U.S. Stocks Likely To Move Back To The Downside After Yesterday’s Rally

Following the rally seen over the course of the previous session, stocks are likely to move back to the downside in early trading on Thursday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 361 points.

Traders may look to cash in on yesterday’s gains, as the buying interest generated by the Bank of England’s bond market intervention quickly fades.

The moves by the BoE contributed to a pullback by bond yields and the U.S. dollar, inspiring traders to pick up stocks at reduced levels following recently weakness.

However, bond yields and the dollar have reversed course this morning, with the yield on the benchmark ten-year note jumping by 10.5 basis points and the U.S. dollar index climbing by 0.5 percent.

A report from the Labor Department showing first-time claims for U.S. unemployment benefits unexpectedly fell to a five-month low last week may also weigh on the markets.

While the report points to continued strength in the labor market, traders may view the data as giving the Federal Reserve confidence that it can continue to aggressively raise interest rates.

The report showed initial jobless claims slipped to 193,000 in the week ended September 24th, a decrease of 16,000 from the previous week’s revised level of 209,000.

The dip surprised economists, who had expected jobless claims to inch up to 215,000 from the 213,000 originally reported for the previous week.

With the unexpected decline, jobless claims dropped to their lowest level since hitting 181,000 in the week ended April 23rd.

Meanwhile, the Commerce Department released its third estimate of U.S. economy activity in the second quarter, showing the decrease in gross domestic product was unrevised from the previous estimate.

The report said real GDP fell by 0.6 percent in the second quarter, unchanged from the drop reported last month and in line with economist estimates.

The dip in GDP in the second quarter follows a 1.6 percent slump in the first quarter, with the two consecutive decreases signaling the U.S. economy is in a technical recession.

After moving sharply lower over the past several sessions, stocks showed a substantial rebound during trading on Wednesday. The major averages all showed strong moves back to the upside, with the Dow and the S&P 500 bouncing off their lowest closing levels since late 2020.

The major averages pulled back off their highs of the session going into the close but held on to significant gains. The Dow surged 548.75 points or 1.9 percent to 29,683.74, the Nasdaq skyrocketed 222.13 points or 2.1 percent to 11,051.64 and the S&P 500 spiked 71.75 points or 2.0 percent to 3,719.04.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.0 percent, while Hong Kong’s Hang Seng Index fell by 0.5 percent.

Meanwhile, the major European markets have shown notable moves back to the downside. While the U.K.’s FTSE 100 Index has slumped by 1.1 percent, the French CAC 40 Index and the German DAX Index are both down by 1.4 percent.

In commodities trading, crude oil futures are edging down $0.05 to $82.10 a barrel after spiking $3.65 to $82.15 a barrel on Wednesday. Meanwhile, after surging $33.80 to $1,670 an ounce in the previous session, gold futures are falling $12.90 to $1,657.10 an ounce.

On the currency front, the U.S. dollar is trading at 144.71 yen versus the 144.16 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $0.9692 compared to yesterday’s $0.9735.

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