent to 4,704.81.

The continued weakness on Wall Street partly reflected concerns investors have become too optimistic about the likelihood of near-term interest rate cuts.

Stocks saw some further downside as the minutes of the Federal Reserve’s latest monetary policy meeting reiterated officials widely expect to begin lowering rates in 2024, but they also highlighted an “unusually elevated degree of uncertainty” about the outlook.

Projections provided by Fed officials at the December 12-13 meeting suggested three quarter point rate cuts by the central bank are likely by the end of 2024.

The forecasts were backed up by the minutes, which said baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024.

However, the minutes said participants also noted an unusually elevated degree of uncertainty and that it was possible further rate increases could be appropriate.

Several participants also observed that circumstances might warrant keeping rates at current levels for longer than they currently anticipated, the minutes said.

The Fed’s next monetary policy meeting is scheduled for January 25-26, with the central bank widely expected to leave interest rates unchanged.

Meanwhile, CME Group’s FedWatch Tool currently indicates there is a 64.8 percent chance the Fed could lower rates by a quarter point at its following meeting in March.

On the U.S. economic front, a report released by the Institute for Supply Management showed U.S. manufacturing activity contracted at a slightly slower rate in the month of December.

The ISM said its manufacturing PMI rose to 47.4 in December from 46.7 in November, but a reading below 50 still indicates contraction. Economists had expected the index to inch up to 47.1.

The Labor Department also released a report showing job openings in the U.S. edged down from an upwardly revised level in the month of November.

Airline stocks extended the sharp pullback seen over the two previous sessions, resulting in a 4.1 percent nosedive by the NYSE Arca Airline Index.

Substantial weakness was also visible among gold stocks, as reflected by the 2.6 percent slump by the NYSE Arca Gold Bugs Index.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, with gold for February delivery tumbling $30.60 or 1.5 percent to $2,042.80 an ounce.

Commercial real estate, semiconductor and housing stocks also saw considerable weakness on the day, while oil producer and pharmaceutical stocks bucked the downtrend.

Commodity, Currency Markets

Crude oil futures are climbing $0.66 to $73.36 a barrel after surging $2.32 to $72.70 a barrel on Wednesday. Meanwhile, after plunging $30.60 to $2,042.80 an ounce in the previous session, gold futures are inching up $7 to $2,049.80 an ounce.

On the currency front, the U.S. dollar is trading at 144.49 yen versus the 143.29 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0940 compared to yesterday’s $1.0922.

Asia

Asian stocks fell broadly on Thursday after the minutes of the latest Federal Reserve meeting offered little clarity on the timing of U.S. interest rate cuts.

Tensions escalated in the Middle East and Fitch downgraded the issuer default ratings of four Chinese national asset management companies, further weighing on sentiment.

Chinese markets ended lower after Fitch downgraded the IDRs of four state-owned asset management companies and put three of them on watch for more potential downgrades, citing increased uncertainty over potential government support.

A private survey highlighted a marked pickup in Chinese service sector activity in December, helping ease some concerns around the economic outlook.

China’s Shanghai Composite Index dropped 0.4 percent to 2,954.35, while Hong Kong’s Hang Seng Index finished marginally lower at 16,645.98 after a choppy session.

Japanese stocks fell on the first trading day of the year as fading rate cut expectations weighed on the technology sector. A devastating earthquake in the northwest on New Year’s Day and weak manufacturing data also dented sentiment.

The Nikkei 225 Index slid 0.5 percent to 33,288.29, while the broader Topix Index settled 0.5 percent higher at 2,378.79 as exporters received a boost from the yen’s weakness.

Seoul stocks fell notably, with the Kospi ending down 0.8 percent at 2,587.02 – extending declines for a second day running on concerns that U.S. interest rates may remain at a high level for some time. Hyundai Motor and Korea Electric Power Corp both fell around 2 percent.

Australian markets joined a global slide, with rate-sensitive financials and gold miners leading losses. The benchmark S&P ASX 200 Index fell 0.4 percent to 7,494.10 after declining 1.4 percent in the previous session. The broader All Ordinaries Index settled 0.3 percent lower at 7,730.60.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index rose 0.3 percent to 11,759.11.

Europe

European shares have rebounded from three-week lows on Thursday as traders digest the latest economic data from the region.

Germany’s consumer price inflation accelerated for the first time in six months in December, in line with expectations, provisional data from Destatis showed.

The consumer price index registered an annual increase of 3.7 percent in December, following a 3.2 percent rise in November.

French consumer price inflation posted an annual increase of 3.7 percent in December, following a gain of 3.5 percent in November. Nonetheless, this was weaker than economists’ forecast of 3.8 percent.

The contraction in euro zone business activity continued at the end of 2023, indicating the bloc’s economy was in recession.

While the French CAC 40 Index is up by 0.3 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the German DAX Index is up by 0.1 percent.

Spanish telecom major Telefonica has moved to the upside after signing an agreement with trade unions to slash up to 3,421 staff.

Energy stocks have also rallied as oil prices are seeing further upside after surging higher overnight on supply concerns.

Next Plc shares have also soared. The retailer raised its pretax profit guidance after sales in the pre-Christmas business period exceeded expectations.

Wind turbine manufacturer Nordex SE has also jumped after announcing it has received an order of 106 MW from Spanish electricity producer Capital Energy. The financial details of the transaction are not yet known.

On the other hand, JD Sports Fashion has shown a substantial move to the downside after lowering its full-year profit forecast.

Evotec SE shares have also plunged. The German biotechnology company said Chief Executive Werner Lanthaler decided to step down as chief executive for personal reasons.

U.S. Economic Reports

Reflecting a healthy bump in leisure and hospitality hiring, payroll processor ADP released a report on Thursday showing private sector employment in the U.S. increased by more than expected in the month of December.

ADP said private sector employment climbed by 164,000 jobs in December after rising by a downwardly revised 101,000 jobs in November.

Economists had expected private sector employment to grow by 115,000 jobs compared to the addition of 103,000 jobs originally reported for the previous month.

“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” said ADP chief economist Nela Richardson.

A separate report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended December 30th.

The Labor Department said initial jobless claims declined to 202,000, a decrease of 18,000 from the previous week’s revised level of 220,000.

Economists had expected jobless claims to edge down to 216,000 from the 218,000 originally reported for the previous week.

The report said the less volatile four-week moving average also dipped to 207,750, a decrease of 4,750 from the previous week’s revised average of 212,500.

At 11 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended December 29th.

Crude oil inventories are expected to decrease by 3.7 million barrels after tumbling by 6.9 million barrels in the previous week.

The Treasury Department is also 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.

Stocks In Focus

Shares of Mobileye (MBLY) are moving sharply lower in pre-market trading after the autonomous driving technology company forecast fiscal 2024 revenues well below analyst estimates amid excess inventory at customers.

Egg producer Cal-Maine Foods (CALM) may also move to the downside after reporting fiscal second quarter net sales and net income that declined year-over-year.

Meanwhile, shares of Eli Lilly (LLY) are likely to see initial strength after the pharmaceutical company announced LillyDirect, a new digital healthcare experience for patients in the U.S. living with obesity, migraine and diabetes.