The major U.S. stock indices are projected to open higher on Thursday, potentially rebounding from the previous session's significant drop. This drop may serve as a buying opportunity to some traders who remain hopeful that the markets will return to the upward trend observed throughout most of January.
The Federal Reserve's indications that an interest rate cut in March is unlikely have led to the historic fall. However, most economists continue to maintain that the central bank will indeed lower rates at some point in the future. According to the CME Group's FedWatch Tool, there is a moderate 37.5% chance of a March rate cut, but a nearly guaranteed chance that rates will be lowered by May.
A continued decrease in treasury yields might also generate buying interest on Wall Street as the yield on the benchmark ten-year note falls to nearly monthly lows. In addition, a recent report from the Labor Department, revealing an unexpected minor increase in first-time claims for U.S. unemployment benefits in the week ending January 27, could boost optimism about future rate adjustments.
In technology stocks, Alphabet, Google's parent company, saw a 7.6% decrease in its shares after announcing Q4 results with weaker than expected ad revenue despite marginally surpassing top and bottom-line estimates. Advanced Micro Devices (AMD) also reported a 2.5% decrease in shares following fourth-quarter earnings that aligned with estimates but offered disappointing first-quarter guidance.
Meanwhile, Microsoft shares also fell due to the software giant's Q3 revenue forecasts falling short of expectations, despite better than expected fiscal second-quarter results. Boeing, however, witnessed a 5.3% increase in shares, limiting Dow's downturn after the firm reported a narrower fourth-quarter loss than expected.
Lastly, ADP's report disclosed a more significant slowdown than anticipated in private sector job growth in the U.S. during January. Private sector employment rose by only 107,000 jobs, down from a revised December growth of 158,000, against economists' prediction of an increase of 145,000 jobs.
Shares in networking saw one of the market's poorest performances, with a 3.5 percent drop in the NYSE Arca Networking Index. This retreat marked a continued pullback from the half-year high observed on the previous Monday.
The software sector also suffered substantial losses, culminating in a 2.5 percent decrease for the Dow Jones U.S. Software Index. Financial markets reacted to the Federal Reserve's announcement, leading to downturns of 2.4 and 2.3 percent in the NYSE Arca Broker/Dealer Index and the KBW Bank Index respectively.
A range of sectors including energy, biotechnology, and transportation also experienced significant downward trends, falling in line with most other major sectors.
In the realm of commodity and currency markets, crude oil futures experienced a rise, increasing by $0.82 to $76.67 a barrel after a drop of $1.97 to $75.85 a barrel on Wednesday. In contrast, Gold futures, which had risen by $16.50 to $2,067.40 an ounce in the prior session, started to slide, falling $15.70 to $2,051.70 an ounce.
The exchange rate of USD against the yen decreased slightly, settling at 146.51 from a closing rate of 146.92 yen in New York's previous trading session. In relation to the euro, the dollar stood at $1.0822, slightly higher than yesterday's $1.0818.
Asian stocks delivered mixed performances on Thursday, influenced by the U.S. Federal Reserve's reluctance to cut rates and China's mixed economic data. This resulted in a cautious atmosphere especially after the Fed's decision to maintain key rates, signaling that interest rate cuts are not imminent due to high inflation rates.
China's manufacturing sector continued to expand in January due to stable output growth and faster logistics, alongside an increase in new export orders. However, the severe slowdown in China's home sales persevered in January, prompting policymakers to intensify their efforts to arrest the slump.
Hong Kong's Hang Seng Index saw a 0.5 percent increase to 15,566.21, offsetting a two-day fall as data showed the city's economy had expanded at a quicker pace at the end of the year. In contrast, Japan's Nikkei 225 Index and Topix Index fell notably, under the influence of the Bank of Japan's groundwork for terminating its negative-rate policy and dwindling hopes for early rate cuts in the U.S.
Australia's S&P ASX 200 Index also suffered a sharp fall after reaching an all-time high in the previous session, with mining, tech, energy, and financial stocks leading the decline.
Turning to Europe, stocks showed a varied performance, swayed by the release of the eurozone inflation data and the Bank of England's latest decision on its monetary policy. While the U.K.'s FTSE 100 Index rose by 0.1 percent, Germany's DAX Index and France's CAC 40 Index fell by 0.1 percent and 0.6 percent, respectively. The Bank of England maintained its benchmark rate, signaling possible rate cuts this year.The Monetary Policy Committee recently made the unanimous decision to maintain the bank rate at 5.25 percent. This did not come without debate, as two members lobbied in favour of a 25 basis point increase, while another promoted a quarter point reduction.
In economic data news, S&P Global and Hamburg Commercial Bank (HCOB) revealed that the euro zone's manufacturing PMI reached a 10-month peak of 46.6 in January 2024.
A variety of corporate updates have hit the market; Finnish pulp and paper manufacturer, Stora Enso, saw its shares fall after reporting substantial declines in its fourth-quarter and annual profits. Similarly, shares in biotech heavyweight Roche dropped following the company’s forecast for a slow recovery in sales and earnings for the year.
ING Group’s stocks felt a steep blow after the Dutch lender announced its total income for 2024 would likely be less than the previous year, owing to the development of interest rates. The banking sector suffered several hits with BNP Paribas reporting a lower than expected pre-tax income of 1.476 billion euros for the last quarter, a substantial dip from the 2.790 billion reported the previous year.
German sportswear giant Adidas also experienced a slump as its operating profit guidance fell short of estimates. Meanwhile, French healthcare firm Sanofi saw its shares depreciate after delivering lower than expected fourth-quarter earnings. However, it also announced the appointment of François-Xavier Roger as Chief Financial Officer and newest member of its Executive Committee from April 1, 2024.
Despite signaling a further decline in copper, nickel, and cobalt production, mining colossus Glencore endured these challenges to finish on an upward trajectory. Other successful companies include Ricardo, who have maintained guidance for the full year, and oil mammoth Shell, who reported full-year profit that exceeded forecasts.
Telecommunications powerhouse BT Group recorded a leap in profits due to price hikes. Deutsche Bank raised its revenue and payout targets while also announcing a job cut plan of 3500 employees.
Turning to U.S. Economic Reports, there was an unexpected increase in first-time applications for U.S. unemployment benefits in the week that ended on January 27th. The Labor Department reported an initial jobless claim of 224,000, an increase of 9,000. Economists had predicted a drop to 212,000. The same Department also disclosed a notable uptick in U.S. labor productivity in the fourth quarter of 2023.
Slated for release is the Institute for Supply Management's report on manufacturing activity for January, and the Commerce Department's report on construction spending in December.
