The primary U.S. index futures suggest a slight downturn at the market's opening on Thursday, indicating a potential reversal following Wednesday's modest gains. Investors remain cautious amidst mounting Middle East tensions, which could suppress trading activity ahead of the Labor Department's highly anticipated monthly jobs report due Friday.
Economists anticipate the report will reveal an increase of 140,000 jobs in September, following August's growth of 142,000 positions, with the unemployment rate projected to hold steady at 4.2 percent. This employment data is crucial as it could influence economic forecasts and inform expectations concerning the Federal Reserve's actions on interest rates.
As the release of the jobs data nears, the CME Group's FedWatch Tool indicates a 63% probability that the Fed will implement a quarter-point rate cut, with a 37% likelihood of a half-point reduction.
In anticipation of the more comprehensive jobs report, the Labor Department disclosed earlier today an increase in the number of first-time unemployment claims for the week ending September 28th. Initial jobless claims rose to 225,000, marking a 6,000 increase from the previous week's adjusted level of 219,000. Experts had forecasted a slight rise to 220,000 from an initially reported 218,000 the prior week. This unexpected increase follows a period where jobless claims hit their lowest mark since May 18th, when they reached 216,000.
Tuesday's trading session saw stocks recover from early declines, exhibiting no clear direction throughout the day. Major indices fluctuated around the neutral line before closing with marginal gains. The Dow climbed by 39.55 points, or 0.1%, reaching 42,196.52; the Nasdaq rose by 14.76 points, or 0.1%, to 17,925.12; and the S&P 500 inched up 0.79 points, amounting to less than a tenth of a percent to settle at 5,709.54.
Market softness was partly fueled by concerns over rising tensions in the Middle East, notably after Iran's ballistic missile attack on Israel on Tuesday. Despite Iran's assurance of no intent to engage in broader conflict, its actions have driven oil prices higher, causing inflationary worries.
Additionally, expectations for an aggressive Fed rate cut diminished following ADP's report of stronger-than-expected private sector job growth for September, which showed a rise of 143,000 jobs compared to the anticipated 120,000. This came after an upwardly revised August figure of 103,000 jobs.
Nevertheless, selling pressure lessened as traders maintained an optimistic view of the economy's prospects in light of the job data. While the broader market saw varied shifts, semiconductor stocks notably rebounded, boosting the Philadelphia Semiconductor Index by 1.5%. Networking stocks also displayed substantial strength, evidenced by the NYSE Arca Networking Index's 1.5% increase. Meanwhile, gains were observed in computer hardware and energy sectors, amid declines in airline and housing stocks.
**Commodities and Currency Markets**
Crude oil futures are climbing, currently up $1.34 to $71.44 a barrel following a previous gain of $0.27 to $70.10. Gold futures, meanwhile, have edged up $1.30 to $2,671 an ounce after a $20.60 decline in the prior session.
In currency trading, the U.S. dollar is trading at 146.72 yen, a marginal increase from the 146.47 yen exchange rate at Wednesday's New York close. Compared to the euro, the dollar stands at $1.1030, slightly down from yesterday's $1.1045.
**Asia**
Asian markets delivered mixed results on Thursday amid escalating Middle East conflicts involving Iran and Israel. Japanese shares outperformed their regional counterparts after Prime Minister Shigeru Ishiba stated that the country is not poised for further rate increases. The U.S. dollar reached a six-week peak against the yen, while gold prices dipped in response to unexpected strength in U.S. private payroll data. Oil prices surged for a third consecutive day due to rising concerns over potential disruptions to Middle Eastern crude supplies.Asian markets exhibited varied trends as some regional markets remained shuttered due to public holidays. Chinese markets were closed for an extended break, while South Korean markets observed the National Day holiday. Meanwhile, Hong Kong's Hang Seng Index faced a downturn of 1.5%, closing at 22,113.51, with significant declines in the real estate and technology sectors.
Japanese markets experienced an upswing, bolstered by remarks from Prime Minister Ishiba and Bank of Japan Governor Kazuo Ueda, who downplayed the prospects of an imminent interest rate increase. Concurrently, data revealed that Japan's service sector expanded for the third consecutive month in September, though the pace of growth slightly decelerated. The Nikkei 225 Index surged by 2.0% to reach 38,552.06, and the Topix Index increased by 1.2% to 2,683.71, driven by gains from major automakers such as Honda, Toyota, Mitsubishi, and Nissan, which advanced between 1-2%.
Australian markets maintained stability, with gains in the mining sector balancing out declines in the energy sector. Across the Tasman Sea, New Zealand's S&P/NZX 50 Index climbed by 1.0% to close at 12,572.66.
In Europe, stock markets generally declined as a survey highlighted a contraction in the eurozone private sector for the first time in seven months. The HCOB composite output index dropped to 49.6 in September from August's high of 51.0, fueling anticipations of a potential interest rate cut at the European Central Bank's meeting on October 17. The U.K. reported a slowdown in business activity to a three-month low in September. In France, economic maneuvers included President Emmanuel Macron's endorsement of a temporary tax on major companies to stabilize public finances. Moreover, geopolitical tensions escalated with concerns over a possible expansion of conflict in the Middle East, following a substantial attack by Iran.
European indices showed mixed performances: France's CAC 40 Index decreased by 0.9%, Germany's DAX Index fell by 0.6%, whereas the U.K.'s FTSE 100 Index edged up by 0.1%.
In currency news, the British pound weakened amid suggestions from Bank of England Governor Andrew Bailey that the institution could adopt a more vigorous strategy for cutting interest rates, should inflationary conditions permit. In a media interview, Bailey hinted at a potential shift towards more assertive interest rate reductions.
On the corporate front, Ericsson shares declined following reports about potential relocations from Kista. Stellantis NV's shares also dropped due to reduced production levels across its Italian factories. British Land Company's shares fell in London after the announcement of a 441 million pound acquisition of a retail park portfolio. LANXESS shares tumbled as it agreed to sell its Urethane Systems division to Japanese firm UBE Corporation. Residential landlord Vonovia's shares decreased following its unchanged liquidity forecast for 2024.
Conversely, Telecom Italia's shares surged after Italy presented a new offer for its Sparkle submarine cable unit. Tesco saw an uptick in its share price following an improved annual profit forecast driven by increased profits and revenues. Alstom's shares also rose after receiving an order for high-speed trains from Proxima.
In the U.S., attention turned to employment figures ahead of the monthly jobs report. The Labor Department reported an increase in initial jobless claims to 225,000 for the week ended September 28, up 6,000 from the previous week's adjusted level. This rise exceeded economists' expectations, who had forecasted claims to reach 220,000.
Looking forward, the Institute for Supply Management was slated to release its September report on service sector activity, with expectations of a marginal rise in the services PMI to 51.7. The Commerce Department was also poised to release August data on new factory orders, anticipated to grow by 0.2% following a significant 5.0% increase in July. Additionally, remarks from Atlanta Federal Reserve President Raphael Bostic were expected at the Opportunity & Inclusive Growth Institute's annual conference.The Treasury Department is poised to reveal specifics regarding this month’s auctions for three-year and ten-year notes, as well as thirty-year bonds, at 11 AM ET.
**Market Highlights**
Levi Strauss (LEVI) is experiencing a significant decline in pre-market trading. This downturn follows the clothing company's report of fiscal third-quarter revenues that fell short of expectations, alongside a downward revision of its full-year revenue forecast.
In the semiconductor sector, Wolfspeed (WOLF) may face downward pressure. This comes after Mizuho reduced its stock rating from Neutral to Underperform.
Conversely, EVgo (EVGO) is seeing a notable surge in pre-market trading. This positive movement is attributed to JPMorgan upgrading the electric vehicle charging company's stock rating from Neutral to Overweight.
