U.S. Stocks May Add To Yesterday’s Gains In Early Trading

The major U.S. index futures are currently pointing to a modestly higher open on Thursday, with stocks likely to add to yesterday’s gains in early trading.

The markets may continue to benefit from optimism about the outlook for interest rates following the release of the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday.

The minutes reinforced expectations of a rate cut next month, as a “vast majority” of participants said it would “likely be appropriate” to lower rates at the next meeting if inflation data continued to come in “about as expected.”

Trading activity may be somewhat subdued, however, as the Kansas City Fed’s Jackson Hole Economic Symposium gets underway later in the day.

Fed Chair Jerome Powell is scheduled to speak at the symposium in Jackson Hole, Wyoming, on Friday, with traders looking for the central bank chief’s comments to provide further clarity about the outlook for rates.

Ahead of Powell’s remarks, CME Group’s FedWatch Tool indicate a 71.5 percent of a quarter point rate cut next month and a 28.5 percent chance of a half point rate cut.

Following the modest pullback seen in Tuesday’s session, stocks moved back to the upside during trading on Wednesday. The major averages fluctuated over the course of the trading day but managed to close in positive territory.

The Nasdaq and the S&P 500 closed higher for the ninth time in the past ten sessions. The Nasdaq climbed 102.05 points or 0.6 percent to 17,918.99 and the S&P 500 rose 23.73 points or 0.4 percent to 5,620.85, while the narrower Dow inched up 55.52 points or 0.1 percent to 40,890.49.

The higher close on Wall Street came after the Federal Reserve released the minutes of its latest monetary policy meeting, which seemingly provided additional support for expectations of an interest rate cut in September.

The minutes of the Fed’s late July meeting revealed that the “vast majority” of participants believed it would “likely be appropriate” to lower rates at the next meeting if inflation data continued to come in “about as expected.”

Reports released by the Labor Department last week showed the annual rates of consumer and producer price growth slowed in line or slightly more than economists had forecast in July.

Fed officials unanimously agreed to leave interest rates unchanged at the meeting, although the minutes noted several participants observed that the progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range by 25 basis points at the July meeting.

“The Fed minutes removed all doubt about a September rate cut,” said Jamie Cox, Managing Partner for Harris Financial Group. “The Fed’s communication strategy is to make its meetings less of a market moving event, and they are following the script to the letter.”

Stocks saw considerable volatility early in the session after the Bureau of Labor Statistics released revised data showing job growth in the U.S. was weaker than previously reported in the twelve months ended March 2024.

The BLS said the U.S. economy added 818,000 fewer jobs from March 2023 to March 2024 than initially reported, reflecting 0.5 percent weaker job growth.

While the data added to recent optimism about an interest rate cut next month, the slower than previously reported job growth also rekindled concerns about the strength of the labor market.

Housing stocks saw substantial strength on the day amid optimism about lower interest rates, resulting in a 2.7 percent surge by the Philadelphia Housing Sector Index.

Toll Brothers (TOL) helped lead the sector higher, with the homebuilder spiking by 5.6 percent after reporting better than expected fiscal third quarter results and raising its full-year guidance.

Significant strength was also visible among steel stocks, as reflected by the 2.5 percent jump by the NYSE Arca Steel Index.

Semiconductor, retail and computer hardware stocks also saw notable strength on the day, while networking stocks gave back ground after moving sharply higher in recent sessions.

Commodity, Currency Markets

Crude oil futures are inching up $0.11 to $72.04 a barrel after slumping $1.24 to $71.93 a barrel on Wednesday. Meanwhile, after edging down $3.10 to $2,547.50 an ounce in the previous session, gold futures are slipping $10.60 to $2,536.90 an ounce.

On the currency front, the U.S. dollar is trading at 146.07 yen versus the 145.21 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1137 compared to yesterday’s $1.1124.

Asia

Asian shares rose broadly on Thursday, though a cautious undertone prevailed ahead of the annual conference of central bankers in Jackson Hole, Wyoming, where Fed Chair Jerome Powell may provide important clues on the outlook for U.S. monetary policy.

Investors are waiting for fresh clues about how deeply and quickly the U.S. central bank will begin cutting interest rates in September.

China’s Shanghai Composite Index dipped 0.3 percent to 2,848.77 as trade tensions flared up. China launched an anti-subsidy investigation into dairy imports from the European Union on Wednesday, a day after the European Union said it plans to introduce an additional 9 percent tariff on Teslas imported from China.

Hong Kong’s Hang Seng Index rallied 1.4 percent to 17,641 after the FOMC minutes hinted at a September rate cut. Tech stocks led the surge, with JD.com and Xiaomi climbing 3.5 percent and 9 percent, respectively.

Japanese markets rose notably as the yen edged lower ahead of BOJ Governor Kazuo Ueda’s testimony in front of parliament.

Meanwhile, activity in Japan’s manufacturing sector contracted slightly in August, but to a lesser extent than in previous months, while the services sector expanded, a business survey showed today.

The Nikkei 225 Index climbed 0.7 percent to 38,211.01, while the broader Topix Index settled 0.3 percent higher at 2,671.40. Among the top gainers, Sumitomo Dainippon Pharma surged 6.7 percent to hit a 52-week high.

Seoul stocks eked out modest gains after the Bank of Korea held its key interest rate steady and took a more dovish tilt, noting that four of the bank’s seven voting members were open to a rate cut within the next three months. The Kospi inched up 0.2 percent to 2,707.67.

Australian stocks moved higher for the tenth consecutive session, with IT, Industrials and A-REITs sectors pacing the gainers. The benchmark S&P/ASX 200 rose 0.2 percent to 8,027 after strong earnings from retailers and banks. The broader All Ordinaries Index gained 0.3 percent to end at 8,258.10.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slipped 0.3 percent to 12,469.35.

Europe

European stocks are modestly higher on Thursday as a survey showed the Eurozone manufacturing PMI fell from 45.8 to an 8-month low of 45.6 in August, reinforcing investor bets on a September ECB rate cut.

Overall business activity showed surprising strength in August, as a strong rebound in the bloc’s dominant services industry offset a deeper downturn among manufacturers.

Elsewhere, Britain’s private sector companies reported their strongest growth in four months alongside cooling price pressures.

The dollar ticked higher in early European trade, recovering from its lowest level since December 23 following the release of dovish minutes from the Federal Reserve meeting and a downward revision to U.S. payrolls data.

While the German DAX Index is up by 0.3 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

In corporate news, Swiss Re has moved sharply higher after the reinsurer reported higher profit in its first half and reiterated guidance for the full year.

JD Sports Fashion has also surged. The British sportswear retailer reported an improvement in second-quarter underlying sales, driven by surging revenues in the U.S. and Europe.

Bank of Georgia has also shown a notable move to the upside after it unveiled a £21 million share buyback program.

Recruiter Hays has also jumped despite full-year pre-tax profit plunging 91 percent as a result of “increasingly challenging” market conditions.

German ticketing group CTS Eventim has also shown a strong upward move after upgrading its full-year earnings outlook.

Lender Deutsche Bank has also surged after settling with over 80 plaintiffs in the Postbank AG litigation.

Meanwhile, Aegon NV has slumped after the Dutch insurer reported a drop in its key operating profit and cash generation metrics.

U.S. Economic News

After reporting decreases by first-time claims for U.S. unemployment benefits over the two previous weeks, the Labor Department released a report on Thursday showing a modest rebound by initial jobless claims in the week ended August 17th.

The report said initial jobless claims rose to 232,000, an increase of 4,000 from the previous week’s revised level of 228,000.

Economists had expected jobless claims to inch up to 230,000 from the 227,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average edged down to 236,000, a decrease of 750 from the previous week’s revised average of 236,750.

At 10 am ET, the National Association of Realtors is due to release its report on existing home sales in the month of July. Existing home sales are expected to rise to an annual rate of 3.93 million in July after plunging to a rate of 3.89 million in June.

The Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.

Stocks In Focus

Shares of Advance Auto Parts (AAP) are plummeting in pre-market trading after the auto parts retailer reported weaker than expected fiscal second quarter earnings and lowered its full-year guidance.

AI Data Cloud company Snowflake (SNOW) is also seeing substantial pre-market weakness despite reporting better than expected fiscal second quarter results and boosting its full-year product revenue forecast.

On the other hand, shares of Peloton (PTON) are moving sharply higher in pre-market trading after the exercise equipment and media company reported a narrower than expected fiscal fourth quarter loss on revenues that exceeded estimates.

Software company Synopsys (SNPS) may also move to the upside after reporting fiscal third quarter results that beat analyst estimates on both the top and bottom lines.