Traders May Take A Breather Following Yesterday's Rally As Jobs Data Looms

(RTTNews) - The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction following the rally seen over the course of the previous session.

Traders may take a step back to assess the outlook for the markets following yesterday's surge, which lifted the Nasdaq and the S&P 500 to new record closing highs.

Trepidation ahead of Friday's closely watched monthly jobs report may also keep some traders on the sidelines, as the data could have a significant impact on the outlook for interest rates.

The Labor Department report is expected to show employment increased by 185,000 jobs in May after climbing by 175,000 jobs in April, while the unemployment rate is expected to remain at 3.9 percent.

A day ahead of the release of the monthly jobs report, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended June 1st.

The Labor Department said initial jobless claims climbed to 229,000, an increase of 8,000 from the previous week's revised level of 221,000.

Economists had expected jobless claims to inch up to 220,000 from the 219,000 originally reported for the previous week.

Stocks moved sharply higher over the course of the trading day on Wednesday, adding to the modest gains posted during Tuesday's session. With the rally on the day, the Nasdaq and the S&P 500 reached new record closing highs.

The Nasdaq and the S&P 500 saw further upside going into the close, reaching new highs for the session. The Nasdaq surged 330.86 points or 2.0 percent to 17,187.90 and the S&P 500 jumped 62.69 points or 1.2 percent to 5,354.03, while the narrower Dow posted a more modest gain, rising 96.04 points or 0.3 percent to 38,807.33.

The surge by the Nasdaq came as tech stocks continued to take their cues from Nvidia (NVDA), as the AI darling soared by 5.2 percent to a new record closing high.

Last month, Nvidia announced a ten-for-one stock split, with holders of the company's common stock as of the close of trading on Thursday set receive nine additional shares.

The advance by Nvidia contributed to strength in the broader semiconductor sector, resulting in a 4.5 percent spike by the Philadelphia Semiconductor Index.

Semiconductor equipment manufacturers Applied Materials (AMAT) and KLA Corp. (KLAC) also posted standout gains after Barclays upgraded its rating on the stocks to Equal-Weight from Underweight.

Computer hardware stocks are also saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 3.4 percent.

Shares of Hewlett Packard Enterprise (HPE) skyrocketed by 12.0 percent after the technology company reported fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

Networking, software and biotechnology stocks also saw notable strength, while gold, housing and airline stocks turned in some of the best performances outside the tech sector.

The strength on Wall Street also came as a report from payroll processor ADP showing private sector job growth in the U.S. slowed by more than expected in the month of May added to optimism about the outlook for interest rates.

ADP said private sector employment climbed by 152,000 jobs in May after jumping by a downwardly revised 188,000 jobs in April.

Economists had expected private sector employment to increase by 173,000 jobs compared to the addition of 192,000 jobs originally reported for the previous month.

Treasury yields moved lower following the release of the jobs data, with the ten-year yield falling to its lowest levels in two months.

Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing service sector activity returned to growth in the month of May after contracting in April for the first time since December 2022.

The ISM said its services PMI jumped to 53.8 in May from 49.4 in April, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 50.8.

With the much bigger than expected increase, the services PMI reached its highest level since hitting 54.1 in August 2023.

Commodity, Currency Markets

Crude oil futures are rising $0.61 to $74.68 a barrel after climbing $0.82 to $74.07 a barrel on Wednesday. Meanwhile, after jumping $28.10 to $2,375.50 an ounce in the previous session, gold futures are inching up $1.90 to $2,377.40 an ounce.

On the currency front, the U.S. dollar is trading at 156.14 yen versus the 156.11 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0884 compared to yesterday's $1.0869.

Asia

Asian stock moved mostly higher on Thursday following broadly positive cues from global markets overnight amid optimism about the outlook for U.S. interest rates.

Expectations the European Central Bank will announce an interest rate cut later in the day also contributed to the positive sentiment in the region.

Recouping some of the losses in the two previous sessions, Japanese stocks moved to the upside on the day. The Nikkei 225 Index reached a high above the 39,000 level before giving back ground and ending the day up 213.34 points or 0.6 percent at 38,703.51.

Australian stocks also moved notably higher, adding to the gains in the previous session. The benchmark S&P/ASX 200 Index climbed 52.80 points or 0.7 percent to 7,821.80, with gains across most sectors led by gold miners and technology stocks.

Despite paring some gains after a bright start and a subsequent move up north, Indian stocks stayed positive throughout the session to end on a firm note. Strong gains posted by IT majors and PSU heavyweight State Bank of India, contributed significantly to market's firm close.

The BSE benchmark Sensex ended with a gain of 692.27 points or 0.9 percent at 75,074.51, about 225 points off the day's high of 75,297.73. The broader Nifty50 index of the National Stock Exchange advanced 201.05 points or 0.9 percent to 22,821.40.

Hong Kong's Hang Seng Index also rose 51.84 points or 0.3 percent to 18,476.80, while China's Shanghai Composite Index bucked the uptrend in the region and fell 16.61 points or 0.5 percent to 3,048.79. The South Korea market was closed for the Memorial Day holiday.

Europe

European stocks have moved moderately higher on Thursday following the European Central Bank's widely expected decision to lower key interest rates by 25 basis points each.

While the German DAX Index is up by 0.5 percent, the U.K.'s FTSE 100 Index is up by 0.4 percent and the French CAC 40 Index is up by 0.3 percent.

The Governing Council, led by ECB President Christine Lagarde, cut the main refinancing rate by 25 basis points to 4.25 percent. The deposit facility rate was lowered from a record high to 3.75 percent and the marginal lending rate was reduced to 4.50 percent.

"Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," the ECB said.

Among the economic releases, data from Eurostat revealed Eurozone retail sales fell more than expected in May. Retail sales posted a monthly decrease of 0.5 percent in April, in contrast to the revised 0.7 percent increase in March. Economists had forecast a 0.3 percent drop.

Meanwhile, the U.K. construction sector logged its fastest growth in two years in May, with activity and new orders increasing at sharper rates, as per the survey results from S&P Global. The construction Purchasing Managers' Index unexpectedly rose to 54.7 in May from 53.0 in April.

The latest HCOB survey compiled by S&P Global showed the German construction sector continued to contract in May on sharp decreases in total industry activity and new orders.

Switzerland's unemployment rate remained stable in May after falling slightly in the previous month, the State Secretariat for Economic Affairs, or SECO, said. The unadjusted unemployment rate came in at 2.3 percent in May, the same as in April.

Further, data from Germany's statistical office Destatis showed factory orders in the country unexpectedly fell in April, largely due to a sharp contraction in orders for other transport equipment.

In the corporate news, digital fashion retailer N Brown Group Plc has moved sharply higher after reporting a profit in its fiscal 2024, despite prior year's loss, and weak revenues. The company also projects trading improvement in fiscal 2025.

Hargreaves Services plc shares have also moved to the upside after the company said it expects to report a fiscal 2024 profit before tax marginally ahead of market expectations.

U.S. Economic Reports

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended June 1st.

The Labor Department said initial jobless claims climbed to 229,000, an increase of 8,000 from the previous week's revised level of 221,000.

Economists had expected jobless claims to inch up to 220,000 from the 219,000 originally reported for the previous week.

Meanwhile, the report said the less volatile four-week moving average edged down to 222,250, a decrease of 750 from the previous week's revised average of 223,000.

The Commerce Department also released a report on Thursday showing the U.S. trade deficit widened significantly in the month of April.

The Commerce Department said the trade deficit surged to $74.6 billion in April from a downwardly revised $68.6 billion in March.

Economists had expected the deficit to widen to $76.1 billion from the $69.4 billion originally reported for the previous month.

The increase in the size of the trade deficit came as the value of imports jumped by 2.4 percent to $338.2 billion, while the value of exports climbed by 0.8 percent to $263.7 billion.

Meanwhile, revised data released by the Labor Department on Thursday showed U.S. labor productivity increased by slightly less than expected in the first quarter of 2024.

The Labor Department said labor productivity crept up by 0.2 percent in the first quarter compared to the previously reported 0.3 percent increase. Economists had expected the uptick in productivity to be downwardly revised to 0.1 percent.

The report said the surge in unit labor costs in the first quarter was also downwardly revised to 4.0 percent from the previously reported 4.7 percent. Unit labor costs were expected to spike by an upwardly revised 4.9 percent.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month's auctions of three-year and ten-year notes and thirty-year bonds.