By Investors Hub
Major U.S. index futures are pointing to a modestly higher opening on Thursday following the mixed performance seen in the previous session.
The upward momentum on Wall Street comes following the release of a report from the Labor Department showing an unexpected drop in initial jobless claims in the week ended October 28th.
A separate report from the Labor Department showed a bigger than expected increase in labor productivity in the third quarter, with output jumping by much more than hours worked.
Traders are also digesting the Bank of England’s decision to raise interest rates for the first time in over a decade.
Later in the day, trading may be impacted by President Donald Trump’s expected announcement of his nominee as the next Federal Reserve Chair.
Multiple media sources have reported that Trump intends to nominate Fed Governor Jerome Powell to replace current Fed Chair Janet Yellen.
House Republicans are also expected to unveil the draft of their tax reform legislation after postponing the release by a day due to disagreements about how to offset the cost of the nearly $6 trillion in tax cuts included in the bill.
Stocks turned mixed over the course of the trading session on Wednesday after initially moving to the upside. The major averages reached record intraday highs early in the session before giving back ground.
The major averages ended the day on opposite sides of the unchanged line. While the Nasdaq edged down 11.14 points or 0.2 percent to 6,716.53, the Dow rose 57.77 points or 0.3 percent to 23,435.01 and the S&P 500 inched up 4.10 points or 0.2 percent to 2,579.36.
The mixed close on Wall Street came following the Federal Reserve’s announcement of its latest monetary policy decision.
The Fed left interest rates unchanged as widely expected and offered support for the December rate hike that most economists are predicting.
The statement from the central bank said data received since the September meeting indicates the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions.
The Fed said inflation for items other than food and energy remained soft but continued to predict inflation would stabilize around its 2 percent objective over the medium term.
The central bank also reiterated its expectation that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.
“Given the strong economy and jobs market, inflation pressures gradually building and Fed officials broadening out the reasons behind hiking – such as financial conditions, asset valuations and financial stability issues – we are still sticking to our view of a December rate hike,” said ING Senior Economist James Knightley.
He added, “This is 80% priced in by financial markets with the main risk coming from the potential for an economically damaging government shutdown in the absence of an agreement to raise the debt ceiling.”
Earlier in the day, payroll processor ADP released a report showing stronger than expected private sector job growth in the month of October.
ADP said private sector employment climbed by 235,000 jobs in October after rising by a downwardly revised 110,000 jobs in September.
Economists had expected an increase of about 200,000 jobs compared to the addition of 135,000 jobs originally reported for the previous month.
The bigger than expected increase came after private sector employment grew at its slowest rate in nearly a year in September.
A separate report from the Institute for Supply Management showed a slowdown in the pace of growth in the manufacturing sector in October.
The ISM said its purchasing managers index fell to 58.7 in October from 60.8 in September, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to edge down to 59.5.
The bigger than expected pullback by the manufacturing index came after it jumped to its highest level in over thirteen years in the previous month.
Natural gas stocks turned in a strong performance on the day, with the NYSE Arca Natural Gas Index jumping by 2.2 percent. With the gain, the index ended the session at its best closing level in almost a month.
Within the natural gas sector, Devon Energy (DVN) posted a standout gain after reporting third quarter earnings that exceeded analyst estimates.
Notable strength was also visible among other energy stocks even though the price of crude oil for December delivery edged lower.
Steel stocks also showed a strong move to the upside, driving the NYSE Arca Steel Index up by 1 percent. U.S. Steel (X) led the sector higher after reporting better than expected third quarter results.
On the other hand, telecom stocks saw substantial weakness, dragging the NYSE Arca North American Telecom Index down by 2.8 percent. The index ended finished the day at its lowest closing level in well over a year.
Frontier Communications (FTR) posted a steep loss after reporting a narrower than expected third quarter loss but weaker than expected revenues.
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