Futures Pointing To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to give back ground after turning in a strong performance in the previous session.

Traders may look to cash in on yesterday’s gains, which saw the tech-heavy Nasdaq surge above 20,000 for the first time ever.

Negative sentiment may also be generated in reaction to a Labor Department report showing producer prices in the U.S. increased by more than expected in the month of November.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in November after rising by an upwardly revised 0.3 percent in October.

Economists had expected producer prices to inch up by 0.2 percent, matching the uptick originally reported for the previous month.

The report also said the annual rate of producer price growth accelerated to 3.0 percent in November from an upwardly revised 2.6 percent in October.

The annual rate of producer price growth was expected to rise to 2.6 percent from the 2.4 percent originally reported for the previous month.

While the data is not likely to significantly impact expectations the Federal Reserve will lower interest rates next week, it could reduce the chances the central bank continues to lower rates early next year.

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended December 7th.

Stocks moved mostly higher during trading on Wednesday, rebounding strongly following the pullback seen to start the week. The tech-heavy Nasdaq showed a particularly strong upward move, closing above 20,000 for the first time.

The Nasdaq surged 347.65 points or 1.8 percent to a new record closing high of 20,034.89, while the S&P 500 climbed 49.28 points or 0.8 percent to 6,084.19.

Meanwhile, the narrower Dow showed a lack of direction over the course of the session before closing down 99.27 points or 0.2 percent at 44,148.56. The blue chip index closed lower for the fifth straight session amid a slump by shares of UnitedHealth (UNH).

The strength in the broader markets came following the release of closely watched consumer price inflation data that came in line with economist estimates.

The Labor Department said its consumer price index climbed by 0.3 percent in November after rising by 0.2 percent for four straight months. The increase matched expectations.

The annual rate of growth by consumer prices ticked up to 2.7 percent in November from 2.6 percent in October, which was also in line with estimates.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in November, matching the increases seen in each of the three previous months as well as expectations.

The Labor Department also said core consumer prices in November jumped by 3.3 percent compared to the same month a year ago, unchanged from October and in line with estimates.

With the data matching expectations, the report increased confidence the Federal Reserve will lower interest rates by another quarter point next week.

CME Group’s FedWatch Tool is currently indicating a 98.6 percent chance the Fed will cut rates by 25 basis points at its December meeting.

“The increase in the inflation rate (2.7% vs 2.6%) won’t be enough to spoil Christmas – the Fed is going to cut rates another 25 bps next week and that should enable markets to rally into year end,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

He added, “The headline CPI was consistently above 3% in the beginning of the year and now it is consistently below 3%, so despite the fact that the series is a little noisy from month-to-month, we believe the Fed is likely to look through these fluctuations and continue on their easing path.”

Gold stocks saw substantial strength on the day amid a sharp increase by the price of the precious metal, driving the NYSE Arca Gold Bugs Index up by 3.9 percent to its best closing level in over a month.

Significant strength also emerged among airline stocks, with the NYSE Arca Airline Index soaring by 3.7 percent to a nearly one-month closing high.

Semiconductor, networking and software stocks also saw considerable strength, contributing to the surge by the tech-heavy Nasdaq.

Notable strength was also visible among oil service, retail and brokerage stocks, while healthcare stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are edging down $0.01 to $70.28 a barrel after jumping $1.70 to $70.29 a barrel on Wednesday. Meanwhile, after surging $38.30 to $2,756.70 an ounce in the previous session, gold futures are falling $17.40 to $2,739.30 an ounce.

On the currency front, the U.S. dollar is trading at 151.92 yen versus the 152.45 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0496 compared to yesterday’s $1.0496.

Asia

Asian stocks ended mixed on Thursday despite a benign inflation report cementing expectations that the Federal Reserve will keep cutting interest rates.

Investors awaited the outcome of a key policy meeting in China, where leaders are expected to map out next year’s economic priorities.

The dollar held steady in Asian trading and gold nudged higher for a fifth straight session to hover near a more than two-week high, while oil extended overnight gains on the possibility of tighter sanctions on Russian crude.

China’s Shanghai Composite Index climbed 0.9 percent to 3,461.50 after reports China’s leaders and policymakers are considering allowing the yuan to weaken next year in response to the threat of a trade war with the U.S.

The yuan held its ground above a one-week low after the central bank kept the official midpoint for the currency stable. Hong Kong’s Hang Seng Index jumped 1.2 percent to 20,397.05.

Japanese markets ended sharply higher, led by technology stocks after a strong showing for tech pushed Amazon and Meta Platforms to fresh records overnight.

The Nikkei 225 Index closed up 1.2 percent at 39,849.14 after surging above 40,000 for the first time since mid-October. The broader Topix Index settled 0.9 percent higher at 2,773.03. The yen languished near a two-week low against the dollar as traders pared bets for a Bank of Japan rate hike next week.

Advantest jumped 5.1 percent and SoftBank Group added 1.9 percent following reports that Apple is partnering with Broadcom to develop a custom AI processing chip, code-named Baltra.

Seoul stocks rose for a third day running, with the Kospi closing up 1.6 percent at 2,482.12, led by heavyweight technology stocks. Samsung Electronics jumped 3.5 percent and SK Hynix added 2.5 percent.

Australian markets fell modestly as data showing a big drop in the unemployment rate last month prompted traders to pare rate-cut bets.

The benchmark S&P/ASX 200 Index dipped 0.3 percent to 8,330.30, extending losses for a third straight session to hit a three-week low. The broader All Ordinaries Index settled 0.3 percent lower at 8,586.90.

Insignia Financial shares jumped more than 11 percent on reports that private equity investor Bain Capital was in advanced stages of making a buyout offer for the wealth manager.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended down 0.5 percent at 12,692.72.

Europe

European stocks are seeing modest strength during trading on Thursday after the European Central Bank announced its widely expected decision to cut its benchmark rates by 25 basis points for the third consecutive meeting.

Earlier today, the Swiss National Bank cut its interest rate by 50 basis points, its biggest reduction in almost 10 years amid an ongoing tussle with depressed inflation and a strong Swiss franc.

Investors also waited for French President Emmanuel Macron to appoint a new prime minister.

Macron is seeking a political deal that would allow him to both name a new prime minister and “guarantee the stability of the country,” a spokesperson for the outgoing government said Wednesday and insisted there was at the moment no “broader” political alliance than the current one between his centrist allies and conservatives from the Republicans party.

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

Bodycote, a provider of heat treatment and thermal processing services, was moving higher after an announcement that it intends to extend its existing 60 million pounds of share repurchase by a further 30 million pounds.

Specialist recruiter SThree plummeted 23 percent after warning of a sharp fall in profits.

Tech and electricals retailer Currys soared 12 percent after narrowing its first-half loss and backing full-year targets.

Hensoldt AG, a German provider of sensors and security solutions, was moving lower in choppy trade despite confirming its outlook for fiscal 2024, and raising parts of its medium-term target.

Semiconductor company STMicroelectronics rose about 1 percent after forging a strategic collaboration with Quobly, a French quantum computing startup.

U.S. Economic News

First-time claims for U.S. unemployment benefits unexpectedly increased in the week ended December 7th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims climbed to 242,000, an increase of 17,000 from the previous week’s revised level of 225,000.

Economists had expected jobless claims to dip to 220,000 from the 224,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also rose to 224,250, an increase of 5,750 from the previous week’s revised average of 218,500.

A separate report released by the Labor Department on Thursday showed producer prices in the U.S. increased by more than expected in the month of November.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in November after rising by an upwardly revised 0.3 percent in October.

Economists had expected producer prices to inch up by 0.2 percent, matching the uptick originally reported for the previous month.

The report also said the annual rate of producer price growth accelerated to 3.0 percent in November from an upwardly revised 2.6 percent in October.

The annual rate of producer price growth was expected to rise to 2.6 percent from the 2.4 percent originally reported for the previous month.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $22 billion worth of thirty-year bonds.