Thursday August 26th

26-08-2021

S&P 500 futures are flat near record levels ahead of Fed summit

U.S. stock index futures were little changed Thursday, following the benchmark’s rally above the 4,500 level for the first time ever in the prior session and ahead of the Federal Reserve’s annual symposium on Friday. S&P 500 futures lost 0.02% and Nasdaq 100 futures were down 0.1%. Dow Jones Industrial average futures were flat. Weekly initial jobless claims came in at 353,000, the Labor Department reported Thursday morning, a slight increase from the prior week’s 349,000.  Economists polled by Dow Jones expected 350,000 Americans filed for unemployment last week. Economic growth totaled 6.6% in the second quarter, according to the Commerce Department’s second estimate Thursday. That was a slight revision upward from the 6.5% annual increase previously reported but slightly lower than the Dow Jones estimate of 6.7%. The highly anticipated Jackson Hole symposium from the Federal Reserve will be held virtually this year on Friday, with many central bank speakers making remarks to the media beginning Thursday. At the event, central bankers could provide updates on their plan around tapering monetary stimulus. Esther George, president of the Kansas City Fed, told CNBC Thursday morning that “given the progress we’ve seen,” Fed tapering is “appropriate,” though she didn’t specify when she thinks it should start. “When you look at the job gains we saw last month, the month before, you look at the level of inflation right now, I think it would suggest that the level of accommodation we’re providing right now is probably not needed in this scenario,” she said. “So I would be ready to talk about taper sooner rather than later.” Shares of Salesforce rose 2% in premarket trading after the software giant reported fiscal second-quarter earnings and forward guidance that exceeded analysts’ estimates. Ulta Beauty rose 5% on strong results. Zoom Video shares jumped more than 2% after Morgan Stanley upgraded the stock and predicted 18% upside. On Wednesday, the S&P 500 gained 0.22% to close at a record, led by stocks that benefit from the economic reopening like airlines, cruise lines and financials. The 500-stock average crossed the 4,500 threshold for the first time ever on Wednesday, but closed below that level. The benchmark is up 105% from its pandemic low. The Nasdaq Composite rose 0.15%, also notching a record close. The Dow Jones Industrial Average rose 39 points. “While we remain believers in the secular bull market for US equities, we have suggested raising some cash in U.S. equities given lower highs (aka bearish divergences) across a variety of indicators, weaker August-October seasonality, the Presidential Cycle moving into its weakest period and bearish signals from margin debt,” wrote Stephen Suttmeier, technical research strategist at Bank of America. The yield on the benchmark 10-year Treasury note rose as high as 1.352% Wednesday as concerns about slowing growth from the delta variant eased, hitting its highest level since earlier in the month when it yielded as much as 1.364%. “The 10-year Treasury bond yield has continued rising in recent days and exploded higher in [Wednesday’s] trading, sending a strong message that the Delta variant of Covid may be peaking in the U.S. which should improve confidence, restart economic reopenings, and drive investment flows toward small caps and cyclicals,” said Jim Paulsen, chief investment strategist at the Leuthold Group. Chairman Jerome Powell is slated to make remarks on Friday as part of the Fed’s summit. The Federal Reserve has been purchasing at least $120 billion of bonds per month to curb longer-term interest rates and jumpstart economic growth in reaction to the pandemic. “Expect investors to keep an eye on the Fed’s symposium the rest of this week for any comments about tapering or timing for interest rate hikes,” said Paulsen. “Either unexpected commentary from the Fed or a failure or success in scaling 4500 could bring additional volatility to the stock and bond markets.” Several companies report quarterly earnings on Thursday including Dell Technologies, Gap, HP and Abercrombie & Fitch. Asia-Pacific markets mostly declined on Thursday despite overnight gains on Wall Street, while South Korea became the first major economy to raise interest rates during the pandemic. The Bank of Korea raised its base rate by 25 basis points to 0.75% for the first time in nearly three years. South Korean stocks were mixed. The benchmark Kospi fell 0.58% to 3,128.53 while the Kosdaq gained 0.26% to 1,020.44. The Korean won weakened against the dollar following the rate hike, trading at around 1,168.84. In Japan, the Nikkei 225 finished near the flatline at 27,742.29 while the Topix index was little changed at 1,935.35. Hong Kong’s Hang Seng index tumbled 1.32% while the tech-heavy Hang Seng Tech Index fell 2.17% as shares of Alibaba dropped 1.4%, Meituan declined about 1% and Apple supplier AAC Tech plunged 11%. Chinese mainland share also declined. The Shanghai composite fell 1.09% to 3,501.66 while the Shenzhen component was down 1.92% to 14,415.46. Oil fell on Thursday for the first session in four amid renewed concerns about demand recovery as more restrictions are imposed to curb Covid-19 infections. Brent crude was down 61 cents, or 0.9%, at $71.63 per barrel, having risen 1.7% on Wednesday. U.S. oil was down 68 cents, or 1%, at $67.68 a barrel, after gaining 1.2% in the previous session. Gold extended losses into a third day on Thursday as the dollar and U.S. Treasury yields gained, and many investors held back, awaiting the next day’s speech from the Fed Chair at Jackson Hole for clues on a strategy for tapering economic support. Spot gold fell 0.3% to $1,784.86 per ounce by 5:13 a.m. ET after failing to capitalize on its break above the key psychological $1,800 level this week. U.S. gold futures edged 0.3% lower to $1,786.00.