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 over the two previous sessions.

The futures had been pointing to a modestly lower open but regained ground following the release of a report from the Labor Department showing a much bigger than expected increase by first-time claims for U.S. unemployment benefits in the week ended May 4th.

The report said initial jobless claims climbed to 231,000, an increase of 22,000 from the previous week’s revised level of 209,000.

Economists had expected jobless claims to inch up to 210,000 from the 208,000 originally reported for the previous week.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 234,000 in week ended August 26th.

The data may add to recently renewed optimism that the Federal Reserve will lower interest rates in the coming months.

Trading activity may remain somewhat subdued, however, as traders express some uncertainty about the near-term outlook for the markets.

Stocks showed a lack of direction over the course of the trading day on Wednesday, extending the lackluster performance seen during Tuesday’s session. Despite the choppy trading, the Dow closed higher for the sixth straight day, reaching its best closing level in over a month.

The major averages eventually finished the day mixed. While the Dow climbed 172.13 points or 0.4 percent to 39,056.39, the S&P 500 edged down 0.03 points or less than a tenth of a percent to 5,187.67 and the Nasdaq dipped 29.80 points or 0.2 percent to 16,302.76.

The choppy trading on Wall Street came amid lingering uncertainty about the outlook for interest rates following Tuesday’s remarks by Minneapolis Federal Reserve President Neel Kashkari.

Kashkari suggested interest rates may need to remain at current levels for an “extended period” and said he couldn’t rule out another rate increase.

The Federal Reserve is still widely expected to lower rates sometime in the third quarter, however, with CME Group’s FedWatch Tool currently indicating an 83.5 percent chance rates will be lower by September.

Traders may also have been reluctant to make more significant moves amid another relatively quiet day on the U.S. economic front.

A report on weekly jobless claims may attract attention on Thursday, while the University of Michigan is due to release its preliminary reading on consumer sentiment in May on Friday.

Among individual stocks, shares of Uber Technologies (UBER) moved sharply lower after the ride-hailing giant reported an unexpected first quarter loss on weaker than expected booking revenue.

Cloud communications company Twilio (TWLO) also came under pressure after reporting first quarter results that exceeded estimates but providing disappointing second quarter revenue guidance.

Meanwhile, ride-hailing company Lyft (LYFT) showed a strong move the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

Reflecting the lackluster performance by the broader markets, most of the major sectors showed only modest moves on the day.

Networking stocks showed a strong move to the upside, however, with the NYSE Arca Networking Index climbing by 1.1 percent.

Arista Networks (ANET) helped lead the sector higher, surging by 6.5 percent after reporting better than expected first quarter results.

Tobacco and telecom stocks also saw notable strength on the day, while biotechnology and commercial real estate stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are rising $0.53 to $79.52 a barrel after climbing $0.61 to $78.99 a barrel on Wednesday. Meanwhile, after edging down $1.90 to $2,322.30 an ounce in the previous session, gold futures are inching up $3 to $2,325.30 an ounce.

On the currency front, the U.S. dollar is trading at 155.64 yen versus the 155.53 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0753 compared to yesterday’s $1.0748.

Asia

Asian stocks ended mostly lower on Thursday, even as Chinese and Hong Kong markets advanced on the back of strong trade data.

A cautious undertone prevailed as uncertainty over Fed rate cuts deepened, and fighting and bombardment continued on the outskirts of the southern Gaza city of Rafah.

The dollar traded firm on hawkish Fed comments, while oil and gold prices saw modest gains in Asian trading.

Mainland China and Hong Kong markets outperformed as customs office data showed Chinese exports rebounded more than expected in April.

Exports advanced 1.5 percent on a yearly basis in April, faster than the 1.0 percent expected growth and reversing March’s 7.5 percent decrease.

Imports posted an annual increase of 8.4 percent, which was also bigger than economists’ forecast of 5.4 percent.

China’s benchmark Shanghai Composite Index jumped 0.8 percent to 3,154.32, while Hong Kong’s Hang Seng Index rallied 1.2 percent to 18,537.81.

Property stocks surged after Chinese megacity Hangzhou lifted all home purchase curbs.

Japanese markets ended modestly lower, giving up early gains as the yen stabilized following three days of decline on talk of intervention.

The country stands ready to deal with foreign exchange matters around the clock, top currency diplomat Masato Kanda said today.

A summary of opinions at the Bank of Japan’s April meeting showed board members turned overwhelmingly hawkish.

Data showed Japan’s real wages in March decreased for the 24th consecutive month, bolstering the case for policymakers to not hike rates aggressively.

The Nikkei 225 Index ended down 0.3 percent at 38,073.98, while the broader Topix Index settled 0.3 percent higher at 2,713.46. Sony, Toyota and Fast Retailing all fell over 1 percent, while Nintendo rallied 3.5 percent.

Seoul stocks fell sharply due to lingering uncertainty over possible U.S. rate cuts. The Kospi slumped 1.2 percent to 2,712.14 ahead of the release of key U.S. CPI data next week. Naver, SK Hynix and Samsung Electronics fell 1-2 percent.

Australian markets lost ground after Commonwealth Bank of Australia reported lower profit in its third quarter.

Shares of the banking giant tumbled 2.2 percent, while the benchmark S&P ASX 200 Index ended 1.1 percent lower at 7,721.60. The broader All Ordinaries Index closed down 1.0 percent at 7,994.20.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slipped 0.3 percent to 11,746.58.

Europe

European stocks are mostly higher during trading on Thursday after the the Bank of England maintained its key policy rate for the sixth consecutive meeting on Thursday.

The Monetary Policy Committee decided to hold the Bank Rate at 5.25 percent again in a split vote. The current bank rate is the highest since early 2008.

While seven members judged that maintaining the rate at the current level was warranted, Swati Dhingra and Dave Ramsden sought a quarter-point reduction at the meeting.

While the German DAX Index has advanced by 0.8 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.3 percent.

In corporate news, Spanish bank Sabadell has jumped after rival BBVA presented a 12.23 billion euro ($13.11 billion) hostile takeover offer directly to its shareholders. BBVA shares plunged 6 percent.

Italian payments group Nexi has also surged after delivering better-than-expected first-quarter results and launching a share buyback program.

Oil services company John Wood Group has also moved to the upside after confirming its FY24 and FY25 guidance.

BAE Systems has also risen. The arms, security and aerospace company backed its FY24 outlook after delivering a strong performance so far this year.

Meanwhile, China-related luxury goods makers traded lower in Paris despite Chinese imports surging past estimates and exports rising in line with expectations in April.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits rose by much more than expected in the week ended May 4th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims climbed to 231,000, an increase of 22,000 from the previous week’s revised level of 209,000.

Economists had expected jobless claims to inch up to 210,000 from the 208,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also crept up to 215,000, an increase of 4,750 from the previous week’s revised average of 210,250.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $25 billion worth of thirty-year bonds.