The Thursday Market Minute
- Global stocks mixed, with Asia sliding amid a new China crackdown and Europe extending gains on earnings strength.
- 'Peak inflation' has U.S. markets in a positive mood following the steepest monthly CPI decline in more than a year.
- Growth concerns persist, however, as the IEA cuts global crude demand amid stubbornly high Delta variant infections.
- Bond yields hold steady after record foreign demand in Wednesday's $41 billion auction drives yields lower.
- U.S. equity futures suggest a mixed open on Wall Street following PPI and weekly jobless claims data and ahead of after-the-bell earnings from Disney.
U.S. equity futures traded mixed Thursday, with the Dow pushing further into record high territory and tech stocks modestly lower, as investors re-price growth prospects amid stubbornly high COIVD infections and a potential peak in domestic inflation.
Stocks held pared earlier gains, however, after data showing weekly jobless claims fell to 375,000 for the period ending August 7 and headline factory gate inflation sped to an annual rate of 7.8%.
CPI held at the highest levels in thirteen years last month, according to BLS data published Wednesday, but a month-on-month measure of inflation slowed the most in more than year, suggesting that the Federal Reserve's forecasts that inflation will slow into the second half of the year looks increasingly likely.
Initial reaction to the data was positive, but stocks accelerated gains after a much stronger-than-expected $41 billion auction of 10-year Treasury notes, which attracted record high interest from foreign buyers and clipped 3 basis points in cost from the prior offering in June.
That's not to say the inflation reading has completely changed the inflation narrative: Dallas Fed President Robert Kaplan, in fact, told CNBC Wednesday that he wanted the Fed to announce tapering plans in September and begin the gradual winddown in purchases the following month.
Growth concerns are also creeping into market forecasts, largely as a result of the rise in Delta-variant coronavirus infections, which are hitting multi-months highs in major states around the country and record highs in some economies in Asia.
Southwest Airlines (LUV) - Get Southwest Airlines Co. Report added to the concern Wednesday when the carrier slashed its current-quarter revenue forecasts amid a jump in cancellations linked to the Delta-variant surge in many southern states.
The International Energy Agency, in fact, cut its 2021 oil demand forecast thanks in part to "new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use".
Still, the combination of improving corporate earnings, central bank support and a "there is no alternative" mindset in a global market awash with $16 trillion worth of negative-yielding bonds looks set to drive stocks higher Thursday.
Futures contracts tied to the Dow Jones Industrial Average indicate a 12 point gain from last night's record close while those linked to the S&P 50 are priced for a 1 point bump at the start of trading. Nasdaq futures are indicating a 5 point dip.
Moderna (MRNA) - Get Moderna, Inc. Report shares were active in pre-market trading, rising 1.7% to $392.00 each amid reports that the Food & Drug Administration is set to approve a booster shot of its coronavirus vaccine -- as well as that of Pfizer (PFE) - Get Pfizer Inc. Report -- for patients with compromised immune systems.
Residential real estate tech platform Opendoor Technologies (OPEN) was also on the move, rising 16% to $16.76 each after stronger-than-expected second quarter earnings and a robust near-term sales outlook.
Micron Technology (MU) - Get Micron Technology, Inc. (MU) Report shares, however, were moving in the other direction, falling 2.36% to $73.26 following a Morgan Stanley downgrade to "equalweight" in a report that hit stocks across the memory chip sector.
Away from stocks, benchmark 10-year Treasury notes yields held at 1.366% following yesterday's record-setting auction and this morning's PPI data, with a sale of 30-year bonds set for 1:00 pm Eastern time later today.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.05% lower at 92.868 as traders trimmed tapering and rate-hike bets following yesterday's inflation report.
The weaker dollar supported oil prices, which edged modestly higher following the IEA's demand downgrade and yesterday's smaller-than-forecast 447,000 barrel decline in domestic crude stocks.
WTI futures for September delivery were marked 33 cents higher at $69.58 per barrel while Brent contracts for October jumped 40 cents to $71.84 per barrel.
In Europe, stocks held near record highs amid a solid second quarter earnings season, with the Stoxx 600 up 0.05% at 474.58 points in the opening hours of trading in Frankfurt.
Overnight in Asia, the China outlined plans for a broader regulatory crackdown on its financial sector with new laws aimed at technology innovation, education and national security that pulled domestic stocks lower and spilled over into the broader economic region.
Japan's Nikkei 225 closed 0.2% lower at 28,014.50 points while the MSCI ex-Japan index was marked 0.44% lower heading into the final hours of trading.