Thursday's U.S. index futures indicate a likely market rebound, following a pullback from highs late in the previous session. Although earlier futures hinted at a stagnant market opening, a mixed set of U.S. economic data has spurred a rise.
The Commerce Department reported stronger-than-anticipated economic growth in Q4, with separate reports revealing unexpected stagnant durable goods orders for December 2023 and a significant uptick in weekly jobless claims. Traders may disregard the Q4 GDP data as outdated, instead focusing on the optimism offered by the fresher economic data for potential future interest rate cuts.
The Commerce Department's report also confirmed that the U.S. economy experienced remarkable growth in Q4 2023, exceeding expectations with a 3.3% GDP surge following a 4.9% rise in Q3. Predictions had pegged this GDP increase at 2.0%.
However, the Commerce Department also reported that new orders for U.S-manufactured durable goods remained unchanged in December 2023. Despite a 5.5% surge in November, economists had predicted a 1.1% growth, contrasting the 5.4% increase seen in the month prior to December.
When excluding transportation equipment orders, the durable goods orders in December rose by 0.6% following November's 0.5% rise. Expectations were for a modest 0.2% increase.
Additionally, the Labor Department reported an unexpected rebound in first-time U.S. unemployment benefit claims in the week leading up to January 20th. Initial jobless claims rose to 214,000, a 25,000 increase from the previous week's revised figure of 189,000. Economists had anticipated that initial jobless claims would increase to 200,000 from the 187,000 initially stated for the week prior.
Following a robust climb in the early trading on Wednesday, stocks lost momentum as the session continued. Major averages retracted considerably from their session highs in afternoon trading, with Dow Jones Industrial Average stepping into negative terrain.
Despite the afternoon pullback, the S&P 500 reached a new record closing high, and Nasdaq topped its best closing level in over two years, buoyed by burgeoning tech stocks in the early trading stages.
Netflix shares skyrocketed 10.7% on Wednesday, pushed by the streaming giant's fourth-quarter revenues surpassing expectations on the back of robust subscriber growth.
ASML, the Dutch chip equipment manufacturer, also enjoyed hefty gains, spiking 8.9% after reporting better-than-expected fourth quarter results.
However, purchase interest weakened over the course of the day, possibly due to renewed concerns over interest rates, coupled with the earlier rebound in treasury yields. These yields initially lowered but significant U.S. economic data and a disappointing five-year note auction sparked a major turnaround.
Despite the wider market pullback, oil service stocks continued to display considerable strength, culminating in a 3.1% spike in the Philadelphia Oil Service Index. Crude oil price rises, encouraged by a report detailing an unexpectedly significant decline in weekly crude oil inventories, instigated this rally by oil service stocks.
Semiconductor stocks also showcased considerable strength - the Philadelphia Semiconductor Index reaching a new record closing high with a 1.5% gain. The sector was lead by ASML, however, Advanced Micro Devices (AMD) also posted significant gains following New Street Research’s upgrade of its stock rating from 'Neutral' to 'Buy'.
Contrasting this strength, declines in gold prices caused a sharp downturn in gold stocks, dragging the NYSE Arca Gold Bugs Index down by 3.0%.During the session, telecommunication stocks experienced some pressure, with the NYSE Arca North American Telecom Index dropping by 2.1 percent. Industry leader AT&T saw a decrease of 3.0 after declaring lower than anticipated first quarter earnings and predicting 2024 earnings below analyst projections.
Industries sensitive to interest rate fluctuation, including utilities, housing and commercial real estate stocks, diminished amid the recovery of treasury yields.
In terms of commodities and currency markets, crude oil futures rose $0.97 to $76.06 a barrel, following a climb of $0.72 to $75.09 a barrel the previous day. Gold futures, after dropping $9.80 to $2,016 an ounce in the previous session, were slightly up by $2.60 to $2,018.60 an ounce.
When it comes to currency, the U.S. dollar is at 147.42 yen versus the 147.51 yen it fetched at the conclusion of New York's trading on Wednesday. Against the euro, the dollar stands at $1.0893 in comparison to Wednesday's value of $1.0885.
Asian equity markets closed positively, spurred on by China unexpectedly reducing the bank's reserve requirement by 50-basis points, which increased economic stability. China's Shanghai Composite Index surged by 3.0 percent to close at 2,906.11, while the Shenzhen Component Index rose by 2 percent to end at 8,856.22.
The Japanese Nikkei 225 slightly rose by 10 points to close at 36,236.47. Companies such as DIC Corp., Nippon Paper Industries, Mitsubishi Materials Corp., Furukawa Electric and Fuji Electric saw gains, while others like Recruit Holdings, Shionogi, Chugai Pharmaceutical, Kikkoman Corp, and Suzuki Motor Corp. slipped more than 2 percent.
In Hong Kong, The Hang Seng Index spiked by 312.09 points or 2.0 percent to end at 16,211.96. Meanwhile, the Korean Kospi Index edged slightly higher to close at 2,470.34, and Australia's S&P/ASX200 Index ended trading at 7,555.40, up 0.5 percent.
European stock markets experienced minor weakness following a third consecutive decision by the European Central Bank to maintain interest rates at the current level. The ECB stated that the decision came as a result of the consistent overall medium-term inflation outlook.
Future decisions, according to the ECB, would ensure rates stay at restrictively high levels as long as necessary for inflation to return to its 2 percent medium-term target. The ECB's Governing Council would continue to employ a data-dependent approach in determining the adequate level of restriction.In December, the volume of new orders for U.S. manufactured durable goods remained stable, a surprise outcome revealed in a Thursday report by the Commerce Department. The stability followed a significant increase of 5.5 percent in November, which was a revision of an earlier figure.
Despite analysts' predictions for a rise of 1.1 percent, December's durable goods orders showed no significant change from November's 5.4 percent increase. Durable goods orders excluding transportation equipment saw a small increase of 0.6 percent in December, after a 0.5 percent rise in November, surpassing the expected increase of 0.2 percent.
In another report released on the same day, the U.S. economy was shown to have grown significantly in the final quarter of 2023, outpacing forecasts. Gross domestic product (GDP) rose by 3.3 percent in the fourth quarter, following a robust 4.9 percent surge in the third quarter. Economists had predicted a more modest GDP increase of just 2.0 percent.
This GDP uptick, according to the Commerce Department, reflects increased consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment.
The Labor Department's Thursday report showed a larger-than-expected increase in first-time claims for U.S. unemployment benefits for the week ending January 20th. Initial jobless claims rose to 214,000, up by 25,000 from the prior week's revised figure of 189,000. This was higher than the anticipated rise to 200,000.
However, the four-week moving average, a less volatile measure, declined to 202,250, a decrease of 1,500 from the previous week's revised average of 203,750.
The Commerce Department is expected to release a report on new home sales for December later on. The expectations point to a rise to an annual rate of 645,000 in December, bouncing back from 590,000 in November.
Additionally, the Treasury Department is set to announce the results of its seven-year note auction with a total worth of $41 billion at 1 pm ET.
