Futures Pointing To Continued Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to extend the sell-off seen in the previous session.

Concerns about U.S. debt may continue to weigh on Wall Street after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating.

Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

A steep drop by shares of Qualcomm (QCOM) may lead to an extended slump by the tech-heavy Nasdaq, with the chipmaker plunging by 9.8 percent in pre-market trading.

Qualcomm is under pressure after reporting better than expected second quarter earnings but weaker than expected revenues. The company also provided disappointing guidance.

After ending Tuesday’s session modestly lower, stocks showed a more substantial move to the downside during trading on Wednesday. The tech-heavy Nasdaq led the sell-off, while the Dow pulled back off its best closing level in well over a year.

The major averages climbed off their worst levels going into the close but remained sharply lower. The Nasdaq plunged 310.47 points or 2.2 percent to 13,973.45, the S&P 500 tumbled 63.34 points or 1.4 percent to 4,513.39 and the Dow slumped 348.16 points or 1.0 percent to 35,282.52.

The sell-off on Wall Street came after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating.

In U.S. economic news, payroll processor ADP released a report showing U.S. private sector employment jumped by much more than expected in the month of July.

ADP said private sector employment shot up by 324,000 jobs in July after surging by a downwardly revised 455,000 jobs in June.

Economists had expected private sector employment to increase by 189,000 jobs compared to the spike of 497,000 jobs originally reported for the previous month.

“The economy is doing better than expected and a healthy labor market continues to support household spending,” said ADP chief economist Nela Richardson. “We continue to see a slowdown in pay growth without broad-based job loss.”

While the report points to continued strength in the U.S. labor market, the data may lead to renewed concerns about the outlook for interest rates.

On Friday, the Labor Department is scheduled to release its more closely watched report on employment in the month of July.

Economists currently employment to increase by 200,000 jobs in July after climbing by 209,000 jobs in June, while the unemployment rate is expected to remain at 3.6 percent.

Semiconductor stocks showed a substantial move to the downside on the day, resulting in a 3.8 percent nosedive by the Philadelphia Semiconductor Index.

Chipmaker Advanced Micro Devices (AMD) moved sharply lower after reporting better than expected second quarter results but providing disappointing sales guidance for the current quarter.

Significant weakness was also visible among software stocks, as reflected by the 3.0 percent plunge by the Dow Jones U.S. Software Index.

Gold stocks also saw considerable weakness amid a modest decrease by the price of the precious metal, dragging the Arca Gold Bugs Index down by 2.8 percent.

Steel, computer hardware, oil and retail stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are rising $0.21 to $79.68 a barrel after plunging $1.88 to $79.49 a barrel on Wednesday. Meanwhile, after slipping $3.80 to $1,975 an ounce in the previous session, gold futures are falling $8 to $1,967 an ounce.

On the currency front, the U.S. dollar is trading at 142.54 yen versus the 143.32 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0953 compared to yesterday’s $1.0938.

Asia

Asian stocks ended mostly lower on Thursday, extending losses from the previous session, as investors fretted about mounting debt in the U.S. and awaited cues from Friday’s U.S. jobs report.

Chinese shares rose on late buying after a private survey showed services sector activity in the country expanded at a stronger pace in July compared to June.

The benchmark Shanghai Composite Index climbed 0.6 percent to 3,280.46 despite Morgan Stanley reducing its rating on Chinese stocks. Hong Kong’s Hang Seng Index ended 0.5 percent lower at 19,420.87.

Japanese shares tumbled and the 10-year Japanese government yield hit its highest level in over nine years, as strong private sector payrolls data released overnight spurred fresh concerns about the outlook for U.S. interest rates.

The Nikkei 225 Index slumped 1.7 percent to 32,159.28, while the broader Topix Index settled 1.5 percent lower at 2,268.35.

Heavyweight semiconductor stocks led loses, with Advantest, Tokyo Electron and Screen Holdings falling between 1.1 percent and 2.7 percent. Marine transportation firm Kawasaki Kisen jumped 4 percent on share buyback news.

Seoul stocks declined amid selling by foreign and institutional investors. The Kospi Average dropped 0.4 percent to 2,605.39.

Australian markets fell after a slew of data showed activity in the country’s services sector contracted in July, retail sales volumes recorded a third consecutive quarterly fall in the second quarter and the trade surplus remained steady in June.

The benchmark S&P ASX 200 Index ended down 0.6 percent at 7,311.70, while the broader All Ordinaries Index closed 0.6 percent lower at 7,522.30. While tech stocks followed their U.S. peers lower, miners fell on concerns about the health of China’s property sector.

Europe

European stocks have fallen on Thursday to touch three-week lows after the Eurozone’s Services PMI was finalized at a six-month low of 50.9 in July.

U.K. services growth cooled to a six-month low in July and German exports data disappointed, adding to concerns around slowing growth.

The dollar hit a four-month high against major peers as signs of resilience in the U.S. labor market revived Fed rate hike bets.

While the German DAX Index has slumped by 1.0 percent, the U.K.’s FTSE 100 Index is down by 0.9 percent and the French CAC 40 Index is down by 0.8 percent.

Miners have led the way, with Anglo American, Antofagasta and Glencore all showing notable moves to the downside.

Energy giants BP Plc and Shell have also moved lower as oil price fell further from more than three-month highs despite data showing a historic drop in U.S. crude inventories.

Axa has also dropped. The insurer reported that its first-half net income edged down to 3.833 billion euros from last year’s 3.852 billion euros.

Infineon has also plunged after the German chipmaker disclosed a 10 percent decline in its quarterly adjusted, or “segment,” result compared to the previous quarter.

On the other hand, sportswear manufacturer Adidas has moved to the upside after lifting its sales outlook.

Rolls-Royce shares have also risen after the aero-engineer reported a jump in first-half profit, led by a large improvement in its civil aerospace margin.

Adecco, a global leader in HR solutions, has also jumped after second quarter revenues slightly beat forecasts.

Societe Generale shares have also rallied after the French lender returned to profit in the second quarter of this year and announced the launch of the 2022 share buyback program, for around 440 million euros.

U.S. Economic Reports

Labor productivity in the U.S. rebounded by much more than expected in the second quarter of 2023, according to a report released by the Labor Department on Thursday.

The report said labor productivity spiked by 3.7 percent in the second quarter after slumping by a revised 1.2 percent in the first quarter.

Economists had expected productivity to jump by 2.0 percent compared to the 2.1 percent plunge that had been reported for the previous quarter.

The Labor Department also said unit labor costs shot up by 1.6 percent in the second quarter after soaring by 3.3 percent in the first quarter.

Unit labor costs were expected to surge by 2.6 percent compared to the 4.2 percent spike that had been reported for the previous quarter.

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 29th.

The Labor Department said initial jobless claims crept up to 227,000, an increase of 6,000 from the previous week’s unrevised level of 221,000. The uptick in jobless claims matched economist estimates.

Meanwhile, the report said the less volatile four-week moving average edged down to 228,250, a decrease of 5,500 from the previous week’s unrevised average of 233,750.

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

The ISM’s services PMI is expected to edge down to 53.0 in July from 53.9 in June, although a reading above 50 would still indicate growth.

The Commerce Department is also due to release its report on new orders for manufactured goods in the month of June at 10 am ET. Factory orders are expected to jump by 2.2 percent in June after rising by 0.3 percent in May.