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Tech Stocks May Help Lead Initial Advance on Wall Street
US Market
The major U.S. index futures are pointing to a higher open on Thursday, with stocks likely to see initial strength after showing a lack of direction over the past couple sessions.
Early buying interest is likely to be generated in reaction to upbeat earnings news from big-name companies like Apple (AAPL) and Facebook (FB).
Shares of Apple are moving notably higher in pre-market trading after the tech giant reported fiscal second quarter earnings that far exceeded analyst estimates and increased its stock buyback and dividend.
Social media giant Facebook is also seeing significant pre-market strength after reporting much better than expected first quarter earnings.
Big-name companies like Comcast (CMCSA), Caterpillar (CAT) and McDonald’s (MCD) may also move to the upside after reporting strong quarterly results.
Most major companies have reported better than expected results this earnings season, but the markets have not seen much buying interest in response due to concerns about valuations and whether the results are strong enough to support even further upside.
Extending the lackluster performance seen during trading on Tuesday, stocks showed a lack of direction over the course of the trading day on Wednesday. The major averages once again spent the day bouncing back and forth across the unchanged line.
The major averages eventually ended the day modestly lower. The Dow slid 164.55 points or 0.5 percent to 33,820.38, the Nasdaq dipped 39.19 points or 0.3 percent to 14,051.03 and the S&P 500 edged down 3.54 points or 0.1 percent to 4,183.18 after reaching a record intraday high.
Stocks initially lacked direction as traders looked ahead to the Federal Reserve’s monetary policy announcement, although the choppy trading continued after the Fed announced its widely expected decision to maintain its ultra-easy policy.
The Fed left interest rates and asset purchases unchanged even as the central bank upgraded its assessment of the U.S. economy.
Citing progress on vaccinations and strong policy support, the Fed noted indicators of economic activity and employment have “strengthened,” which reflects a modest upgrade from last month, when the central bank said the indicators have “turned up recently.”
The Fed also said the sectors most adversely affected by the coronavirus pandemic remain weak but have shown improvement.
After previously saying inflation continues to run below 2 percent, the Fed now acknowledges that inflation has risen but largely attributed the increase to “transitory factors.”
The statement from the central bank also said risks to the economic outlook remain due to the ongoing public health crisis, although that reflects an improvement from last month, when the Fed cited “considerable risks to the economic outlook.”
Despite the improvements mentioned in the statement, the Fed once again kept the target range for the federal funds rate at 0 to 1/4 percent.
The Fed also reiterated that it expects rates to remain at near-zero levels until labor market conditions have reached levels consistent with its assessments of maximum employment and inflation is on track to moderately exceed 2 percent for some time.
The central bank also said it plans to continue its bond purchases at a rate of at least $120 billion per month until “substantial further progress” has been made toward its goals of maximum employment and price stability.
Traders were also reacting to the latest earnings news from several big-name companies, including some megacap technology stocks.
Shares of Alphabet (GOOGL) moved sharply higher after the Google parent reported better than expected first quarter results and announced a $50 billion stock buyback.
Credit card giant Visa (V) also moved to the upside after reporting fiscal second quarter results that beat analyst estimates on both the top and bottom lines.
On the other hand, shares of Microsoft (MSFT) saw notable weakness even though the software giant reported better than expected fiscal third quarter results.
Fellow Dow components Amgen (AMGN) and Boeing (BA) have also come under pressure after reporting disappointing results, weighing on the blue chip index.
Reflecting another lackluster performance by the broader markets, most of the major sectors once again ended the day showing only modest moves.
Software stocks saw significant weakness, however, with the negative reaction to Microsoft’s results weighing on the sector.
The Dow Jones U.S. Software Index slid by 1.5 percent, pulling back further off the record closing high set on Monday.
Notable weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent drop by the Philadelphia Semiconductor Index.
On the other hand, energy stocks moved sharply higher amid an increase by the price of crude oil. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 5.8 percent, the NYSE Arca Oil Index spiked by 3.6 percent and the NYSE Arca Natural Gas Index surged up by 2.7 percent.
U.S. Economic Reports
First-time claims for U.S. unemployment benefits dropped to a new pandemic-era low in the week ended April 24th, according to a report released by the Labor Department on Thursday.
The report said initial jobless claims dipped to 553,000, a decrease of 13,000 from the previous week’s revised level of 566,000.
Economists had expected jobless claims to inch up to 549,000 from the 547,000 originally reported for the previous week.
Jobless claims fell for the third straight week, once again sliding to their lowest level since hitting 256,000 in the week ended March 14, 2020.
Meanwhile, preliminary data released by the Commerce Department showed an acceleration in the pace of U.S. economic growth in the first three months of 2021.
The report said real gross domestic product surged up by 6.4 percent in the first quarter after jumping by 4.3 percent in the fourth quarter of 2020. Economists had expected GDP to increase by 6.5 percent.
The Commerce Department said the GDP growth reflected increases in consumer spending, non-residential fixed investment, federal government spending, residential fixed investment, and state and local government spending.
Meanwhile, decreases in private inventory investment and exports helped limit the upside along with an increase in imports, which are a subtraction in the calculation of GDP.
At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of March. Pending home sales are expected to jump by 5.0 percent in March after plunging by 10.6 percent in February.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Federal Reserve Vice Chair Randal Quarles is due to participate in a “Financial Regulation” discussion before a virtual Options Clearing Corporation Conference at 11 am ET.
At 2 pm ET, New York Federal Reserve President John Williams is scheduled to moderate a virtual conversation hosted by the Economic Club of New York.
Stocks in Focus
Shares of Qualcomm (QCOM) are moving sharply higher in pre-market trading after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance.
Restaurant chain Cheesecake Factory (CAKE) is also likely to see initial strength after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.
On the other hand, shares of eBay (EBAY) may come under pressure after the e-commerce company reported better than expected first quarter results but provided disappointing guidance.
Drug maker Bristol-Myers Squibb (BMY) is also seeing notable pre-market weakness after reporting first quarter results that missed analyst estimates.
Europe
European stocks are broadly higher on Thursday, with a slew of upbeat earnings reports and dovish comments from the U.S. Federal Reserve boosting sentiment.
The pan-European Stoxx 600 Index has risen by 0.3 percent, while the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.4 percent.
Meanwhile, the German DAX has fallen by 0.4 after data showed German unexpectedly unemployment rose in April amid extended restrictions on shopping, travel and social life to contain a third wave of COVID-19 infections.
Finnish telecom network equipment maker Nokia has moved sharply higher after reporting forecast-beating profit and revenue.
Franco-Italian chipmaker STMicroelectronics has also moved to the upside as it reported higher net profit and revenue for the first quarter.
Unilever shares have also jumped in London. The consumer goods giant announced a share buyback program after posting better than expected quarterly sales.
Royal Dutch Shell has also risen. The Anglo-Dutch company raised its dividend after profit rose more than expected in the first quarter.
Standard Chartered has also shown a strong move to the upside after its first quarter pre-tax profit beat the consensus estimate.
Weir Group has also moved higher. The engineering company expects to deliver growth in full year constant currency profits in line with current market expectations.
Telecommunications company BT Group has also rallied after saying it is in early talks with a number of select strategic partners, to explore ways to generate investment, strengthen sports business.
Total SE shares have also risen after the French petroleum refining company posted first-quarter earnings close to pre-pandemic levels.
Planemaker Airbus has also surged after it posted higher first quarter core earnings, while Capgemini has advanced after the consulting and technology group returned to organic growth in the first quarter of the year.
Meanwhile, Swiss chemicals company Clariant has fallen after saying it expects to achieve moderate local currency sales growth in continuing operations in FY21.
In economic news, German unemployment unexpectedly rose in April, data released by the Federal Labor Agency showed.
The number of people out of work increased by 9,000 in April, in contrast to the expected fall of 10,000 and March’s decrease of 6,000. The unemployment rate remained unchanged at 6.0 percent in April, in line with expectations.
The euro zone economic sentiment indicator rose strongly by 9.4 to 110.3 in April, beating expectations for a score of 103.0.
Asia
Asian stocks ended broadly higher on Thursday as investors reacted to Fed Chair Jerome Powell’s dovish comments and U.S. President Joe Biden’s congressional speech about increasing taxes on the rich. Japanese markets were closed for Showa Day.
Chinese shares fluctuated before finishing higher after Biden said he told Chinese President Xi that “we welcome the competition – and that we are not looking for conflict.” Biden also said he didn’t seek worse relations with Russia.
The benchmark Shanghai Composite Index rose 17.83 points, or 0.5 percent, to 3,474.90, while Hong Kong’s Hang Seng Index ended up 231.92 points, or 0.8 percent, at 29,303.26.
Australian markets advanced as higher commodity prices helped lift shares of energy companies and gold miners. The benchmark S&P/ASX 200 Index edged up 17.60 points, or 0.3 percent, to 7,082.30, while the broader All Ordinaries Index ended up 26 points, or 0.4 percent, at 7,346.
Evolution Mining, Newcrest and Northern Star Resources climbed 2-3 percent as bullion prices jumped overnight after dovish rhetoric from the Federal Reserve. Resolute Mining surged 5.4 percent after reaffirming its 2021 guidance.
Woodside Petroleum and Santos posted modest gains as oil extended overnight gains. Viva Energy Group shares jumped 3.7 percent.
Medical gloves and protective suits company Ansell climbed 3.8 percent to extend gains from the previous session after upgrading guidance for FY21. Supermarket chain Woolworths tumbled 3.9 percent after a disappointing earnings report.
Seoul stocks fell for the third straight day despite the Federal Reserve’s soothing comments on inflation, interest rates and the economic outlook. The Kospi dipped 7.40 points, or 0.2 percent, to 3,174.07.
Chemical firm LG Chem surged 6.9 percent after posting a record earnings jump, while internet portal operator Naver, its rival Kakao and automaker Hyundai Motor all lost about 2 percent.
Business sentiment in South Korea picked up steam in April, the latest survey from the Bank of Korea showed earlier today, with a Business Survey Index score of 96.0 – up from 89.0 in March. The outlook also improved, climbing from 91.0 last month to 98.0 in April.
New Zealand shares eked out modest gains, with the benchmark NZX-50 Index rising 69.06 points, or 0.6 percent, to 12,715.20 after data showed both exports and imports grew in March from the previous month. Z Energy shares jumped 3.5 percent and A2 Milk Company advanced 1.7 percent.
Commodities
Crude oil futures are jumping $1.33 to $65.19 a barrel after climbing $0.92 to $63.86 a barrel on Wednesday. Meanwhile, after falling $4.90 to $1,773.90 an ounce in the previous session, gold futures are rising $5.60 to $1,779.50 an ounce.
On the currency front, the U.S. dollar is trading at 108.92 yen versus the 108.60 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2127 compared to yesterday’s $1.2126.
