Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to see further upside after ending the previous session sharply higher.

While the Federal Reserve lowered its forecast for interest rate cuts this year on Wednesday, stocks may continue to benefit from optimism about the outlook for rates following another tamer than expected inflation reading.

The Labor Department released a report this morning unexpectedly showing a modest decrease by producer prices in the month of May.

The report said the producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Economists had expected producer prices to inch up by 0.1 percent.

The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April.

Economists had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month.

On the heels of yesterday’s tamer than expected consumer price inflation data, the data may add to optimism Fed officials were being conservative when they forecast just one rate cut this year.

Potentially adding to hopes about future rate cuts, the Labor Department released a separate report showing an unexpected increase by first-time claims for U.S. unemployment benefits in the week ended June 8th.

After an early rally on tamer than expected consumer price inflation data, stocks saw some volatility following the Federal Reserve’s monetary policy announcement but still managed to end Wednesday’s trading mostly higher.

The Nasdaq led the charge, surging 264.89 points or 1.5 percent to a new record closing high of 17,608.44. The S&P 500 also reached a new record closing high, jumping 45.71 points or 0.9 percent to 5,421.03.

Meanwhile, the narrower Dow gave back ground after an early upward move and eventually ended the day down 35.21 points or 0.1 percent at 38,712.21.

The early rally on Wall Street came following the release of a Labor Department report showing U.S. consumer prices were unexpectedly flat in the month of May.

The Labor Department said its consumer price index came in unchanged in May after rising by 0.3 percent in April. Economists had expected consumer prices to inch up by 0.1 percent.

The unchanged reading came as a 3.5 percent nosedive by gasoline prices helped offset a continued increase in prices for shelter.

Excluding food and energy prices, core consumer prices rose by 0.2 percent in May after climbing by 0.3 percent in April. Core prices were expected to increase by another 0.3 percent.

The report also said the annual rate of consumer price growth slowed to 3.3 percent in May from 3.4 percent in April. Economists had expected the pace of growth to remain unchanged.

The annual rate of core consumer price growth also slowed to 3.4 percent in May from 3.6 percent in April. The pace of growth was expected to dip to 3.5 percent.

The slower than expected annual growth rates led to renewed optimism about the outlook for interest rates ahead of the Fed’s monetary policy announcement.

However, while announcing its widely expected decision to leave interest rates unchanged, the Fed also revealed officials now expect only one interest rate cut this year.

In support of its goals of maximum employment and inflation at the rate of 2 percent over the longer run, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent.

The Fed acknowledged modest further progress toward its inflation objective in recent months but said officials still need “greater confidence” inflation is moving sustainably towards the target before they will consider lowering rates.

The continued need for “greater confidence” inflation is slowing was reflected in the Fed officials’ forecast for interest rates.

The latest projections showed officials now expect rates in a range of 5.0 to 5.25 percent by the end of 2024, suggesting just one rate cut this year compared to the three forecast in March.

Still, the accompanying dot plot indicates there is considerable division among Fed officials about the outlook for rates this year.

“More participants expect to cut twice than once, but no one expects to cut more than twice, while four don’t expect to cut at all this year,” said FHN Financial Chief Economist Chris Low. “So, a plurality favor two cuts, but the median is for one.”

Interest rate-sensitive housing stocks turned in some of the market’s best performances on the day, resulting in a 2.9 percent spike by the Philadelphia Housing Sector Index.

Substantial strength was also visible among semiconductor stocks, as reflected by the 2.9 percent surge by the Philadelphia Semiconductor Index.

Software and computer hardware stocks also saw considerable strength, contributing to the jump by the tech-heavy Nasdaq.

Airline, banking and brokerage stocks also saw notable strength, while oil producer stocks bucked the uptrend despite an increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are falling $0.26 to $78.24 a barrel after climbing $0.60 to $78.50 a barrel on Wednesday. Meanwhile, after surging $28.20 to $2,354.80 an ounce in the previous session, gold futures are slumping $20 to $2,334.80 an ounce.

On the currency front, the U.S. dollar is trading at 156.88 yen versus the 156.72 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0797 compared to yesterday’s $1.0809.

Asia

Asian stocks rose broadly on Thursday, as soft U.S. inflation data helped keep the door open for a Federal Reserve rate cut in September.

However, Chinese and Japanese markets ended lower after Europe threatened to impose provisional duties on imports of Chinese electric vehicles in July.

The dollar index regained momentum, keeping gold prices under pressure. Oil prices declined as data showed a surprise U.S. inventory jump and the IEA forecast surplus petroleum production of up to eight million barrels per day by 2030.

China’s Shanghai Composite Index dropped 0.3 percent to 3,028.92 amid increased U.S. scrutiny of imports from China and cooling trade relations between the two countries.

Hong Kong’s Hang Seng Index jumped 1.0 percent to 18,112.63 on optimism about AI’s potential to positively impact businesses.

Japanese markets ended lower as investors braced for Friday’s BOJ policy meeting where the central bank may consider trimming its bond buying, taking a first key step to reducing its almost $5 trillion balance sheet.

The Nikkei 225 Index dipped 0.4 percent to 38,720.47. The broader Topix Index settled 0.9 percent lower at 2,731.78, giving up early gains.

Automakers Honda Motor, Nissan and Toyota fell between 1.4 percent and 2.5 percent as Europe moved to hike tariffs on electric vehicles made in China and Beijing hinted at countermeasures.

Chip-testing equipment maker Advantest advanced 1.5 percent, tracking overnight gains in the U.S. semiconductor sector. Tokyo Electron shed 1.7 percent and Screen Holdings lost 2.3 percent.

Seoul stocks gained ground, with the Kospi jumping 1.0 percent to 2,754.89 – extending gains for a third straight session. Tech stocks surged, with heavyweight Samsung Electronics rallying 2.8 percent and peer SK Hynix rising 3.3 percent.

Australian markets ended higher, paring some early gains as May employment figures topped forecasts and raised concerns about the RBA’s rate path.

The benchmark S&P ASX 200 Index rose 0.4 percent to 7,749.70, snapping a two-day losing streak led by tech stocks and real estate investment trusts. The broader All Ordinaries Index finished up 0.5 percent at 8,002.50.

Market operator ASX plunged 8 percent after forecasting an increase in technology spending. Bookseller Booktopia had its stock put into a trading halt pending a significant announcement related to outcomes from a strategic review.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index rallied 1.1 percent to 11,872.64 on optimism over slowing inflation in the United States.

Europe

European stocks have declined on Thursday, a day after the U.S. Federal Reserve held interest rates steady but cautioned that inflation is still too high to start cutting rates.

Closer to home, European Central Bank Governing Council member Joachim Nagel warned that consumer price growth in the euro zone is proving stubborn and that he and his colleagues won’t simply lower borrowing costs automatically.

In economic news, Eurostat said in a report that industrial output in the euro zone declined by 0.1 percent in April compared to March.

Elsewhere, German wholesale prices continued to decline in May, albeit at a slower pace, Destatis reported.

Wholesale prices registered an annual decline of 0.7 percent in May, which was slower than the 1.8 percent decrease in April.

While the U.K.’s FTSE 100 Index has slipped by 0.3 percent, the German DAX Index and the French CAC 40 Index are down by 1.0 percent and 1.1 percent, respectively.

Automakers BMW, Renault, Mercedes Benz and Volkswagen have slumped after the European Union announced a hike in tariffs on electric vehicles imported from China, potentially paving the way to a trade war.

Homebuilder Crest Nicholson has also shown a substantial move to the downside after issuing a profit warning.

Wise shares have also tumbled after the money transfer company forecast slower income growth in fiscal 2025 than fiscal 2024.

French rolling stock maker Alstom SA has also slid. The company has completed a share capital increase with shareholders’ preferential subscription rights in an amount of 1 billion euros, including issue premium. This was the final step of a previously announced 2 billion euros deleveraging plan.

On the other hand, Halma has moved sharply higher after the health and safety device maker posted strong annual results.

BT has also surged in London after Carlos Slim, the wealthiest individual in Latin America, bought a 3.2 percent stake in the broadband and mobile operator.

U.S. Economic Reports

The Labor Department released a report on Thursday showing an unexpected increase by first-time claims for U.S. unemployment benefits in the week ended June 8th.

The report said initial jobless claims climbed to 242,000, an increase of 13,000 from the previous week’s unrevised level of 229,000. Economists had expected jobless claims to edge down to 225,000.

With the unexpected increase, jobless claims reached their highest level since hitting 248,000 in the week ended August 12, 2023.

The Labor Department said the less volatile four-week moving average also rose to 227,000, an increase of 4,750 from the previous week’s unrevised average of 222,250.

A separate report released by the Labor Department on Thursday showed producer prices in the U.S. unexpectedly edged lower in the month of May.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Economists had expected producer prices to inch up by 0.1 percent.

The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April.

Economists had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s twenty-year bond auction.

New York Federal Reserve President John Williams is due to moderate a discussion before the Economic Club of New York at 12 pm ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $16 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Broadcom (AVGO) are soaring in pre-market trading after the chipmaker reported better than expected fiscal second quarter results and announced a 10-for-1 stock split.

Electric vehicle maker Tesla (TSLA) is also seeing significant pre-market strength after CEO Elon Musk said shareholder resolutions on his $56 billion pay package and moving the company’s incorporation to Texas are passing by “wide margins.”

Meanwhile, shares of Dave & Buster’s (PLAY) are likely to come under pressure after the restaurant chain reported fiscal first quarter revenues that missed analyst estimates.