Thursday August 27th

27-08-2020

U.S. stock futures fall slightly ahead of big Powell speech

U.S. stock index futures dipped in premarket trading Thursday morning as Wall Street turned its attention to an upcoming address from Federal Reserve Chairman Jerome Powell. Dow futures dipped about 35 points, pointing to a flat open when regular equity trading resumes Thursday morning. S&P 500 and Nasdaq 100 futures were lower by 0.1%. Thursday’s trading is likely to be driven in large part by comments from Fed Chair Jerome Powell, who is expected at 9:10 a.m. ET to introduce a new pandemic-era tool to combat the economic impact of Covid-19 and foster inflation in the U.S. The Fed’s annual symposium will be held virtually this year instead of the usual locale of Jackson Hole, Wyoming. The central bank has for years tried to keep inflation at 2%, a rate of price increase that policymakers consider both manageable and indicative of a healthy economy. But ever since the financial crisis, inflation in the U.S. has more often than not lagged the Fed’s target. Powell is expected to acknowledge that ongoing inflation shortfall and announce that the Fed will now have an “average inflation” target. Investors say that the move will allow the Fed to be more comfortable with inflation creeping above the 2% threshold so long as it’s eventually offset by periods of below-average price growth. Rick Rieder, BlackRock’s global chief investment officer of fixed income, told CNBC that “the rates markets are anticipating the Fed is going to be dovish and willing to withstand inflation being higher for a longer period.” Economic data on Wednesday showed weekly jobless claims totaled 1 million, in line with expectations. It marked the second consecutive week that the number of Americans who filed for unemployment benefits tallied more than 1 million. Meanwhile, the second reading on the second-quarter GDP was revised to a 31.7% decline, versus a 32.5% drop estimated. The prospect of continued stimulative policy could help push the major market indexes to new record highs, a feat both the Nasdaq Composite and S&P 500 clinched on Wednesday. A tech-fueled rally led the S&P 500 up 1% to 3,478.73 on Wednesday while the Nasdaq popped 1.7% to finish the day at 11,665.06. Some of the nation’s largest technology and consumer communications companies were responsible for the upward pressure on Wednesday, with blowout earnings from Salesforce sending its stock up 26%. Facebook and Netflix jumped 8.2% and 11.6%, respectively, while Apple added 1.4%, Amazon advanced 2.8% and Microsoft climbed 2.1%. Wednesday’s gains put the S&P 500 up more than 58% since hitting an intraday low on March 23. The Nasdaq has soared by 75% in that time period. Shares of Abbott Laboratories jumped 8% after the company won authorization for a $5 rapid coronavirus test. Shares in Asia Pacific were mixed by the close on Thursday as the latest data showed China’s economy continued to recover. Investors will monitor oil prices after oil rigs and refineries were shut ahead of a massive hurricane approaching Texas and Louisiana. Stocks in mainland China rose by the close. The Shanghai composite was up 0.61% to 3,350.11, while the Shenzhen composite jumped 1.04% to 2,261.16. The Shenzhen component rose 0.79% to 13,535.09. Over in Hong Kong, the Hang Seng index fell 0.83% in the afternoon. In Japan, the Nikkei 225 shed 0.35% to close at 23,208.86, while the Topix index dipped 0.53% to 1,615.89. South Korea’s Kospi fell 1.05% to close at 2,344.45. Oil prices were broadly stable on Thursday as a massive hurricane in the Gulf of Mexico made landfall in the heart of the U.S. oil industry, forcing oil rigs and refineries to shut down. Brent crude futures for October, which expire on Friday, fell 18 cents to trade at $45.46 per barrel. The more active November Brent contract was virtually flat at $46.17 per barrel. U.S. West Texas Intermediate crude futures fell 29 cents, or 0.67%, to $43.10 per barrel. Gold fell on Thursday as investors reassessed their positions, booked profits after a more than 1% jump in the prior session and anticipated fresh stimulus announcements from the U.S. Federal Reserve Chairman could spur an economic revival. Spot gold was down fell 0.7% to $1,939.30 per ounce, after rising 1.3% on Wednesday. U.S. gold futures declined 0.3% to $1,947.60.