The Thursday Market Minute
- Global stocks build on gains after weekly jobless data and ahead of tomorrow's key inflation reading, with investors balancing growth and earnings prospects against the chances of near-term action from the Federal Reserve.
- Fed Governor Randy Quarles suggests stronger-than-expected near-term growth could prompt a discussion on bond purchase tapering, although he stressed the need for patience in tracking inflation data.
- Benchmark 10-year note yields rise to 1.61% in overnight trading after hotter-than-forecast Q1 PCE data, while the dollar index slips 0.05% to trade at 90.002.
- CDC data shows 131.9 million Americans have now been fully vaccinated against the coronavirus, with around 289.2 million doses administered as of Wednesday.
- U.S. equity futures suggest a mixed open on Wall Street following earnings from Best Buy and Dollar General and weekly jobless claims and PCE inflation data.
U.S. equity futures traded mixed Thursday ahead of a busy session on Wall Street as investors balance the strength of the domestic recovery with comments from the Federal Reserve that could suggest a near-term paring of emergency support that has boosted markets to recent record highs.
The Atlanta Fed's GDPNow tracker suggests a second quarter growth rate of around 10.1%, firmly ahead of the 6.4% pace recorded over the first three months of the year and one of the fastest rates of expansion on record. Corporate earnings are likely to grow 62% from last year to around $372 billion, according to Refinitiv forecasts, and today's weekly jobless claims data, which fell to a new post-pandemic low of 406,000.
Inflation has followed lockstep with the recovery, however, and Friday's PCE index data -- the Fed's preferred gauge -- could crystalize recent remarks from central bank officials that simultaneously stress the 'transitory' nature of price increases while hinting at a possible pullback in the $120 billon pace of monthly bond purchases that are holding down market rates.
Fed Governor Randy Quarles -- whose term expires in October -- added his views to the mix at a Brookings Institute event yesterday by noting that "if my expectations about economic growth, employment and inflation over the coming months are borne out, and especially if they come in strong, it will become important to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings."
With the S&P 500 testing the 4,200 point threshold, and PCE data due Friday, Quarles' comments were enough reason for investors to pare recent gains heading into the Thursday session, with futures contracts tied to the Dow Jones Industrial Average indicating a 125 point gain, thanks in part to a 2.6% pre-market advance for Boeing (BA) , which rose on the back of an improved production outlook from its larger rival Airbus.
Futures linked to the S&P 500 are priced for an 2.2 point bump while those tied to the Nasdaq Composite are looking at a 40 point decline as market rates bump higher and benchmark 10-year Treasury note yields move closer to the 1.6% mark.
Ford Motor (F) shares were a notable pre-market mover, rising 1.7% and set to open north of the $14 mark for the first time in more than five years following its investor day event yesterday that saw the carmaker double-down on its plans to expand electric vehicle production.
Pfizer (PFE) shares were also active, rising 0.3% to $39.01 each after India said it was working with the drugmaker to establish "the earliest possible import" of its messenger RNA-based coronavirus vaccine.
Nvidia (NVDA) shares, meanwhile, slipped 0.6% lower to $624.20 each after the chipmaker posted stronger-than-expected first quarter earnings but noted a lack of clarity in the near-term demand prospects from cryptocurrency miners
Before-the-bell earnings from Dollar Tree (DLTR) and Best Buy (BBY) will keep investors busy ahead of weekly jobless claims data at 8:30 am, while updates from Gap (GPS) , Salesforce (CRM) and Costco (COST) are expected after the close of trading.
In Europe, stocks held near all-time highs with the Stoxx 600 trading 0.2% in the green at 445.46 points while Britain's FTSE 100 drifted 0.2% lower as the pound climbed to 1.4120 against the U.S. dollar.
Oil prices retreated amid bets that the U.S. may lift sanctions in Iran that could see its nearly 2 million barrels of crude return to global markets. WTI futures contracts were 63 cents lower at $65.57 per barrel while Brent fell 64 cents to $68.23 per barrel.
Overnight in Asia, stocks retreated following last night's weaker close on Wall Street, with volumes unusually high ahead of the implementation of changes to MSCI indices, which take place at the close of trading today.
Japan's Nikkei 225, which closed 0.33% lower at 28,549.01 points, was also weakened by a call from the Tokyo Governor to extend the city's COVID emergency status until the end of June - less than a month before the proposed start of the Summer Olympics.