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Traders May Cash In On Recent Strength On Wall Street
US Market
The major U.S. index futures are currently pointing to a modestly lower open on Thursday, with stocks likely to give back ground following the strong upward move seen over the course of the previous session.
Profit taking may contribute to an initial pullback on Wall Street, as some traders look to cash in on the recent strength in the markets.
The advance seen during Wednesday’s session lifted the Dow and S&P 500 to new record closing highs, while the Nasdaq reached its best closing level in two years.
The S&P 500 reached an intraday peak just of the 5,000 level, which could prove to be a psychological resistance for the broad market index.
The futures did not show much reaction to a Labor Department report showing first-time claims for U.S. unemployment benefits fell by more than expected in the week ended February 3rd.
The report said initial jobless claims slipped to 218,000, a decrease of 9,000 from the previous week’s upwardly revised level of 227,000.
Economists had expected jobless claims to edge down to 220,000 from the 224,000 originally reported for the previous week.
Among individual stocks, entertainment giant Disney (DIS) is likely to see initial strength after reporting better than expected fiscal first quarter earnings, boosting its dividend and providing an upbeat forecast.
After ending Tuesday’s choppy trading session modestly higher, stocks showed a strong move to the upside during trading on Wednesday. The Dow and the S&P 500 set new record closing highs, with the latter reaching an intraday peak just shy of 5,000.
The major averages pulled back off their best levels going into the close but remained firmly positive. The S&P 500 climbed 40.83 points or 0.8 percent to4,995.06 and the Dow rose 156.00 points or 0.4 percent to 38,677.36, while the tech-heavy Nasdaq jumped 147.65 points or 1.0 percent to 15,756.64.
The strength on Wall Street may partly have reflected recent upward momentum, which helped stocks rally late last week despite waning optimism about the Federal Reserve cutting interest rates in March.
While CME Group’s FedWatch Tool suggests the chances of March rate cut are just 18.5 percent, the Fed is still expected to begin lowering rates sometime in the coming months.
Recent upbeat economic data has seemingly reduced the likelihood of a near-term rate cut but a strong economy is still seen as a net positive for stocks.
A positive reaction to some of the latest earnings news also contributed to notable advance seen over the course of the session.
Share of Enphase Energy (ENPH) soared by 16.9 percent after the solar inverter maker reported weaker than expected fourth quarter revenues but said it expects demand to improve throughout 2024.
Auto giant Ford (F) also surged by 6.1 percent after reporting better than expected fourth quarter results, providing upbeat guidance for 2024 and announcing a supplemental dividend of 18 cents per share.
On the other hand, shares of Snap (SNAP) plummeted by 34.6 percent after the Snapchat parent reported mixed fourth quarter results and forecast first quarter sales below analyst estimates.
“We’re hip deep in company earnings and so far investors have been somewhat relieved that for the most part the news has been pretty positive in a season that had a big question mark hanging over it,” said Danni Hewson, head of financial analysis at AJ Bell.
In U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit widened in the month of December.
The Commerce Department said the trade deficit increased to $62.2 billion in December from a revised $61.9 billion in November.
Economists had expected the trade deficit to narrow to $62.2 billion from the $63.2 billion originally reported for the previous month.
Software stocks turned in some of the market’s best performances on the day, driving the Dow Jones U.S. Software Index up by 1.9 percent to a record closing high.
Significant strength was also visible among semiconductor stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Semiconductor Index.
Steel and housing stocks also saw considerable strength, while biotechnology stocks showed a notable move to the downside.
U.S. Economic Reports
Following last Friday’s much stronger than expected monthly jobs report, the Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits fell by more than expected in the week ended February 3rd.
The report said initial jobless claims slipped to 218,000, a decrease of 9,000 from the previous week’s upwardly revised level of 227,000.
Economists had expected jobless claims to edge down to 220,000 from the 224,000 originally reported for the previous week.
Meanwhile, the Labor Department said the less volatile four-week moving average rose to 212,250, an increase of 3,750 from the previous week’s revised average of 208,500.
At 10 am ET, the Commerce Department is due to release its report on wholesale inventories in the month of December. Wholesale inventories are expected to rise by 0.4 percent.
Richmond Federal Reserve President Thomas Barkin is scheduled to speak before the Economic Club of New York at 11:30 am ET.
At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $25 billion worth of thirty-year bonds.
Stocks in Focus
Shares of Arm Holdings (ARM) are soaring in pre-market trading after the chipmaker reported better than expected fiscal third quarter results and provided upbeat guidance for the current quarter.
On the other hand, shares of PayPal (PYPL) are seeing significant pre-market weakness after the online payments company reported fourth quarter results that exceeded estimates but provided a disappointing forecast.
Europe
European stocks are mostly higher on Thursday despite heightened geopolitical tensions and lingering uncertainty over the Fed’s rate trajectory.
On a light day on the economic front, new data showed China is struggling to shake off persistent deflation pressures.
The French CAC 40 Index is up by 0.7 percent and the German DAX Index is up by 0.4 percent, although the U.K.’s FTSE 100 Index is nearly unchanged.
The euro rose against a basket of major rivals, extending gains for a third straight session against the dollar after several ECB officials warned central banks need to move carefully on cutting interest rates this year.
ECB member Isabel Schnabel said in an interview with the Financial Times that recent data and market bets on quick rate cuts mean the central bank needs to be patient before easing policies.
In corporate news, Danish carrier Maersk has plunged after it reported a net loss of $442 million for the fourth quarter of 2023.
Dutch payments company Adyen NV has soared after reporting a significant increase in net profit for the second half of fiscal 2023.
ArcelorMittal has moved notably higher despite the global steel giant posting a net loss of $2,966 million during the December quarter.
British drug maker AstraZeneca has moved to the downside after reporting lower-than-expected profit.
Consumer goods manufacturer Unilever has rallied after launching a 1.5-billion-euro ($1.6 billion) share buyback.
Catering group Compass Group has surged after it reported an 11.7 percent jump in first quarter organic revenue and backed its full-year outlook.
British American Tobacco has jumped after an announcement that it plans to sell some of its stake in India’s cigarette-to-hotels conglomerate ITC.
Anglo American has rallied. The miner reported a 24 percent rise in copper production last year to 826000 metric tons.
Unibail-Rodamco-Westfield, a commercial real estate company, has moved sharply higher in Paris. After reporting a loss before tax of 1.771 billion euros for the full year, the company projected earnings growth for 2024.
Ipsen has tumbled. The biopharmaceutical company reported that its fiscal 2023 IFRS consolidated net profit was 647.2 million euros, nearly flat compared with last year’s 647.5 million euros.
Lender Credit Agricole has plunged despite outperforming expectations with robust fourth quarter profits.
Siemens was moving lower after two of its largest investors called for the German engineering group to simplify its operations. Meanwhile, the company’s first quarter net profit beat expectations.
Asia
Asian stocks ended mixed on Thursday as caution crept in before the Lunar New Year holidays.
Treasuries were unchanged and the dollar moved in a tight range amid Fed rate cut uncertainty.
Gold edged down slightly, while oil prices rose for a fourth straight session after Israel rejected a ceasefire offer from Hamas.
Chinese shares ended a choppy session sharply higher, heading into the Lunar New Year break. There was some positive reaction after Beijing appointed a veteran regulator as the new securities watchdog head.
With prospects of support measures from authorities boosting sentiment, traders shrugged off disappointing inflation data.
Chinese consumer prices fell last month at the fastest pace since 2009 and producer prices declined for a 16th month in January, underscoring the threat of deflation in the world’s second largest economy.
The benchmark Shanghai Composite Index rallied 1.3 percent to 2,865.90, while Hong Kong’s Hang Seng Index settled 1.3 percent lower at 15,878.07. Alibaba Group Holdings slumped over 6 percent after missing revenue expectations.
Japanese markets posted strong gains to close at a fresh 34-year high as the yen weakened following comments from Shinichi Uchida, a Bank of Japan’s deputy governor, that rapid rate hikes are unlikely even after ending negative rates.
The Nikkei 225 Index jumped 2.1 percent to 36,863.28, logging its biggest daily rise in nearly three months, led by exporter issues. The broader Topix Index ended half a percent higher at 2,562.63.
SoftBank Group soared more than 11 percent after the technology investor reported a quarterly profit for the first time in more than a year.
Seoul stocks eked out modest gains, with the Kospi rising 0.4 percent to 2,620.32 on hopes of U.S. rate cuts later this year.
Australian stocks ended modestly higher, led by financial and real estate stocks. The benchmark S&P ASX 200 Index rose 0.3 percent to 7,639.20, while the broader All Ordinaries Index closed up 0.3 percent at 7,875.20.
Property investment firm Mirvac Group surged 4.7 percent after posting better-than-expected half-year results and reaffirming its annual forecast.
Power producer AGL Energy soared 10.3 percent after raising its full-year profit forecast.
Commodities
Crude oil futures are jumping $1.08 to $74.94 a barrel after climbing $0.55 to $73.86 a barrel on Wednesday. Meanwhile, after inching up $0.30 to $2,051.70 an ounce in the previous session, gold futures are falling $13.10 to $2,038.60 an ounce.
On the currency front, the U.S. dollar is trading at 149.42 yen versus the 148.18 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0742 compared to yesterday’s $1.0772.
