Thursday June 6th

6-06-2019

Stock futures rise as Wall Street’s rally looks set to continue

U.S. stock index futures rose on Thursday as Wall Street’s rally on hopes of a rate cut from the Federal Reserve looked set to continue. At around 7 a.m. ET, Dow Jones Industrial Average futures indicated a gain of 77 points, while futures for the S&P 500 and Nasdaq also ticked higher. Advanced Micro Devices contributed to the early gains, climbing more than 2% in the premarket after Morgan Stanley upgraded the chipmaker to equal weight from underweight. The analyst also hiked his price target on AMD to $28 per share from $17.  The Dow jumped more than 500 points on Tuesday, its second best day of the year, and continued its rally on Wednesday by gaining more than 200 points. For the week, the 30-stock index is up nearly 3% through Wednesday’s close. The S&P 500 and Nasdaq are also up 2.7% and 1.6%, respectively, this week. Comments from Fed Chair Jerome Powell on Tuesday further fueled expectations that the U.S. central bank is moving closer to cutting interest rates, causing U.S. stocks to surge. Powell said that the central bank will keep an eye on current developments in the economy, and would do what it must to “sustain the expansion.” Investors monitored lingering global trade tensions, however, particularly the threat from President Donald Trump to impose a 5% tariff on all Mexican imports, in a political ploy criticized even by members of his own party. Trump also tweeted that while progress between the two countries had been made on immigration, it is “not nearly enough.” Trump ratcheted up tensions with China on Thursday, telling reporters that tariffs on Chinese goods could be raised by another $300 billion if necessary. The president was on his way to France for a D-Day commemoration. The number of people who applied for unemployments benefits in early June was flat, leaving new jobless claims near a postrecession low and suggesting little deterioration in the strongest labor market in decades. Initial jobless claims, a rough way to measure layoffs, was flat at 218,000, the government said Thursday. The prior week’s tally was revised up to 218,000 from 215,000, however. Economists polled by MarketWatch estimated new claims would total a seasonally adjusted 215,000 in the seven days ended June 1. The nation’s trade deficit fell 2.1% in April, but in a sign of weakness, both exports and imports declined and the gap with China grew. The U.S. trade deficit slipped to $50.8 billion from a revised $51.9 billion in March, the government said Thursday. Economists polled by MarketWatch had forecast a $50.4 billion gap. Investors will also be keeping an eye on the European Central Bank, which is set to announce its latest monetary policy decision Thursday. Asia Pacific traded mixed on Thursday as markets in the Greater China region struggled for gains, while South Korea remained shut for a public holiday. The session followed overnight gains on Wall Street where investors grew more confident that the U.S. Federal Reserve may slash interest rates this year to support an economy affected by the ongoing trade war. The Nikkei 225 in Japan erased earlier gains to finish near flat at 20,774.04 while the Topix index declined 0.34% to 1,524.91. In China, the Shanghai composite fell 1.17% to 2,827.80 and the Shenzhen composite was down 2.08% at 1,463.70. Taiwan’s Taiex fell 0.5% to 10,409.20 while Hong Kong’s Hang Seng index was fractionally higher in the final hour of trade. Oil prices firmed on Thursday after falling to near five-month lows in the previous session, but sentiment stayed weak due to rising U.S. supply and a stalling global economy. Front-month Brent crude futures were at $61 a barrel at 0831 GMT, up 37 cents or 0.6%. U.S. West Texas Intermediate crude futures fetched $51.84, up 16 cents or 0.3%. The two benchmarks on Wednesday hit their lowest since mid-January at $59.45 and $50.60, respectively, amid a surge in U.S. crude inventories and record production, and as a global economic slowdown was starting to hit energy demand. Despite Thursday’s gains, oil markets are moving into bear territory as defined by a 20% fall from recent peaks reached in late April. Gold prices rose on Thursday, drawing closer to their highest levels this year on increased expectations of a U.S. rate cut, even as some investors locked in profits from bullion’s recent rally. Spot gold rose 0.5% to $1,336.67 per ounce, while U.S. gold futures gained 0.6% to $1,341. “Gold’s strength is most certainly based on the prompt change in the market outlook on how aggressively the Fed will cut rates over the coming months,” Saxo Bank commodity strategist Ole Hansen said.