U.S. Stocks May Lack Direction Following Yesterday’s Turnaround

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 following the substantial turnaround seen over the course of the previous session.

The futures had been pointing to a higher open for the markets but gave back ground following the release of a Labor Department report showing producer prices in the U.S. rose by slightly more than expected in the month of August.

The Labor Department said its producer price index for final demand crept up by 0.2 percent in August, while revised data showed prices were unchanged in July.

Economists had expected producer prices to inch up by 0.1 percent, matching the uptick originally reported for the previous month.

Following yesterday’s report showing a slightly bigger than expected increase by core consumer prices, the data is likely to further reduce expectations for aggressive interest rate cuts by the Federal Reserve

At the same time, the report said the annual rate of producer price growth slowed to 1.7 percent in August from a downwardly revised 2.1 percent in July.

The year-over-year increase by producer prices was expected to decelerate to 1.8 percent from the 2.2 percent originally reported for the previous month.

The Labor Department also released a separate report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended September 7th.

Stocks moved sharply lower early in the session on Wednesday but showed a substantial turnaround over the course of the trading day. The tech-heavy Nasdaq led the recovery, with all of the major averages ending the day in positive territory.

After tumbling by as much as 1.4 percent in early trading, the Nasdaq surged 369.65 points or 2.2 percent to 17,395.53. The S&P 500 also jumped 58.61 points or 1.1 percent to 5,554.13, while the Dow rose 124.75 points or 0.3 percent to 40,861.71 after hitting its lowest intraday level in almost a month.

The early sell-off on Wall Street came following the release of the Labor Department’s closely watched report on consumer price inflation in the month of August.

While the report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the uptick seen in July as well as economist estimates.

Meanwhile, core consumer prices, which exclude food and energy prices, climbed by 0.3 percent in August after rising by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

Stocks moved sharply lower as the data seemingly reduced the chances of the Federal Reserve cutting interest rates by 50 basis points next week.

Selling pressure waned dramatically over the course session, however, as the Fed is still expected to continue lowering interest rates in the coming months.

CME Group’s FedWatch Tool suggests the chances of a half-point rate cut next week have fallen following the release of the report, but it still points to rates being at least a full percentage point lower by the end of the year.

“Given the stickiness of services inflation, the Fed will likely cut by 25 basis points in the upcoming meeting and reserve the potential for more aggressive action later this year if we have further deterioration in the job market,” said Jeffrey Roach, Chief Economist for LPL Financial.

Semiconductor stocks helped lead the turnaround on Wall Street, with the Philadelphia Semiconductor Index spiking by 4.9 percent. Market leader and AI darling Nvidia (NVDA) turned in one of the sector’s best performances, soaring by 8.0 percent.

Significant strength also emerged among networking, software and computer hardware stocks, contributing to the surge by the tech-heavy Nasdaq.

Steel and retail stocks also showed strong moves to the upside over the course of the session, while weakness remained visible among oil producer stocks despite a rebound by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are climbing $0.73 to $68.04 a barrel after jumping $1.56 to $67.31 a barrel on Wednesday. Meanwhile, after edging down $0.70 to $2,542.40 an ounce in the previous session, gold futures are rising $10.90 to $2,553.30 an ounce.

On the currency front, the U.S. dollar is trading at 142.05 yen versus the 142.36 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1027 compared to yesterday’s $1.1012.

Asia

Asian shares advanced on Thursday, buoyed by a tech-fueled rally on Wall Street overnight.

The dollar held firm in Asian trading as signs of some stickiness in U.S. inflation dented hopes for a big rate cut at next week’s Federal Reserve meeting.

Gold edged up marginally, while oil prices rose more than 1 percent to extend gains from the previous session, spurred by concerns of Hurricane Francine impacting output in the U.S.

Chinese shares underperformed their regional peers due to economic concerns and rising geopolitical tensions ahead of the November U.S. presidential elections.

The benchmark Shanghai Composite Index slipped 0.2 percent to 2,717.12. Hong Kong’s Hang Seng Index ended up 0.8 percent at 17,240.39.

Japanese stocks rose the most in a month, as a pause in the yen’s rally lifted semiconductor-related stocks and automakers. The Nikkei 225 Index soared 3.4 percent to 36,833.27, halting a seven-day slide. The broader Topix Index settled 2.4 percent higher at 2,592.50.

Honda Motor and Toyota both surged around 4 percent, while Advantest spiked 9.2 percent and Tokyo Electron added 4.8 percent. Lender Mitsubishi UFJ Financial Group climbed 2.2 percent after long-term Treasury yields gained.

In economic news, Japanese producer price inflation eased in August from an 11-month high in July, the Bank of Japan said in a report today. The producer price index climbed 2.5 percent year-over-year in August, slower than the 3.0 percent rise in July.

South Korea’s Kospi jumped 2.3 percent to 2,572.09. The country’s top financial regulator said today it plans to lift the ban on short selling at the end of March.

Samsung Electronics rallied 2.2 percent amid reports it plans to lay off over 200 executives in India due to slowing business growth and weakening consumer demand.

Australian markets ended sharply higher, led by banks and energy stocks. The benchmark S&P/ASX 200 Index rose 1.1 percent to 8,075.70 while the broader All Ordinaries Index climbed 1.2 percent to 8,293.10.

Nine Entertainment shares slumped more than 4 percent before finishing 0.8 percent higher after Mike Sneesby announced his resignation as CEO of one of the country’s largest media groups.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index jumped 1.5 percent to 12,820.28, as data showed food prices in the country increased 0.4 percent in the 12 months to August 2024 following a 0.6 percent increase in the 12 months to July 2024.

Europe

European stocks are sharply higher on Thursday after the European Central Bank announced its widely expected decision to lower interest rates by another 25 basis points.

The pan European STOXX 600 Index is up 1.1 percent at 513.68 after ending flat with a positive bias on Wednesday.

The German DAX Index is up by 1.2 percent, the French CAC 40 Index is up by 1.0 percent and the U.K.’s FTSE 100 Index is up by 0.9 percent.

The dollar firmed up after August U.S. CPI came in line with estimates but core CPI inflation rose more than expected, denting hopes for a 50-basis point rate cut at next week’s FOMC meeting.

Technology stocks have followed their U.S. peers higher, with Infineon and ASML Holding showing strong moves to the upside.

Nordex SE has also jumped. The German wind turbine manufacturer said it has received an order from renewable energy company Ørsted for its 43 MW Farranrory wind farm in Ireland.

British lender Lloyds Banking Group, HSBC and Standard Chartered have also moved higher after the Bank of England relaxed a proposed overhaul of the banking system.

Rail ticketing app Trainline has also soared after posting strong first half results and upgrading its full-year profit guidance.

Online trading firm IG Group Holdings has also advance after reporting a jump in revenue in its first quarter.

Meanwhile, Swiss drug maker Santhera Pharmaceuticals Holding AG has slumped after posting a first-half net loss of 15.3 million Swiss Francs.

Roche has also tumbled after reports that an early-stage trial of an obesity medication showed a high rate of temporary side effects.

U.S. Economic News

A report released by the Labor Department on Thursday showed producer prices in the U.S. rose by slightly more than expected in the month of August.

The Labor Department said its producer price index for final demand crept up by 0.2 percent in August, while revised data showed prices were unchanged in July.

Economists had expected producer prices to inch up by 0.1 percent, matching the uptick originally reported for the previous month.

Meanwhile, the report said the annual rate of producer price growth slowed to 1.7 percent in August from a downwardly revised 2.1 percent in July.

The year-over-year increase by producer prices was expected to decelerate to 1.8 percent from the 2.2 percent originally reported for the previous month.

The Labor Department also released a separate report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended September 7th.

The report said initial jobless claims rose to 230,000, an increase of 2,000 from the previous week’s revised level of 228,000.

Economists had expected jobless claims to inch up to 230,000 from the 227,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also crept up to 230,750, an increase of 500 from the previous week’s revised average of 230,250.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auction of twenty-year bonds.

The Treasury Department is also due to announce the results of this month’s auction of $22 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of Alaska Air Group (ALK) are moving sharply higher in pre-market trading after the airline raised its third quarter earnings guidance.

U.S. Bancorp (USB) may also move to the upside after announcing a $5 billion share repurchase program and increasing its quarterly dividend to $0.50 per share.

On the other hand, shares of Moderna (MRNA) are seeing significant pre-market weakness after the drugmaker said it expects to reduce annual research and development expenses by approximately $1.1 billion by 2027.

Clothing company Oxford Industries (OXM) may also come under pressure after reporting weaker than expected fiscal second quarter results.