U.S. equity futures powered higher again Thursday, lifting the Nasdaq to another all-time high, as investors took advantage of a pause in bond market volatility to focus on growth prospects in the world’s biggest economy.
With Federal Reserve Chairman Jerome Powell’s congressional testimony from earlier this week cementing the central bank’s case for an easing of inflation pressures later in the year, and hinting at a longer-term timetable for the slowing of monthly bond purchases, Treasury yields have stabilized even as underlying growth continues to surge.
The ISM manufacturing index for June, a key benchmark for factory activity, jumped to 62.6 - firmly ahead of the 50 mark that indicates GDP growth - as companies slowly work their way through supply-chain disruptions.
The Atlanta Fed’s GDPNow forecasting tool, meanwhile, suggests the economy is growing a 10.3% clip, well ahead of the Fed’s official 2021 estimate of 7% and one of the fastest on record.
Inflation, of course, nearly always follows this kind of growth, and two Fed speakers Wednesday - Atlanta Fed President Raphael Bostic and Gov. Michelle Bowman - noted concern that the "transitory" nature of price increases could last a bit longer than expected.
That hasn’t trigged a selloff in bonds, however, and while two-year note yields are trading ahead of the Fed’s target rate at 0.27%, investors aren’t ready to price in 2022 rate hikes just yet.
That’s allowing for more upside moves in the equity market, where traders are preparing for a second-quarter earnings season that is expected to show collective S&P 500 profits rising 64% from last year to a share-weighted $376.9 billion.
Six more Fed speakers will be in the field Thursday so there’s every chance that the current narrative may change in the coming hours, but for the moment at least things are looking bullish.
Futures contracts tied to the Nasdaq, which closed at a record high of 14,271 on Wednesday, are priced for an 80-point opening bell gain while those tied to the S&P 500 are looking at an 18-point advance.
Futures tied to the Dow Jones Industrial Average, meanwhile, are indicating a 150 -point opening bell move after weekly jobless claims fell to another post-pandemic low of 411,000 for the period ending June 19.
Tesla (TSLA) - Get Report shares were active again in premarket trading, rising 2.55% to $673.30 following Wednesday's 5.3% jump, after CEO Elon Musk said he would “do his best” to give long-term shareholders the inside track on any listing of his Starlink space internet venture.
In Europe, tech stocks were also leading the Thursday charge and lifting the Stoxx 600 0.7% higher on the session amid a bullish outlook for German business morale, as measured by the closely-watched IFO index, and dovish signals on rates and bond market support from the European Central Bank.
Britain’s FTSE 100 was also in the green, rising 0.3% on the session ahead of a Bank of England rate decision at 7:00 am Eastern time.
Oil prices jumped back to 2018 highs, as well, following Energy Department data yesterday that showed domestic crude supplies falling 7.6 million barrels last week to 459.1 million, the lowest since the pandemic began in March of last year.
WTI futures for August delivery were marked 6 cents higher on the session at $73.14 a barrel while Brent contracts of the same month, the global benchmark edged 17 cents higher to $75.36 per barrel.
Overnight in Asia, Tokyo’s Nikkei 225 was little-changed in a tepid session to close at 28,875.10 points while the region-wide MSCI ex-Japan benchmark added 0.14% heading into the final hours of trading.