Futures Pointing To Modestly Higher Open On Wall Street

The major U.S. index futures are pointing to a modestly higher open on Thursday following the lackluster performance seen in the previous session.

The markets may benefit from the upward momentum seen earlier in the week, which has helped stocks largely offset the steep losses posted last week.

Easing concerns about speculative trading have helped drive the markets higher along with mostly upbeat earnings news from big-name companies.

Positive sentiment may also be generated in reaction to a report from the Labor Department showing a continued decline in first-time claims for U.S. unemployment benefits in the week ended January 30th.

Nonetheless, overall trading activity may be somewhat subdued ahead of the release of the Labor Department’s more closely watched monthly jobs report on Friday.

Economists currently expect employment to edge up by 50,000 jobs in January after slumping by 140,000 jobs in December. The unemployment rate is expected to hold at 6.7 percent.

After moving sharply higher early in the week, stocks showed a lack of direction during trading on Wednesday. The major averages bounced back and forth across the unchanged line before ended the day little changed.

The major averages finished the session on opposite sides of the unchanged line. While the Nasdaq edged down 2.23 points or less than a tenth of a percent to 13,610.54, the Dow inched up 36.12 points or 0.1 percent to 30,723.60 and the S&P 500 crept up 3.86 points or 0.1 percent to 3,830.17.

A positive reaction to the latest earnings news contributed to initial strength on Wall Street, with Google parent Alphabet (GOOGL) helping to lead the way higher.

Shares of Alphabet surged up by 7.3 percent after the tech giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, online retail giant Amazon turned lower over the course of the session despite reporting better than expected fourth quarter results.

Amazon also announced CEO Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021, with Amazon Web Services chief Andy Jassy set to become CEO at that time.

A notable decline by shares of Amgen (AMGN) weighed on the Dow after the biotechnology company reported fourth quarter results that beat estimates but provided disappointing guidance.

The lackluster performance by the broader markets also came following the release of some upbeat economic data, which raised concerns lawmakers will feel less pressure to provide additional stimulus.

Before the start of trading, payroll processor ADP released a report showing a much stronger than expected rebound in private sector employment in the month of January.

ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December.

Economists had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month.

“Based on these numbers, our estimate that the officials figures will show non-farm payroll employment unchanged last month, data due Friday, now looks a little pessimistic,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, “If non-farm payrolls did rally last month, that could complicate the push in Congress for another large-scale fiscal stimulus.”

A separate report released by the Institute for Supply Management showed U.S. service sector activity unexpectedly grew at an accelerated rate in the month of January.

The ISM said its services PMI inched up to 58.7 in January from a revised 57.7 in December, with a reading above 50 indicating growth in the service sector.

The uptick came as surprise to economists, who had expected the index to edge down to 56.8 from the 57.2 originally reported for the previous month.

With the unexpected monthly increase, the services PMI reached its highest level since hitting 58.8 in February of 2019.

Despite the lackluster close by the broader markets, energy stocks moved sharply higher on the day as the price of crude oil climbed to its highest levels in over a year.

Reflecting the strength in the sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index spiked by 4.8 percent and 4.3 percent, respectively.

Substantial strength was also visible among airline stocks, with the NYSE Arca Airline Index skyrocketing by 3.2 percent on the day.

Natural gas, banking and computer hardware stocks also saw notable strength on the day, while weakness among semiconductor stocks led to a 2.1 percent slump by the Philadelphia Semiconductor Index.

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $56.03 a barrel after climbing $0.93 to $55.69 a barrel on Wednesday. Meanwhile, after inching up $1.70 to $1,835.10 an ounce in the previous session, gold futures are tumbling $22.20 to $1,812.90 an ounce.

On the currency front, the U.S. dollar is trading at 105.29 yen versus the 105.03 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1985 compared to yesterday’s $1.2036.

Asia

Asian stocks fell on Thursday as investors booked profits after recent strong gains on earnings optimism and firm signs of an economic recovery.

A spike in short-term interest rates raised worries that Chinese policymakers may be starting to shift to a tighter stance to rein in share prices and property markets.

Chinese shares drifted lower as the country’s short-term interest rates rose again, raising worries over signs of liquidity tension ahead of the upcoming Lunar New Year holiday.

The benchmark Shanghai Composite Index slid 15.45 points, or 0.4 percent, to 3,501.86, while Hong Kong’s Hang Seng Index ended down 193.96 points, or 0.7 percent, at 29,113.50.

Japanese shares ended lower to snap a three-day winning streak, weighed down by losses in chip-related shares. The Nikkei 225 Index fell 304.55 points, or 1.1 percent, to 28,341.95, while the broader Topix closed 0.3 percent lower at 1,865.12.

Advantest shed 3.9 percent, Sumco gave up 3.8 percent and Tokyo Electron declined 2.6 percent. Sony shares jumped 9.5 percent after the electronics and media giant reported a 62 percent surge in its profit for the third quarter and also raised its full-year outlook.

Nomura Holdings climbed 4.1 percent after reporting strong earnings. Transport company Kawasaki Kisen Kaisha rose 4.4 percent after signing a deal with Ship Data Center to share operation data of the K Line fleet installed with Kawasaki Integrated Maritime Solutions.

Nippon Yusen gained 4.3 percent after reporting an increase in its profit for the third quarter and raising its financial outlook for the full year.

Australian markets fell, dragged down by gold miners and healthcare companies. The benchmark S&P/ASX 200 Index dropped 59.10 points, or 0.9 percent, to 6.765.50, snapping a three-day winning streak. The broader All Ordinaries Index ended down 53 points, or 0.8 percent, at 7,037.90.

Healthcare stocks such as Cochlear and CSL fell 1-2 percent, pressured by a stronger Aussie dollar. Miners ended mostly higher despite a fall in Chinese iron ore futures ahead of the Lunar New Year holidays.

Evolution Mining, Newcrest Mining, Northern Star and Regis Resources lost 2-3 percent after spot gold prices weakened overnight amid rising Treasury yields and gains in equity prices.

Power provider Origin Energy slumped 6.9 percent after downgrading its profits and earnings guidance for the 2021 financial year. AGL Energy shares tumbled 3.6 percent. Banks ended flat to slightly lower as investors awaited RBA’s updated economic forecasts.

In economic news, a government report showed Australia had a seasonally adjusted merchandise trade surplus of A$6.785 billion in December. That exceeded expectations for a A$6.0 billion surplus following the downwardly revised A$5.014 billion surplus in November. Exports were up 3.0 percent month-on-month, while imports slipped 2.0 percent.

Seoul stocks fell sharply on profit taking after three days of gains. The benchmark Kospi tumbled 42.13 points, or 1.4 percent, to 3,087.55 as foreign and institutional investors booked profits after the recent string of gains on optimism around vaccine rollouts.

The government’s extension of its pandemic-imposed ban on short selling also weighed on markets. Market heavyweight Samsung Electronics gave up 2.5 percent and No. 2 chipmaker SK Hynix lost 3.9 percent.

Europe

European shares are mostly higher on Thursday, extending a three-day rally on hopes of a swifter global economic recovery.

Sentiment was also underpinned after former European Central Bank chief Mario Draghi agreed to help form a new Italian government.

The French CAC 40 Index and the German DAX Index are both up by 0.5 percent, although the U.K.’s FTSE 100 Index has bucked the uptrend and edged down by 0.1 percent.

British homebuilder Barratt Developments has jumped after achieving “a fantastic first half performance,” according to its Chief Executive.

Bayer AG has also surged higher after the German chemical company announced a formal agreement with plaintiffs’ class counsel on a class plan designed to manage and resolve future Roundup cases.

On the other hand, Swiss engineering company ABB has moved to the downside after it swung to a loss in the fourth quarter.

Consumer goods giant Unilever has also slumped after its underlying sales rose 3.5 percent in the fourth quarter, in line with estimates.

Deutsche Bank has also moved lower despite the lender reporting a small annual profit in 2020, its first since 2014, on higher revenues and cost reductions at its investment banking division.

Semiconductor manufacturer Infineon Technologies is little changed in choppy trading after reporting higher revenue and net profit for the first quarter of fiscal 2021.

In economic news, the construction Purchasing Managers’ Index for Germany fell to 46.6 in January from 47.1 in December due to a sustained downturn in work on commercial building projects.

French business managers forecast a strong rebound in investment expenditure this year, according to a survey, released by the statistical office Insee.

Managers forecast investment expenditure to rise 10 percent this year, reversing an estimated decline of 13 percent in 2020. Managers upgraded their forecast for 2021 by 6 points and that for 2020 by 1 point.

U.S. Economic Reports

With the more closely watched monthly jobs report looming, the Labor Department released a report on Thursday showing a decrease in first-time claims for U.S. unemployment benefits in the week ended January 30th.

The report said initial jobless claims fell to 779,000, a decrease of 33,000 from the previous week’s revised level of 812,000.

Economists had expected jobless claims to edge down to 830,000 from the 847,000 originally reported for the previous week.

A separate report released by the Labor Department showed a steep drop in U.S. labor productivity in the fourth quarter and a sharp increase in unit labor costs.

The Labor Department said labor productivity plunged by 4.8 percent in the fourth quarter after spiking by an upwardly revised 5.1 percent in the third quarter.

Economists had expected productivity to tumble by 2.8 percent compared to the 4.6 percent jump that had been reported for the previous quarter.

Meanwhile, the report said unit labor costs skyrocketed by 6.8 percent in the fourth quarter after plummeting by a revised 7.7 percent in the third quarter.

Unit labor costs were expected to surge up by 3.9 percent compared to the 6.6 percent nosedive that had been reported for the previous quarter.

At 10 am ET, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of December. Factory orders are expected to increase by 0.7 percent.

Dallas Federal Reserve President Robert Kaplan is due to participate in a moderated question-and-answer session before a virtual event hosted by the Urban Land Institute at 1 pm ET.

At 2 pm ET, San Francisco Federal Reserve President Mary Daly is scheduled to participate in a presentation and research panel before “Career Pathways” Session 4 at the virtual “Uneven Outcomes in the Labor Market: Understanding Trends and Identifying Solutions” event.

Stocks In Focus

Shares of Canada Goose (GOOS) are moving sharply higher in pre-market trading after the outerwear maker reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

E-commerce giant eBay (EBAY) is also likely to see initial strength after reporting better than expected fourth quarter results and provided upbeat guidance.

On the other hand, shares of Qualcomm (QCOM) are likely to come under pressure after the chipmaker reported fiscal first quarter earnings that beat estimates but warned chip supply constraints will hold back sales growth.

Food delivery company GrubHub (GRUB) may also move to the downside after reporting a wider than expected fourth quarter loss.