Interest Rate, Economic Worries May Continue To Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks poised to extend the notable downward move seen over the past several sessions.

Lingering concerns about higher interest rates and the impact on the global economy are likely to continue to weigh on the markets.

Disappointing manufacturing data out of Europe and Asia is likely to add to worries about the potential for a global recession.

A steep drop by shares of Nvidia (NVDA) may also weigh on the markets, with the graphics chipmaker slumping by 4.4 percent in pre-market trading.

The decline by Nvidia comes after the company warned approximately $400 million in potential sales to China could be impacted by new U.S. licensing requirements on shipments of some of its most advanced chips.

Fellow chipmaker Advanced Micro Devices (AMD) said some of its chips would also be impacted by the new requirements.

Overall trading activity may be somewhat subdued, however, as traders look ahead to Friday’s closely watched monthly jobs report.

The report, which is expected to show employment jumped by 300,000 jobs in August after surging by 528,000 jobs in July, could impact the outlook for interest rates.

Stocks came under pressure over the course of the trading day on Wednesday, extending the notable downward move seen in the past few sessions. The major averages showed a lack of direction early in the session but eventually slid firmly into negative territory.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow slid 280.44 points or 0.9 percent to 31,510.43, the Nasdaq fell 66.93 points or 0.6 percent to 11,816.20 and the S&P 500 dropped 31.16 points or 0.8 percent to 3,955.00.

With the decrease on the day, the major averages closed lower for the fourth consecutive session, falling to their lowest levels in a month.

The continued weakness on Wall Street reflected lingering concerns about higher interest rates following some hawkish comments from Federal Reserve officials.

In remarks earlier this morning, Cleveland Federal Reserve President Loretta Mester said she expects the Fed to raise interest rates above 4 percent by early next year.

Mester also said she does not anticipate the Fed cutting interest rates in 2023, with the central bank likely to keep rates at an elevated level in an effort to combat inflation.

Meanwhile, payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of August.

ADP said private sector employment rose by 132,000 jobs in August after jumping by nearly 270,000 jobs in July. Economists had expected employment to surge by 288,000 jobs.

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” said ADP chief economist Nela Richardson. “We could be at an inflection point, from super-charged job gains to something more normal.”

ADP suspended its jobs report for June and July as the firm revamped its methodology and entered into a partnership with the Stanford Digital Economy Lab.

Airline stocks moved sharply lower over the course of the session, dragging the NYSE Arca Airline Index down by 2.3 percent to its lowest closing level in a month.

Significant weakness also emerged among gold stocks, as reflected by the 1.6 percent drop by the NYSE Arca Gold Bugs Index. With the decrease, the index slumped to a more than two-year closing low.

The weakness in the gold sector came as the price of the precious metal fell to its lowest levels in over a month, with gold for December delivery slipping $10.10 to $1,726.20 an ounce.

Steel, computer hardware and chemical stocks also came under pressure as the day progressed, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $1.54 to $88.01 a barrel after tumbling $2.09 to $89.55 a barrel a barrel on Wednesday. Meanwhile, after falling $10.10 to $1,726.20 an ounce in the previous session, gold futures are declining $15.10 to $1,711.10 an ounce.

On the currency front, the U.S. dollar is trading at 139.59 yen versus the 138.96 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $0.9996 compared to yesterday’s $1.0054.

Asia

Asian stocks declined on Thursday as data showed the region’s factory hubs saw further easing in demand in August. Hawkish comments from another Federal Reserve official on inflation and the pace of future interest rate hikes also weighed on sentiment.

The dollar rose to a fresh 24-year high against the yen, while oil extended losses on concerns over the ailing state of the global economy.

China’s Shanghai Composite Index dropped 0.5 percent to 3,184.98 after a private survey showed the country’s manufacturing sector slipped into contraction for the first time in three months in August amid weakening demand. Hong Kong’s Hang Seng Index plunged 1.8 percent to 19,597.31.

Japanese shares tumbled to hit a one-month low after a survey showed the country’s manufacturing activity grew at the weakest rate in nearly a year in August.

The Nikkei 225 Index tumbled 1.5 percent to 27,661.47, while the broader Topix ended 1.4 percent lower at 1,935.49.

Chip giants Tokyo Electron, Screen Holdings and Advantest lost 3-4 percent after reports that the U.S. has begun to impose fresh restrictions on exports of advanced chips necessary for AI-related applications to Russia and China.

Uniqlo clothing store owner Fast Retailing gave up 1.5 percent and technology investor SoftBank Group shed 0.9 percent.

Nippon Steel gained 1.3 percent after reports that Toyota Motor has agreed to raise the price of steel materials used for cars. Toyota shares gave up 2.3 percent.

Seoul stocks tumbled and the Korean won hit a 13-year low against the dollar after data showed the country’s export growth slowed in August. The Kospi dove 2.3 percent to 2,415.61, dragged down by tech and bio shares. Samsung Electronics, SK Hynix, Samsung SDI plunged 2-4 percent.

Australian markets closed lower, led by losses in the technology, materials and energy sectors. Growth worries resurfaced after data showed activity across Australia’s manufacturing sector cooled in August.

The benchmark S&P/ASX 200 Index slumped 2 percent to 6,845.60, while the broader All Ordinaries Index ended 2 percent lower at 7,079.90. Mining giant BHP Group sank 7.6 percent on going ex-dividend.

Europe

European stocks have fallen to seven-week lows on Thursday amid worries that aggressive interest rate hikes by the Federal Reserve and other central banks in Europe and Asia will dent economic growth.

Markets are betting that the U.S. Federal Reserve and the ECB will both raise their key borrowing costs by 75 basis points when they meet later this month.

Meanwhile, closely watched gauges of manufacturing in Europe and Asia fell in August, raising worries over a possible recession.

While the German DAX Index has slumped by 1.1 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 1.3 percent.

Miners Anglo American, Antofagasta and Glencore have moved sharply lower in London as metals prices tumble following weak manufacturing data from China.

Rio Tinto has also shown a notable move to the downside after it agreed to buy out Turquoise Hill Resources in a deal valued at about $3.3 billion.

Government services provider Serco has also dropped after it agreed to acquire immigration services provider ORS, which provides services in Switzerland, Germany, Austria and Italy.

Reckitt Benckiser has also plunged. The consumer goods company said its CEO Laxman Narasimhan has decided to leave for personal reasons to relocate back to the United States.

Lender Barclays has also moved lower after selling its remaining 63 million shares in South African lender Absa Group.

French spirits group Pernod Ricard has also fallen despite posting better-than-expected annual results.

Luxury stocks have also come under selling pressure, with Hermes and LVMH posting steep losses, after a private survey showed China’s manufacturing sector slipped into contraction for the first time in three months in August amid weakening demand.

German flag carrier Deutsche Lufthansa has also slid after a pilots’ trade union decided on a day-long strike for Friday, September 2, following a warning strike by ground staff in July.

U.S. Economic Reports

With the more closely watched monthly jobs report looming, the Labor Department released a report on Thursday unexpectedly showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 27th.

The report showed initial jobless claims edged down to 232,000, a decrease of 5,000 from the previous week’s revised level of 237,000.

The dip came as a surprise to economists, who had expected jobless claims to inch up to 248,000 from the 243,000 originally reported for the previous week.

A separate Labor Department report showed labor productivity in the U.S. tumbled by less than previously estimated in the second quarter.

The Labor Department said labor productivity dove by 4.1 percent in the second quarter compared to the previously reported 4.6 percent plunge. Economists had expected the slump in productivity to be revised to 4.5 percent.

The smaller than previously reported decrease in productivity came on the heels of a 7.4 percent nosedive in the first quarter.

The report also showed the surge in labor costs in the second quarter was downwardly revised to 10.2 percent from 10.8 percent. Economists had expected a more modest revision to 10.7 percent.

The spike in unit labor costs in the second quarter came after unit labor costs soared by 12.7 percent in the first quarter.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of August.

The ISM’s manufacturing PMI is expected to slip to 52.0 in August from 52.8 in July, although a reading above 50 would still indicate growth in the sector.

The Commerce Department is also due to release its report on construction spending in the month of July at 10 am ET. Construction spending is expected to edge down by 0.1 percent.

At 3:30 pm ET, Atlanta Federal Reserve President Raphael Bostic is scheduled to make a presentation to the undergraduate finance class at Georgia Tech’s Scheller College of Business.

Stocks In Focus

Shares of Okta (OKTA) are moving sharply lower in pre-market trading after the identity management software company reported better than expected fiscal second quarter results but said it is facing integration issues related to last year’s acquisition of rival Auth0.

Networking equipment maker Ciena (CIEN) is also likely to come under pressure after reporting fiscal third quarter results that missed analyst estimates on both the top and bottom lines.

Shares of Lands’ End (LE) may also move to the downside after the apparel retailer reported narrower than expected fiscal second quarter loss but cut its full-year outlook.

On the other hand, shares of Nutanix (NTNX) are seeing significant pre-market strength after the cloud computing company reported better than expected fiscal fourth quarter results and provided upbeat guidance.