The major U.S. index futures indicate a positive opening on Thursday, suggesting that stocks may continue their upward trend following a notable increase in the previous session.
On Wednesday, the Federal Reserve lowered its forecast for interest rate cuts this year, yet the stock market might still benefit from optimism regarding future rate policies influenced by another lower-than-expected inflation report.
This morning, the Labor Department released unexpected data showing a slight decrease in producer prices for May. The producer price index (PPI) for final demand fell by 0.2 percent last month, following a 0.5 percent rise in April. Economists had anticipated a marginal increase of 0.1 percent.
The annual rate of PPI growth also decelerated to 2.2 percent in May from an upwardly revised 2.3 percent in April. Analysts had forecasted an acceleration to 2.5 percent.
After yesterday’s lower-than-anticipated consumer price inflation data, today's producer price figures may enhance optimism, suggesting that the Federal Reserve's forecast of only one rate cut this year might be conservative.
In another Labor Department report, an unexpected rise in initial claims for U.S. unemployment benefits for the week ending June 8 was observed, potentially heightening hopes for future rate cuts.
Following an initial rally spurred by the tamer consumer price inflation data, stocks experienced volatility after the Federal Reserve’s policy announcement but managed to close mostly higher on Wednesday.
The Nasdaq surged by 264.89 points, or 1.5 percent, reaching a new record high of 17,608.44. The S&P 500 also hit a record high, jumping 45.71 points, or 0.9 percent, to 5,421.03. Meanwhile, the Dow Jones Industrial Average retracted after an upward move, closing the day 35.21 points, or 0.1 percent, lower at 38,712.21.
This early rally in Wall Street was driven by a Labor Department report indicating that U.S. consumer prices remained flat in May. The consumer price index held steady after a 0.3 percent increase in April. Economists had projected a minor rise of 0.1 percent.
The unchanged reading was attributed to a 3.5 percent drop in gasoline prices, which counterbalanced rising shelter costs. Excluding food and energy, core consumer prices rose by 0.2 percent in May following a 0.3 percent increase in April, with expectations set at another 0.3 percent hike.
Moreover, the annual consumer price growth rate slowed to 3.3 percent in May from April's 3.4 percent. Economists had anticipated it would stay the same. The growth rate for core consumer prices also decelerated to 3.4 percent in May from 3.6 percent in April, contrary to the expected dip to 3.5 percent.
These slower annual growth rates rekindled optimism about future interest rates ahead of the Federal Reserve’s policy announcement.
However, while the Fed announced its decision to keep interest rates unchanged, it also revised its forecast to incorporate only one rate cut this year. To support its goals of maximum employment and a 2 percent inflation rate over the long run, the Fed maintained the target range for the federal funds rate at 5.25 to 5.50 percent.
Acknowledging modest progress towards its inflation objective, the Fed emphasized the need for “greater confidence” in the movement towards the target before considering rate cuts. The necessity for more assurance was reflected in the Fed’s latest interest rate projections. These projections indicate a rate range of 5.0 to 5.25 percent by the end of 2024, suggesting a single rate cut this year compared to the three forecasted in March.
Despite this, the accompanying dot plot shows substantial division among Fed officials regarding the rate outlook for this year. As FHN Financial Chief Economist Chris Low noted, “More participants expect to cut twice than once, but no one expects to cut more than twice, while four don’t expect to cut at all this year. So, a plurality favors two cuts, but the median is for one.”
Interest rate-sensitive housing stocks performed exceptionally well, with the Philadelphia Housing Sector Index spiking 2.9 percent. Significant strength was also observed in semiconductor stocks, reflected by the Philadelphia Semiconductor Index's 2.9 percent surge.### Tech Stocks Propel Nasdaq; Mixed Fortunes for Oil and Gold
**U.S. Market Performance**
Software and computer hardware stocks displayed significant strength, driving the tech-heavy Nasdaq higher. Airline, banking, and brokerage stocks also experienced notable gains. However, oil producer stocks diverged from the upward trend despite a rise in crude oil prices.
**Commodity and Currency Markets**
- **Crude Oil**: Futures for crude oil are down by $0.26, trading at $78.24 per barrel, after a previous increase to $78.50.
- **Gold**: Gold futures have slumped by $20, settling at $2,334.80 per ounce, following a surge of $28.20 to $2,354.80 in the prior session.
- **Currencies**: The U.S. dollar is trading at 156.88 yen, slightly up from 156.72 yen. Against the euro, the dollar stands at $1.0797, compared to the previous $1.0809.
**Asian Markets**
Asian stocks broadly rose on Thursday. Optimism from soft U.S. inflation data maintained the possibility of a Federal Reserve rate cut in September. Nonetheless, markets in China and Japan ended lower due to European threats of provisional duties on Chinese electric vehicle imports.
- **China**: The Shanghai Composite Index dipped 0.3% to 3,028.92, reflecting increased U.S. scrutiny of Chinese imports and cooled trade relations.
- **Hong Kong**: The Hang Seng Index rose 1.0% to 18,112.63, buoyed by optimism over AI's impact on businesses.
- **Japan**: The Nikkei 225 Index fell 0.4% to 38,720.47, while the broader Topix Index decreased 0.9% to 2,731.78. Investors await the BOJ policy meeting, anticipating potential reductions in bond-buying initiatives.
- **South Korea**: The Kospi climbed 1.0% to 2,754.89, driven by a surge in tech stocks, including Samsung Electronics and SK Hynix.
- **Australia**: The S&P/ASX 200 Index rose 0.4% to 7,749.70, snapping a two-day losing streak, helped by strong tech and real estate shares. However, market operator ASX tumbled 8% following forecasts of increased technology spending.
In New Zealand, the S&P/NZX 50 Index rallied 1.1% to 11,872.64, buoyed by optimism over slowing U.S. inflation.
**European Markets**
European stocks retreated on Thursday, with the U.S. Federal Reserve holding interest rates steady but signaling that inflation remains too high to cut rates soon.
- **Germany**: The DAX Index fell 1.0%, while industrial output in the eurozone showed a modest decline of 0.1% for April. German wholesale prices continued to decline in May, reporting a slower annual decrease of 0.7%.
- **France**: The CAC 40 Index dropped by 1.1% amid concerns over new EU tariffs on Chinese electric vehicles.
- **United Kingdom**: The FTSE 100 Index slipped 0.3%, with shares of Crest Nicholson and Wise taking significant hits due to weak profit forecasts and income growth expectations, respectively.
Key automakers like BMW, Renault, Mercedes-Benz, and Volkswagen saw their stocks slump following the EU's announcement to hike tariffs on Chinese electric vehicles, raising fears of a potential trade war.### Economic Updates and Market Movements
**Alstom SA:** The French rolling stock manufacturer, Alstom SA, has experienced a decline. The company recently completed a share capital increase valued at €1 billion, inclusive of the issue premium. This marks the final phase of a previously announced €2 billion deleveraging strategy.
**Halma:** Conversely, Halma has seen a significant uptick. The health and safety device manufacturer posted robust annual results, driving this positive movement.
**BT in London:** British telecommunications giant BT has surged following the news that Carlos Slim, the wealthiest individual in Latin America, acquired a 3.2% stake in the company.
### U.S. Economic Reports
**Unemployment Benefits:** The U.S. Labor Department released a report indicating an unexpected rise in first-time claims for U.S. unemployment benefits for the week ending June 8th. Initial jobless claims increased to 242,000, up by 13,000 from the previous unrevised level of 229,000. Contrarily, economists had predicted a decrease to 225,000. This surge brought jobless claims to their highest level since August 12, 2023, when they hit 248,000.
The four-week moving average, considered less volatile, also climbed to 227,000, marking an increase of 4,750 from the prior week's average of 222,250.
**Producer Prices:** A separate report from the Labor Department highlighted an unexpected dip in U.S. producer prices in May. The producer price index for final demand dropped by 0.2% in May, following a 0.5% rise in April. Economists had anticipated a slight increase of 0.1%. Additionally, the annual growth rate of producer prices slowed to 2.2% in May, down from an upwardly revised 2.3% in April. Expectations had been set at an increase to 2.5%.
**Upcoming Financial Announcements:**
- At 11 a.m. ET, the Treasury Department will release the details of this month's twenty-year bond auction.
- At 12 p.m. ET, New York Federal Reserve President John Williams will moderate a discussion at the Economic Club of New York.
- At 1 p.m. ET, the Treasury Department will announce the results of the auction of $16 billion worth of thirty-year bonds.
### Stocks in Focus
**Broadcom (AVGO):** Shares of Broadcom are soaring in pre-market trading after the chipmaker delivered better-than-expected fiscal second-quarter results and announced a 10-for-1 stock split.
**Tesla (TSLA):** Electric vehicle maker Tesla is exhibiting significant pre-market strength. CEO Elon Musk revealed that shareholder resolutions regarding his $56 billion pay package and the company's incorporation move to Texas are passing by "wide margins."
**Dave & Buster's (PLAY):** In contrast, shares of Dave & Buster's are likely to face pressure. The restaurant chain reported fiscal first-quarter revenues that fell short of analyst expectations.
