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Dow Futures Pare Gains On Inflation Concerns; Jobless Claims Rise to 419,000

Inflation concerns have quietly returned to the forefront Thursday amid a cautious outlook from Unilever, rising Treasury bond yields and a likely dovish ECB policy meeting.

The Thursday Market Minute

  • Global stocks higher as growth concerns fade amid a robust U.S. and European corporate earnings season, but inflation worries are starting to creep back into market moves.
  • The ECB meets later today following a change in inflation targeting that could allow the central bank to concede to faster price increases in the months ahead.
  • Unilever says rising costs will trim profit margins at the food and brands giant, a warning for U.S. packaged food groups as input costs jump.
  • Benchmark 10-year note yields rise to 1.315% ahead of a 10-year TIPS auction, while the dollar index holds near three-month highs against its currency peers.
  • Oil prices grind higher, with WTI crude topping $71 per barrel, as trader price in tighter supplies over the second half of the year. 
  • U.S. equity futures suggest a firmer open on Wall Street ahead of second quarter earnings from AT&T, Freeport McMoRan and Biogen and a surprise increase in weekly jobless claims.

U.S. equity futures edged lower Thursday as markets attempt to put Monday's sell-off in the rearview mirror amid a stronger-than-expected earnings seasons that has, for the moment at least, clarified concerns over slower prospects in the world's biggest economies. 

Stocks gains were weakened, however, by a surprise increase in weekly jobless claims, which rose to 419,000 for the period ending July 17, firmly ahead of the 350,000 forecast. 

Inflation worries, however, are starting to creep back into investor thoughts into today's European Central Bank policy meeting in Frankfurt, where policymakers committed to a "persistently accommodative stance" that would meet its new inflation target that essentially concedes to faster increases over the coming months and a second quarter earnings update from Unilever  (UL)  that warned of narrower profit margins due to higher commodity and input prices for the food brands giant.

Benchmark 10-year note yields, which traded as low as 1.15% during Monday's sell-off, have moved higher for most of the week and changed hands at 1.315% in overnight dealing ahead of an auction of inflation-protected securities later this morning. 

U.S. stocks look set for a solid, although certainly not spectacular, open, with futures contracts tied to the Dow Jones Industrial Average indicating a 25 point dip and those linked to the S&P 500 priced for a 1 point move to the downside following second quarter updates from AT&T  (T) , Biogen  (BIIB) , Danaher  (DHR)  and Freeport-McMoRan  (FCX)

Nasdaq Composite futures, meanwhile, are indicating a modest gain of around 8 points at the start of trading.

Texas Instruments  (TXN)  shares were active in pre-market, falling 4.55% to $56.04 each, after a weaker-than-expected current quarter revenue forecast clouded solid second quarter profits that included a 41% year-on-year increase in sales.

AT&T jumped 1.3% after it posted stronger-than-expected second-quarter earnings, and boosted its full-year revenue guidance, as it continues to build its HBO Max subscriber base while reducing churn rates in its wireless division.

American Airlines Group  (AAL) , however, slipped 1% after it posted a narrower-than-expected second quarter loss, but held off on predicting the carrier's return to profit later this year. 

So far, around 90% of the &P 500 companies reporting this season have beaten Street forecasts, with analysts expecting collective earnings to rise 72% from last year to a share-weighted $393 billion in total profits.

Oil prices extended gains, pushing WTI crude well past $70 per barrel, as investors priced in a tighter supply/demand structure over the second half of the year even after data from the Energy Department showed the first increase in domestic crude supplies since early May.

WTI futures for September delivery were marked 70 cents higher at $71.00 per barrel while Brent contracts for the same month rose 67 cents to $72.90 per barrel.

European stocks were also higher, rising 0.7% to move within touching distance of the Stoxx 600's all-time high amid expectations of a dovish ECB  policy statement and a series of solid bluechip corporate earnings. 

In Asia, stocks had their best single-day gain in two months, lifting the MSCI ex-Japan benchmark 1.27% heading into the close of trading, as this week's snap-back rally on Wall Street fed into regional stocks and Japan's Nikkei 225 remained closed for a two-day holiday ahead of tomorrow's Olympic Games opening ceremonies.