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Bargain Hunting May Contribute To Early Rebound On Wall Street
US Market
The major U.S. index futures are currently pointing to a notably higher open on Thursday, with stocks likely to regain some ground following the sell-off seen late in the previous session.
Bargain hunting may contribute to early strength on Wall Street, as some traders look to pick up stocks at reduced levels following yesterday’s steep losses.
The Dow closed lower for the tenth straight session on Wednesday, marking its longest losing streak since 1974
The blue chip index tumbled to its lowest closing level in over a month, while the broader S&P 500 also slumped to a one-month closing low.
Yesterday’s sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year.
While strength in the U.S. economy played a factory in the Fed taking a cautious approach to further rate cuts, the futures remained firmly positive following the release of a batch of largely upbeat economic data.
The Commerce Department released a report this morning showing the pace of U.S. economic growth unexpectedly surged by more than previously estimated in the third quarter.
The report said gross domestic product shot up by 3.1 percent in the third quarter, reflecting an upward revision from the 2.8 percent jump previously reported. Economists had expected the pace of growth to be unrevised.
A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended December 14th.
The Labor Department said initial jobless claims fell to 220,000, a decrease of 22,000 from the previous week’s unrevised level of 242,000. Economists had expected jobless claims to dip to 230,000.
Stocks saw modest strength early in the session on Wednesday but plummeted in reaction to the Federal Reserve’s monetary policy announcement. The major averages all moved sharply lower on the day, with the Dow extending its losing streak to ten straight sessions.
The major averages finished the day near their lows of the session. The Dow plummeted 1,123.03 points or 2.6 percent to 42,326.87, the Nasdaq dove 716.37 points or 3.6 percent to 19,392.69 and the S&P 500 plunged 178.45 points or 3.0 percent to 5,872.16.
With the steep drop on the day, Dow saw its longest losing streak since 1974, tumbling to its lowest closing level in over a month. The broader S&P 500 also slumped to a one-month closing low.
The sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year.
The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent, matching the rate cut seen in early November.
With the rate cut almost universally expected, the focus of the announcement was on Fed officials’ latest economic projections.
The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September.
Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.
The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 percent compared to the 2.1 percent forecast in September.
During his post-meeting press conference, Fed Chair Jerome Powell said the central bank will be looking for additional progress on inflation before considering further rate cuts, noting annual price growth has recently been moving sideways.
Notably, the decision to lower rates at this meeting was not unanimous, as Cleveland Fed President Beth M. Hammack preferred to leave rates unchanged.
Gold stocks moved sharply lower as the price of the precious metal plummeted in after hours trading, dragging the NYSE Arca Gold Bugs Index down by 4.6 percent to its lowest closing level in over four months.
Substantial weakness also emerged among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index plunging by 4.3 percent and 4.2 percent, respectively.
Interest rate-sensitive commercial real estate stocks also saw considerable weakness, resulting in a 4.0 percent nosedive by the Dow Jones U.S. Real Estate Index.
Software, housing, semiconductor and steel stocks also showed significant moves to the downside amid broad based weakness on Wall Street.
U.S. Economic News
A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended December 14th.
The Labor Department said initial jobless claims fell to 220,000, a decrease of 22,000 from the previous week’s unrevised level of 242,000. Economists had expected jobless claims to dip to 230,000.
Meanwhile, the report said the less volatile four-week moving average crept up to 225,500, an increase of 1,250 from the previous week’s unrevised average of 224,250.
The Commerce Department also released a report showing the pace of U.S. economic growth unexpectedly surged by more than previously estimated in the third quarter.
The report said gross domestic product shot up by 3.1 percent in the third quarter, reflecting an upward revision from the 2.8 percent jump previously reported. Economists had expected the pace of growth to be unrevised.
The Commerce Department said upward revisions to exports and consumer spending offset a downward revision to private inventory investment and an upward revision to imports, which are a subtraction in the calculation of GDP.
Philadelphia-area manufacturing activity declined overall in the month of December, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.
The Philly Fed said its diffusion index for current general activity slumped to a negative 16.4 in December from a negative 5.5 in November, with a negative reading indicating contraction. Economists had expected the index to climb to a positive 3.0.
Looking ahead, the Philly Fed said the survey’s broad indicators for future activity continue to suggest widespread expectations for growth over the next six months, although the diffusion index for future general activity plunged to 30.7 in December from 56.6 in November.
At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of November. Existing home sales are expected to jump to an annual rate of 4.07 million in November after surging to a rate of 3.96 million in October.
The Conference Board is also due to release its report on leading economic indicators in the month of November at 10 am ET. The leading economic index is expected to edge down by 0.1 percent in November after falling by 0.4 percent in October.
At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.
Europe
European stocks have moved mostly lower on Thursday after the U.S. Federal Reserve cut rates as expected and penciled in two more for 2025, fewer than four seen in September.
Meanwhile, the Bank of England decided to leave its benchmark rate unchanged on Thursday as inflation is expected to continue rising and the economy is forecast to stagnate in the fourth quarter.
The Monetary Policy Committee voted 6-3 to hold the bank rate at 4.75 percent. Three members preferred a quarter-point reduction.
While the German DAX Index is down by 0.9 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 1.0 percent.
In economic news, the forward-looking German consumer sentiment index came in at -21.3 in January, up from -23.1 in December. The score was expected to rise to -22.6.
The French manufacturing sentiment index stood at 97 in December, the same as in November.
Skanska AB has fallen after the Swedish construction firm divested the multi-family rental property C.F. Møllers Have in Copenhagen, Denmark.
German perfume and cosmetics maker Douglas Holding AG has also tumbled despite reporting a turnaround to a net profit for the fourth quarter.
Shares of Stellantis NV have also shown a notable move to the downside after the carmaker reported a decrease in sales in November.
Meanwhile, Swiss technology firm SoftwareOne Holding has soared after it announced a deal to buy Crayon Group Holding.
Renault has also jumped in Paris after reports emerged that Foxconn is in talks with Nissan Motor Co.’s biggest shareholder Renault about its willingness to sell its shares in the Japanese automaker.
Serco Group shares have also surged in London. The outsourcing giant Serco forecast full-year revenue of £4.8bn in line with its prior guidance.
Asia
Asian stocks declined on Thursday after the U.S. Federal Reserve warned it would be cautious about more interest cuts in the face of inflation concerns.
U.S. Treasury yields jumped and the dollar rose to its highest level in more than two years as the Fed’s hawkish outlook raised concerns about tighter monetary conditions.
Analysts have warned that policies proposed by U.S. President-elect Donald Trump, including plans for tax cuts and widespread import tariffs, could put upward pressure on prices and keep interest rates higher for longer.
Gold rebounded from the lowest level in a month in Asian trade, while oil prices fell on demand concerns.
China’s Shanghai Composite Index fell 0.4 percent to 3,370.03 amid trade tensions, as TP-Link routers faced a potential U.S. ban over cybersecurity risks.
In addition, China issued rules today to tighten scrutiny of foreign accounting firms’ domestic operations as part of efforts to rein in accounting failures and fraud.
Hong Kong’s Hang Seng Index recouped some early losses but still closed 0.6 percent lower at 19,752.51.
Japanese markets ended off their day’s lows, the yen weakened and government bonds showed little reaction following Bank of Japan’s decision to refrain from raising interest rates.
The Nikkei 225 Index ended down 0.7 percent at 38,813.58, while the broader Topix Index settled 0.2 percent lower at $2,713.83.
Chip-related stocks led losses, with Advantest and Tokyo Electron falling 0.8 percent and 1.4 percent. Artificial intelligence-focused startup investor SoftBank Group lost 4.3 percent after U.S. memory chip giant Micron Technology issued weaker-than-expected guidance for the current quarter.
Financials rose, with Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial climbing 1-2 percent.
Seoul stocks plunged, with the Kospi tumbling 2.0 percent to 2,435.93, dragged down by heavyweight technology stocks. Samsung Electronics slumped 3.3 percent and SK Hynix dove 4.6 percent.
Australian markets fell sharply amid weakness among banks and commodity-related stocks. The benchmark S&P/ASX 200 Index slumped 1.7 percent to 8,168.20, while the broader All Ordinaries Index closed 1.7 percent lower at 8,415.
Woodside Energy declined 1.9 percent after it entered a deal with oil behemoth Chevron to swap stakes in several energy projects.
Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index slid 0.9 percent to 12,754.15 as data showed New Zealand’s economy sank into recession in the third quarter.
Commodities
Crude oil futures are edging down $0.02 to $70.56 a barrel after rising $0.50 to $70.58 a barrel on Wednesday. Meanwhile, after slipping $8.70 to $2,675.50 an ounce in the previous session, gold futures are tumbling $41.40 to $2,611.90 an ounce.
On the currency front, the U.S. dollar is trading at 156.77 yen versus the 154.80 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0408 compared to yesterday’s $1.0353.
