Upbeat Earnings, Economic News May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to see initial strength after ending the previous session little changed.

Early buying interest is likely to be generated in reaction to upbeat earnings news, with Facebook parent Meta Platforms (META) poised to lead an early rally by the tech-heavy Nasdaq.

Shares of Meta are surging by 9.7 percent in pre-market trading after the company better than expected second quarter results and provided upbeat guidance.

Fast food giant McDonald’s (MCD) is also likely to see initial strength after reporting second quarter results that beat analyst estimates on both the top and bottom lines.

Shares of Comcast (CMCSA) are also seeing significant pre-market strength after the cable and entertainment giant reported better than expected second quarter results.

The futures remained firmly positive following the release of a batch of upbeat U.S. economic data, including a Commerce Department showing an unexpected acceleration in the pace of economic growth in the second quarter.

Stocks saw typical volatility following the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday. The major averages showed wild swings before ending the day narrowly mixed.

While the Dow rose 82.05 points or 0.2 percent to 35,520.12, extending its winning streak to 13 sessions, the S&P 500 edged down 0.71 points or less than a tenth of a percent to 4,566.75 and the Nasdaq slipped 17.27 points or 0.1 percent at 14,127.28.

The late-day volatility came after the Fed announced its widely expected decision to resume raising interest following a pause last month.

The Fed said that it has decided to raise the target range for the federal funds rate by 25 basis points to 5.25 to 5.50 percent. With the increase, the midpoint of the target range is the highest since early 2001.

The decision to increase rates came as the Fed noted inflation remains elevated, while U.S. economic activity has been expanding at a moderate pace and job gains have been robust in recent months.

In his post-meeting press conference Fed Chair Jerome Powell said it is possible the central bank could raise rates again in September or hold steady, noting the central bank plans to take a meeting by meeting approach.

“We’re going to be going meeting by meeting and as we go into each meeting, we’re going to be asking ourselves the same questions,” Powell said.

He added, “So we haven’t made any decisions about any future meetings, including the pace at which we consider hiking, but we’re going to be assessing the need for further tightening that may be appropriate.”

At the same time, the Fed Chief said the central bank can “afford to be a little patient” as they assess incoming economic data.

“The Fed is going to be locked in with all the key inflation data points,” said Edward Moya, senior market analyst at OANDA. “The June CPI report was cooler-than-expected, so if that trend continues, the Fed will probably skip in September.”

CME Group’s FedWatch Tool is currently indicating an 80.0 percent chance the Fed will leave rates unchanged following its next meeting scheduled for September 19-20.

Despite the lackluster close by the broader markets, software stocks saw substantial weakness on the day, dragging the Dow Jones U.S. Software Index down by 2.6 percent.

Software giant Microsoft (MSFT) led the way lower, plunging by 3.7 percent after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for the current quarter.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent drop by the Philadelphia Semiconductor Index.

On the other hand, transportation stocks moved sharply higher, driving the Dow Jones Transportation Average up by 2.7 percent to its best closing level in over a year.

Railroad operator Union Pacific (UNP) spiked by 10.4 percent after announcing veteran rail executive Jim Vena has been appointed as chief executive officer.

Banking stocks also turned in a strong performance on the day, resulting in a 1.9 percent advance by the KBW Bank Index.

Shares of PacWest Bancorp (PACW) skyrocketed by 26.9 percent after the regional bank agreed to a merger with Banc of California (BANC).

Under the terms of the merger agreement, PacWest stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock.

Commodity, Currency Markets

Crude oil futures are jumping $0.99 to $79.77 a barrel after sliding $0.85 to $78.78 a barrel on Wednesday. Meanwhile, after rising $6.40 to $1,970.10 an ounce in the previous session, gold futures are edging down $1 to $1,969.10 an ounce.

On the currency front, the U.S. dollar is trading at 140.47 yen versus the 140.24 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1075 compared to yesterday’s $1.1086.

Asia

Asian stocks advanced on Thursday after the U.S. Federal Reserve reiterated its fight against inflation and Chair Jerome Powell said staff economists at the central bank no longer foresee a recession.

Samsung Electronics forecast a gradual global chip demand recovery, helping lift technology stocks in the region.

Data showed the decline in China’s industrial profits narrowed for the straight month in June, offering some respite to investors concerned about slowing growth in the world’s second-largest economy.

Chinese shares ended slightly lower amid the lack of details on stimulus measures. The benchmark Shanghai Composite Index slipped 0.2 percent to 3,216.67, while Hong Kong’s Hang Seng Index rallied 1.4 percent to 19,639.11.

XPeng shares soared nearly 34 percent after German automaker Volkswagen announced a tie-up with the Chinese EV startup and joint venture partner SAIC to build new models and potentially co-create platforms.

Japanese shares rose notably as investors braced for the Bank of Japan’s policy meeting on Friday, with economists expecting the central bank to maintain its ultra-loose policy.

The Nikkei 225 Index gained 0.7 percent to close at 32,891.16 after the government kept its headline economic assessment unchanged in a monthly report released Wednesday. The broader Topix Index settled 0.5 percent higher at 2,295.14.

The yen strengthened sharply amid fears that the Bank of Japan could still offer a hawkish surprise by altering its yield curve control policy.

Chipmaking equipment giant Tokyo Electron advanced 2.7 percent and Screen Holdings rose 1.3 percent.

Electronics maker Sharp rallied 3.2 percent on a Nikkei report that top shareholder Foxconn has demanded the company submit an improvement plan within three months.

Seoul stocks eked out modest gains, with the Kospi rising 0.4 percent to 2,603.81. Samsung Electronics climbed 2.7 percent after it forecast an improvement in chip demand through the second half of the year. Peer SK Hynix surged 9.7 percent.

Australian markets climbed on optimism that cooling inflation would prompt the Reserve Bank to continue its pause in the rate-hike cycle.

The benchmark S&P/ASX 200 Index rose 0.7 percent to 7,455.90, hitting a five-month high, boosted by financials and technology stocks. The broader All Ordinaries Index closed up 0.7 percent at 7,672.60.

Investment bank Macquarie Group lost 4.4 percent after forecasting a lower quarterly profit.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally lower at 11,954.11.

Europe

European shares have reached nine-week highs on Thursday, as investors react to the Fed’s interest rate decision as well as a 25 basis point rate hike by the European Central Bank.

Overnight, the Federal Reserve raised interest rates by 25 basis points, as widely expected, and downplayed the prospect of a U.S. recession this year.

The ECB also raised rates by another quarter point, saying inflation is still expected to “remain too high for too long.”

While the French CAC 40 Index has surged by 1.8 percent, the German DAX Index is up by 1.1 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.

Nestle has moved notably higher after the Swiss food and beverages giant raised its full-year organic sales outlook.

British retail group Frasers has also shown a strong move to the upside after pretax profit more than doubled for fiscal 2023.

Centrica, the owner of British Gas, has also surged after it delivered strong operational and financial performance in the first half of 2023.

Lender BNP Paribas has also jumped after an announcement that it will buy back shares starting next month.

Industrial gases firm Air Liquide has also moved notably higher as it reported a 32 percent jump in first-half net profit.

Aixtron has also soared nearly after the semiconductor equipment company raised its outlook for 2023 revenue and orders in light of strong demand.

Meanwhile, Indivior has slumped. The pharmaceutical firm revealed a profit for the second quarter that decreased from last year.

BT Group, Britain’s biggest broadband and mobile provider, has also declined despite reiterating its full-year outlook.

Shell has also shown a significant move to the downside after reporting its lowest quarterly profit in almost two years.

Barclays has also tumbled after the bank said it expects to earn less interest in the U.K. due to stubborn inflation and high interest rates.

Aircraft manufacturer Airbus has also fallen in Paris after reporting a decrease in net profit in the first half of this year.

German automaker Volkswagen has also tumbled after cutting its 2023 deliveries outlook.

U.S. Economic Reports

U.S. economic growth unexpectedly accelerated in the second quarter of 2023, the Commerce Department revealed in a preliminary report released on Thursday.

The report said real gross domestic product surged by 2.4 percent in the second quarter after jumping by 2.0 percent in the first quarter. Economists had expected the pace of GDP growth to slow to 1.8 percent.

The Commerce Department said the unexpected acceleration in GDP primarily reflected an upturn in private inventory investment and an acceleration in nonresidential fixed investment.

The positive contributions were partly offset by a downturn in exports and decelerations in consumer spending, federal government spending, and state and local government spending.

The Labor Department also released a report on Thursday unexpectedly showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 22nd.

The report said initial jobless claims slipped to 221,000, a decrease of 7,000 from the previous week’s unrevised level of 228,000. Economists had expected jobless claims to inch up to 235,000.

The Labor Department said the less volatile four-week moving average also edged down to 233,750, a decrease of 3,750 from the previous week’s unrevised average of 237,500.

A separate report released by the Commerce Department showed new orders for U.S. manufactured durable goods soared by much more than expected in the month of June.

The Commerce Department said durable goods orders shot up by 4.7 percent in June after surging by an upwardly revised 2.0 percent in May.

Economists had expected durable goods orders to increase by 1.0 percent compared to the 1.8 percent jump that had been reported for the previous month.

Excluding a spike in orders for transportation equipment, durable goods orders rose by 0.6 percent in June after climbing by 0.7 percent in May. Ex-transportation orders were expected to come in unchanged.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of June. Pending home sales are expected decrease by 0.5 percent in June after tumbling by 2.7 percent in May.

The Treasury Department is due to announce the results of this month’s auction of $35 billion worth of seven-year notes at 1 pm ET.