U.S. Stocks May See Further Downside Amid Ongoing Interest Rate Concerns

After ending the previous session modestly lower, stocks are likely to see further downside in early trading on Thursday. The major index futures are currently pointing to a lower open for the markets, with the S&P 500 futures down by 0.7 percent.

Ongoing concerns about the outlook for interest rates are likely to weigh on Wall Street following the release of a report from payroll processor ADP showing much stronger than expected private sector job growth in the month of June.

ADP said private sector employment spiked by 497,000 jobs in June after jumping by a downwardly revised 267,000 jobs in May.

Economists had expected private sector employment to increase by 228,000 jobs compared to the addition of 278,000 jobs originally reported for the previous month.

While the surge in private sector employment paints a positive picture of the economy, continued strength in the labor market may convince the Federal Reserve to resume raising interest rates.

The Fed, which is due to announce its next interest rate decision later this month, has previously warned about the impact of labor market tightness.

Meanwhile, a separate report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 1st.

The report said initial jobless claims rose to 248,000, an increase of 12,000 from the previous week’s revised level of 236,000.

Economists had expected jobless claims to climb to 245,000 from the 239,000 originally reported for the previous week.

The Commerce Department also released a report showing the U.S. trade deficit narrowed by slightly more than expected in May amid a slump in the value of imports.

Shortly after the start of trading, At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of June.

The ISM’s services PMI is expected to inch up to 51.0 in June from 50.3 in May, with a reading above 50 indicating growth in the sector.

The Labor Department is also due to release its report on job openings in the month of May. Job openings are expected to decrease to 9.9 million in May from 10.1 million in April.

U.S. stocks ended weak on Wednesday, although those from the technology sector managed to briefly emerge higher around mid-morning. Lingering concerns about the impact of rising interest rates on economic growth weighed on the markets.

The mood was cautious with investors focusing on the minutes of the Federal Reserve’s latest monetary policy meeting. Disappointing service sector data from China and the Europe weighed as well.

The major averages all ended modestly lower. The Dow ended with a loss of 129.83 points or 0.4 percent at 34,288.64. The S&P 500 settled at 4,446.82 with a loss of 8.77 points or 0.2 percent, while the Nasdaq closed lower by 25.12 points or 0.3 percent at 13,791.65.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index tumbled by 1.7 percent, while Hong Kong’s Hang Seng Index plummeted by 3.0 percent.

The major European markets have also shown significant moves to the downside on the day. While the French CAC 40 Index has plunged by 2.1 percent, the U.K.’s FTSE 100 Index is down by 1.5 percent and the German DAX Index is down by 1.4 percent.

In commodities trading, crude oil futures are falling $0.40 to $71.39 a barrel after spiking $2 to $71.79 a barrel on Wednesday. Meanwhile, after slipping $2.40 to $1,927.10 an ounce in the previous session, gold futures are sliding $12.50 to $1,914.60 an ounce.

On the currency front, the U.S. dollar is trading at 144.33 yen versus the 144.66 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0863 compared to yesterday’s $1.0854.

Business News