The major U.S. index futures are currently pointing to a notably higher open on Thursday, with stocks likely to move to the upside as traders continue to digest yesterday's Federal Reserve announcement.
The upward momentum on Wall Street comes amid easing concerns the Fed's next monetary policy move could actually be an interest rate hike rather than a cut, which Fed Chair Jerome Powell called "unlikely" in his post-meeting press conference.
"A market concern coming into [yesterday's] FOMC meeting was that the Fed might shift gears to a more hawkish tone, including potential rate hikes, based on recently hotter CPI readings," said Larry Tentarelli, Chief Technical Strategist, Blue Chip Daily Trend Report.
"Powell seemed to push back on the idea of rate hikes," he added. "His early commentary today was that the FOMC believes that current rates are restrictive and are weighing on demand. Powell also stated that the Fed believes that 'policy stance is appropriate to the current situation.'"
The Fed's next monetary policy meeting is scheduled for June 11-12, with the central bank likely to leave rates unchanged once again.
After turning in a lackluster performance for much of the session, stocks saw substantial volatility following the Federal Reserve's monetary policy announcement Wednesday afternoon. The major averages initially surged in reaction to the Fed announcement but pulled back going into the close.
The major averages eventually finished the day mixed. While the Dow rose 87.37 points or 0.2 percent to 37,903.29, the Nasdaq fell 52.34 points or 0.3 percent to 15,605.48 and the S&P 500 dipped 17.30 points or 0.3 percent to 5,018.39.
The late-day volatility came after the Federal Reserve announced its widely expected decision to leave interest rates unchanged.
Citing a lack of further progress toward its 2 percent inflation objective in recent months, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent
Members of the Fed also reiterated they need "greater confidence" inflation is moving sustainably toward 2 percent before they consider cutting interest rates.
Meanwhile, the Fed said it would continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities but revealed plans to slow the pace of decline.
The central bank said would slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
The monthly redemption cap on agency debt and agency mortgage-backed securities will be maintained at $35 billion, and the Fed will reinvest any principal payments in excess of this cap into Treasury securities.
"In continuation with the wait-and-see policy that has been in place, Chairman Powell is buying some time by diverting attention of this meeting towards the Fed's balance sheet and focusing on reducing the runoff pace of their Treasury holdings," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.
He added, "Ultimately, today's policy decision was a well-rounded approach to give the Fed more time to gain confidence in the path of inflation, but we suspect they remain ready to cut knowing that the interest rate curve has remained inverted for the longest period on record."
On the economic data front, payroll processor ADP released a report showing private sector employment increased by more than expected in the month of April.
ADP said private sector employment shot up by 192,000 jobs in April after jumping by an upwardly revised 208,000 jobs in March.
Economists had expected private sector employment to climb by 175,000 jobs compared to the addition of 184,000 jobs originally reported for the previous month.
Meanwhile, the Institute for Supply Management released a separate report showing a modest contraction by U.S. manufacturing activity in the month of April.
The ISM said its manufacturing PMI slipped to 49.2 in April from 50.3 in March, with a reading below 50 indicating contraction. Economists had expected the index to edge down to 50.0.
The slight pullback by the index came after it indicated a modest expansion in March following sixteen consecutive months of contraction.
Semiconductor stocks showed a substantial move to the downside on the day, resulting in a 3.5 percent nosedive by the Philadelphia Semiconductor Index.
Advanced Micro Devices (AMD) led the sector lower, plunging by 9.0 percent despite reporting slightly better than expected first quarter results. Traders may have been disappointed AMD provided second quarter sales guidance in line with analyst estimates.
Significant weakness was also visible among computer hardware stocks, as reflected by the 2.0 percent slump by the NYSE Arca Computer Hardware Index.
Shares of Super Micro Computer (SMCI) plummeted by 14.0 percent after the high efficiency server maker reported weaker than expected fiscal third quarter revenues.
Energy stocks also saw considerable weakness amid a steep drop by the price of crude oil, while biotechnology, utilities and telecom stocks showed strong moves to the upside.
Commodity, Currency Markets
Crude oil futures are climbing $0.63 to $79.63 a barrel after plummeting $2.93 to $79 a barrel on Wednesday. Meanwhile, after rising $8.10 to $2,311 an ounce in the previous session, gold futures are edging down $2.10 to $2,308.90 an ounce.
On the currency front, the U.S. dollar is trading at 154.51 yen versus the 154.57 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0710 compared to yesterday's $1.0712.
Asia
Asian stocks fluctuated on Thursday after mixed signals from Federal Reserve Chief Jerome Powell on the outlook for inflation and interest rates.
After leaving interest rates steady on Wednesday, the Fed signaled that it is still leaning toward eventual reductions in borrowing costs but needs more evidence that prices are cooling before cutting interest rates.
Mainland Chinese markets remained closed for the Labour Day holidays. Hong Kong's Hang Seng Index jumped 2.5 percent to 18,207.13 as traders returned to their desks after a holiday.
Japanese markets ended little changed as the yen slipped to the lower 155 range against the U.S. dollar after rising as high as 153 overnight on suspected intervention by Japanese authorities.
The Nikkei 225 Index seesawed before finishing marginally lower at 38,236.07, extending losses for a second straight session.
The broader Topix Index also settled on a flat note at 2,728.53, with the marine transport, steel and glass sectors underperforming.
As per the Bank of Japan Minutes of the March meeting, many members shared the view that long-term interest rates should basically be set by markets.
Seoul stocks snapped a three-day rise, with the Kospi ending down 0.3 percent at 2,683.65 after the Fed said that no rate hike is on the table. Investors also digested official data showing that South Korean inflation slowed more than expected in April.
South Korean factory activity contracted again in April, but manufacturers' optimism climbed to the highest level in nearly two years, a private survey revealed.
Australian markets eked out modest gains, led by banks and miners. The benchmark S&P ASX 200 Index rose 0.2 percent to 7,587 ahead of the Reserve Bank of Australia's (RBA) monetary policy announcement due on May 7. The broader All Ordinaries Index settled up 0.2 percent at 7,849.40.
Lender National Australia Bank added 1.5 percent on share buyback news. Supermarket chain Woolworths slumped 4.2 percent after posting worse than expected financial results for the March quarter.
Across the Tasman, New Zealand's benchmark S&P/NZX 50 Index finished marginally higher at 11,874.04, recovering from an early slide.
Europe
European stocks are turning in a mixed performance on Thursday after the U.S. Federal Reserve signaled that it is poised to keep interest rates higher for longer.
Sentiment was also dented after a survey showed the ongoing downturn in euro zone manufacturing activity deepened in April.
HCOB's final euro zone manufacturing PMI, compiled by S&P Global, dropped to 45.7 in April from March's 46.1.
While the French CAC 40 Index is down by 0.6 percent, the German DAX Index is up by 0.1 percent and the U.K.'s FTSE 100 Index is up by 0.4 percent.
Shell has moved to the upside. The energy major launched a $3.5 billion share buyback program after beating first-quarter profit estimates.
Standard Chartered has also jumped after the lender clocked a stronger-than-expected first-quarter profit on the back of higher interest rates and growth in its wealth management business.
Smurfit Kappa shares have also moved sharply higher after the packaging producer reported robust first-quarter revenue of €2.7 billion.
French office services and call center company Teleperformance has also surged after quarterly revenue jumped 26.7 percent, boosted by its acquisition of Dutch rival Majorel completed last year.
Meanwhile, German fashion retailer Hugo Boss has fallen despite first-quarter profit coming in above expectations and the company guiding for growth over the year ahead.
Vestas, the world's largest maker of wind turbines, has also moved notably lower after reporting a surprise first-quarter loss.
Danish pharmaceutical giant Novo Nordisk has also slumped despite posting better-than-expected first-quarter earnings.
U.S. Economic Reports
With the more closely watched monthly jobs report looming, the Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits remained flat in the week ended April 27th.
The report said initial jobless claims came in 208,000, unchanged from the previous week's upwardly revised level.
Economists had expected jobless claims to inch up to 212,000 from the 207,000 originally reported for the previous week.
Meanwhile, the Labor Department said the less volatile four-week moving average dipped to 210,000, a decrease of 3,500 from the previous week's revised average of 213,500.
The U.S. trade deficit edged slightly lower in the month of March, according to a report released by the Commerce Department on Thursday.
The Commerce Department said the trade deficit narrowed to $69.4 billion in March from a revised $69.5 billion in February
Economists had expected the trade deficit to inch up to $69.1 billion from the $68.9 billion originally reported for the previous month.
The report said the value of imports slumped by 1.6 percent to $327.0 billion, while the value of exports tumbled by 2.0 percent to $257.6 billion.
A separate report released by the Labor Department on Thursday showed labor productivity in the U.S. increased by less than expected in the first quarter of 2024.
The Labor Department said labor productivity rose by 0.3 percent in the first quarter after spiking by a revised 3.5 percent in the fourth quarter.
Economists had expected productivity to climb by 0.8 percent compared to the 3.2 percent surge that had been reported for the previous quarter.
Meanwhile, the report said unit labor costs soared by 4.7 percent in the first quarter following a revised unchanged reading in the fourth quarter.
Economists had expected labor costs to shoot up by 3.2 percent compared to the 0.4 percent increase 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 March. Factory orders are expected to surge by 1.6 percent in March after jumping by 1.4 percent in February.
Stocks In Focus
Shares of Carvana (CVNA) are skyrocketing in pre-market trading after the used car retailer reported record first quarter net income on better than expected revenues.
Chipmaker Qualcomm (QCOM) is also likely to see initial strength after reporting fiscal second quarter earnings that exceeded estimates and providing upbeat revenue guidance.
Meanwhile, shares of DoorDash (DASH) may come under pressure after the food delivery company reported a wider than expected first quarter loss.
Online marketplace Etsy (ETSY) is also seeing significant pre-market weakness after reporting disappointing first quarter results.
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