Profit Taking May Contribute 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 moving notably higher over the past few sessions.

Traders may look to cash in on the recent strength in the markets, which saw the Nasdaq and the S&P 500 nearly offset the sell-off seen last week.

Lingering concerns about the outlook for interest rates may also weigh on the markets after the Federal Reserve recently signaled it plans to cut rates less than previously estimated last year.

Overall trading activity is likely to be relatively, subdued, however, with many traders likely to remain away from their desks following the Christmas Day holiday on Wednesday.

On the U.S. economic front, he Labor Department released a report showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended December 21st.

The report said initial jobless claims slipped to 219,000, a decrease of 1,000 from the previous week’s unrevised level of 220,000. Economists had expected jobless claims to rise to 224,000.

In an abbreviated Christmas Eve session, stocks moved sharply higher over the course of the trading day on Tuesday. The major averages all showed strong moves to the upside, extending the upward move seen over the two previous sessions.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow advanced 390.08 points or 0.9 percent to 43,297.03, the Nasdaq surged 266.24 points or 1.4 percent to 20,031.13 and the S&P 500 jumped 65.97 points or 1.1 percent to 6,040.04.

The strength on Wall Street came as traders continued to pick up stocks at relatively reduced levels following last week’s sell-off, which saw the Dow and the S&P 500 tumble to their lowest levels in over a month.

Stocks may also have benefitted from ongoing optimism about the outlook for the markets even after indications the Federal Reserve plans to cut interest rates less than previously estimated next year.

The extent of the upward move may have been exaggerated by below average volume, as many traders remained away from their desks ahead of the Christmas Day holiday on Wednesday. The markets also closed earlier than usual on the day, which likely kept some traders on the sidelines.

A lack of major U.S. economic data may also have contributed to light trading, as the release of reports on durable goods orders and new home sales was pushed forward to Monday after President Joe Biden signed an executive order closing the federal government for Christmas Eve.

Brokerage stocks turned in some of the market’s best performances on the day, driving the NYSE Arca Broker/Dealer Index up by 1.7 percent.

Significant strength was also visible among retail stocks, as reflected by the 1.5 percent gain posted by the Dow Jones U.S. Retail Index.

Networking, computer hardware and banking stocks also saw notable strength moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.54 to $70.64 a barrel after jumping $0.86 to $70.10 a barrel on Tuesday. Meanwhile, after rising $7.30 to $2,635.50 an ounce in the previous session, gold futures are inching up $6.40 to $2,641.90 an ounce.

On the currency front, the U.S. dollar is trading at 157.78 yen versus the 157.40 yen it fetched on Wednesday. Against the euro, the dollar is valued at $1.0401 compared to yesterday’s $1.0405.

Asia

Asian stocks ended mixed in thin holiday trading on Thursday, while regional currencies were mostly lower against a resilient dollar and elevated Treasury yields amid uncertainty about the Federal Reserve’s interest rate path and U.S. President-elect Donald Trump’s tariff threats. Oil and gold clung to modest gains in Asian trading.

Markets in Australia, New Zealand and Hong Kong were closed for the Boxing Day holiday. Indonesian markets were closed for Christmas.

Mainland Chinese stocks edged up slightly after authorities agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year to stimulate growth and counter tariffs.

The benchmark Shanghai Composite Index ended 0.1 percent higher at 3,398.08 as the People’s Bank of China held the interest rate on the one-year medium-term lending facility steady at 2 percent and drained the most cash since 2014 with a one-year policy tool.

Japanese markets rallied and the yen languished near a five-month low after Bank of Japan Governor Kazuo Ueda maintained his dovish stance in a speech on Wednesday, saying the central bank must scrutinize the impact of Trump’s policy and overseas risks.

The Nikkei 225 Index jumped 1.1 percent to 39,568.06, while the broader Topix Index settled 1.2 percent higher at 2,766.78.

Toyota Motor soared 6 percent to extend gains from the previous session after reports suggested the automaker would double its return on equity target to 20 percent by around 2030.

Honda Motor rallied 3.8 percent, Nissan Motor surged 6.6 percent and Mitsubishi Motors advanced 6.5 percent.

Seoul stocks drifted lower amid concerns about domestic political turmoil and fluctuations in the forex market. The Kospi dropped 0.4 percent to 2,429.67.

Europe

The major European markets remained closed on Thursday in observance of Boxing Day.

U.S. Economic News

The Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended December 21st.

The report said initial jobless claims slipped to 219,000, a decrease of 1,000 from the previous week’s unrevised level of 220,000. Economists had expected jobless claims to rise to 224,000.

Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 226,500, an increase of 1,000 from the previous week’s unrevised average of 225,500.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also climbed by 46,000 to 1.910 million in the week ended December 14th, reaching their highest level since November 2021.

The four-week moving average of continuing claims also rose to 1,881,000, an increase of 3,250 from the previous week’s revised average of 1,877,750.

At 11 am ET, the Energy Information Administration is due to release its report oil inventories in the week ended December 20th. Crude oil inventories are expected to decrease by 1.6 million barrels after dipping by 0.9 million barrels in the previous week.

The Treasury Department is scheduled to announce the results of this month’s auction of $44 billion worth of seven-year notes at 1 pm ET.