Modupe Gbadeyanka
By Investors Hub
The major U.S. index futures are pointing to a roughly flat opening on Thursday, with stocks likely to show a lack of direction after moving sharply higher over the two previous sessions.
The markets could continue to benefit from continued optimism about a potential interest rate cut by the Federal Reserve, although lingering trade concerns are likely to keep any buying interest somewhat subdued.
Overall trading activity may also remain light as some traders may stay on the sidelines ahead of the release of the Labor Department?s closely watched monthly jobs report on Friday.
Employment is expected to climb by 185,000 jobs in May after surging up by 263,000 jobs in April, while the unemployment rate is expected to hold at 3.6 percent.
The strength of the jobs data could have a notable impact on the perceived prospects for a near-term interest rate cut by the Fed.
After fluctuating early in the session, stocks moved notably higher over the course of the trading day on Wednesday. With the upward move on the day, the major averages extended the substantial rally seen in the previous session.
The major averages reached new highs for the session going into the close of trading. The Dow jumped 207.39 points or 0.8 percent to 25,539.57, the Nasdaq climbed 48.36 points or 0.6 percent to 7,575.48 and the S&P 500 advanced 22.88 points or 0.8 percent to 2,826.15.
Stocks continued to benefit from optimism about a potential interest rate cut after Federal Reserve Chairman Jerome Powell’s pledged to sustain the U.S. economic expansion.
Citing uncertainty surrounding trade negotiations and other matters, Powell said in a speech on Tuesday that the central bank will act “as appropriate” to support the economy.
Powell’s comments were widely seen as an indication the Fed is prepared to discuss lowering interest rates if escalating global trade disputes weigh down economic growth.
A report from payroll processor ADP showing much weaker than expected private sector job growth in May initially generated some negative sentiment but was subsequently seen as adding to the case for a rate cut.
ADP said private sector employment edged up by 27,000 jobs in May after spiking by a downwardly revised 271,000 jobs in April.
Economists had expected employment to increase by 180,000 jobs compared to the jump of 275,000 jobs originally reported for the previous month.
“Job growth is moderating,” said Mark Zandi, chief economist of Moody’s Analytics. “Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”
Later in the day, traders largely shrugged off the Fed’s Beige Book, which said economic activity in the U.S. expanded at a modest pace overall from April through mid-May.
The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, noted the assessment of the overall economy reflected a slight improvement over the slight-to-moderate growth indicated in the previous report.
Interest rate-sensitive utilities and commercial real estate stocks turned in some of the market’s best performances amid optimism about a future rate cut.
Reflecting the strength in the sectors, the Dow Jones Utility Average and the Dow Jones U.S. Real Estate Index both surged up by 2.1 percent.
Software and networking stocks also extended the rebound seen in the previous session, driving the Dow Jones U.S. Software Index and the NYSE Arca Networking Index up by 1.9 percent and 1.3 percent, respectively.
On the other hand, energy stocks saw significant weakness on the day, with a steep drop by the price of crude oil weighing on the sector.
Crude for July delivery tumbled following the release of a report showing a weekly jump in U.S. crude oil inventories.
