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The Thursday Market Minute

  • Global stocks slip lower Thursday, as investors react to both the Federal Reserve's rate stance and market closures throughout the Asia region.
  • Fed Chair Powell sees "no strong case" for moving rates in either direction, but comments tied to inflation prospects cast a hawkish tone over an otherwise neutral policy decision.
  • European stocks drift lower amid another active earnings session; Bank of England holds key rate at 0.75% but boosts 2019 GDP forecast to 1.5%.
  • Tesla shares spike after it files to issue 2.7 million in new common stock, just days after Elon Musk said it wasn't the right time to raise capital.
  • Record U.S. production rates of 12.3 million barrels per day, alongside a bigger-than-expected build in domestic crude stocks, has global oil prices trading lower overnight, although declines were capped by a weaker U.S. dollar.
  • U.S. earnings look set to grow by 0.5% over the first quarter, according to the latest Refinitiv estimate, as better-than-expected FAANG profits drive a surprising solid reporting season.
  • U.S. equity futures suggest little-change for the three major benchmarks this morning ahead quarterly earnings from CBS Corp, Kellogg, Discovery Communications and Dow and a host of employment data before 8:30 am Eastern time.

Market Snapshot

Global stocks sputtered Thursday, although U.S. equity futures extended gains. with investors reacting to last night's policy statement from the Federal Reserve that suggested interest rates would likely remain unchanged for the better part of the year, amid a stronger-than-expected corporate earnings season and mixed signals from the broader economy.

Fed Chairman Jerome Powell told reporters in Washington yesterday that he didn't see a "strong case for moving it in either direction" on policy as he and his colleagues on the FOMC kept the target range of the key Fed Funds rate unchanged at between 2.25% and 2.5%. He did, however, allude to the transitory nature of conditions that are keeping inflation below the central bank's 2% target rate, comments that investors interpreted as signalling and upward bias on rates by the latter part of the year.

"Chair Powell delivered a not so dovish delight for equity markets. After giving the nod to the weaker inflation issues, but in " Yellenesque" fashion; the Chair unequivocally said that "transitory factors" might be at work," said Stephen Innes of SPI Management. "While the Powell Put is still in full force, the Fed is clearly in a four-corner stall as the commentary around patience remained intact."

U.S. equity futures reflected that state again this morning, following a modest sell-off on Wall Street last night, with contracts tied to the Dow Jones Industrial Average suggesting a 10 point pullback and those linked to the S&P 500, which hit another all-time high of 2,954.12 points during the Wednesday trading session, indicating a 2 point gain.

Investors are now likely to turn their attention to Friday's non-farm payroll report, which is expected to show that U.S. employers added 175,000 new jobs to the economy last month, for fresh signals on both growth and inflation, which the Fed expects to continue to accelerate throughout the rest of the year. 

Earnings are likely to return to the fore today, however, now that investors have the Fed risk behind them for several months, as U.S. companies continue to surpass analysts' forecast for both top and bottom line growth.

With just over half of the S&P 500 reporting so far this season, including all of the so-called FAANG stock complex of Facebook (FB - Get Report) , Amazon (AMZN - Get Report) , Apple (AAPL - Get Report)  Netflix (NFLX - Get Report) and Google (GOOGL - Get Report) , collective corporate earnings are expected to grow by around 0.5% from last year, according to Refinitiv data, a massive shift from the near 3% contraction forecast at the start of the reporting period. 

Dow (DOW) , CBS Corp. (CBS - Get Report) , Discovery Communications (DISCA - Get Report) , Kellogg (K - Get Report) , Under Armour (UA - Get Report) and Acitivsion Blizzard (ATVI - Get Report) and Skyworks (SWKS - Get Report) are slated to update investors before and after the bell today, with markets also focused on a host of employment data ahead of tomorrow's April jobs report from the Bureau of Labor Statistics. 

Qualcomm Inc. (QCOM - Get Report) shares were indicated 3.35% after the smartphone chipmaker forecast weaker-than-expected revenues for the current quarter as it accounted for payments from Apple Inc. (AAPL - Get Report) to settle a long-running patent dispute.

Under Armour Inc. (UAA - Get Report)  surged in pre-market after it posted stronger-than-expected first quarter earnings Thursday, and boosted its full year earnings guidance, as solid overseas demand offset a fall in North American sales for the athletic apparel maker.

DowDuPont Inc. (DWDP) posted weaker-than-expected first quarter earnings Thursday in its first full investor report following its spin-off from Dow Inc. (DOW) earlier this year.

DowDuPont said adjusted non-GAAP earnings for the three months ending in March were pegged at 84 cents per share, down 25% from last year but just ahead of the Street consensus forecast. Group net sales, the company said, fell 9% from last year to $19.6 billion, just shy of analysts' estimates of $19.65 billion.

Dow also posted a sharp decline in first quarter profits Thursday, with earnings for the three months ending in March fell 24.4% from the same period last year to $1.92 billion, in-line with the company's previous guidance. Group sales, however, rose 10% to $10.8 billion and topped the Street consensus forecast of $10.68 billion.

Most markets in Asia were closed overnight, with Japan continuing to mark the coronation of new Emperor Naruhito and China observing the traditional labor day break. With much of the region's bourses remaining dark, little price action from last night's close on Wall Street carried over into the European session, which is also focused on blue chip earnings and mixed economic data.

The Stoxx Europe 600 was marked 0.3% lower in the opening hours of trading as investors returned from the May Day holiday, while Britain's FTSE 100 was little changed  as the pound advanced to 1.3067 against the U.S. dollar ahead of today's Bank of England rate decision.

Volkswagen AG (VLKAY) shares look set to extend gains in Frankfurt after the world's second-largest automaker posted first quarter earnings that were largely in-line with analysts' forecasts but included a further €1 billion legal charge for the group's legacy emissions cheating scandal.

Royal Dutch Shell (RDS.A - Get Report) echoed its global peers in citing weaker refining margins as impacting its first quarter bottom line, but higher crude prices and a surge in natural gas output helped the London-listed oil major post stronger-than-expected profits of $5.43 billion.

Global oil prices were weaker in the overnight session, as well, although volumes were thin owing to the Asia market closures, with traders referencing data from the U.S. Energy Department that showed domestic crude stocks rose by a much-bigger-than-expected 9.93 million barrels over the week ending April 26, while U.S. production rates jumped to a record 12.3 million barrels per day.

Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 97 cents lower from their Wednesday close in New York and changing hands at $71.20 per barrel while WTI contracts for the same month were seen 83 cents lower at $62.78 per barrel.