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U.S. Stocks May Benefit From Positive Reaction To Fed Statement


Stocks are likely to move to the upside in early trading on Thursday, adding to the modest gains posted in the previous session. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 240 points.

The markets may continue to benefit from a positive reaction to the Federal Reserve's monetary policy announcement on Wednesday.

The Fed left interest rates unchanged as widely expected but signaled that the next change in interest rates is likely to be a rate cut.

While the Fed did not provide a specific time frame for lowering rates, CME Group's FedWatch Tool shows the markets are pricing in a rate cut at the next monetary policy meeting in late July.

The FedWatch Tool currently indicates a 63.6 percent chance for a 25 basis point rate cut and a 36.4 percent chance for a 50 basis point rate cut.

Traders are likely to closely watch incoming economic data in the weeks leading up to the meeting for clues about the potential for lower rates.

The Labor Department released a report this morning a modest decrease in first-time claims for U.S. unemployment benefits in the week ended June 15th.

The report said initial jobless claims dipped to 216,000, a decrease of 6,000 from the previous week's unrevised level of 222,000. Economists had expected jobless claims to edge down to 220,000.

Meanwhile, the Labor Department said the less volatile four-week moving average inched up to 218,750, an increase of 1,000 from the previous week's unrevised average of 217,750.

A separate report from the Philadelphia Federal Reserve showed regional manufacturing activity was nearly stagnant in the month of June.

The Philly Fed said its index for current general activity tumbled to 0.3 in June from 16.6 in May. While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to slip to 11.0.

With the much bigger than expected decrease, the Philly Fed Index fell to its lowest level since turning negative in February.

Shortly after the start of trading, the Conference Board is scheduled to release its report on leading economic indicators in the month of May. The leading economic index is expected to inch up by 0.1 percent in May after rising by 0.2 percent in April.

Stocks showed typical volatility on the heels of the Federal Reserve's monetary policy announcement but managed to end Wednesday's trading mostly higher amid indications the central bank plans to cut interest rates sometime in the future.

The major averages posted moderate gains, once again reaching their best closing levels in over a month. The Dow edged up 38.46 points or 0.2 percent to 26,504.00, the Nasdaq climbed 33.44 points or 0.4 percent to 7,987.32 and the S&P 500 rose 8.71 points or 0.3 percent to 2,926.46.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index climbed by 0.6 percent, while Hong Kong's Hang Seng Index jumped by 1.2 percent.

The major European markets have also moved to the upside on the day. While the German DAX Index has advanced by 0.9 percent, the U.K.'s FTSE 100 Index is up by 0.8 percent and the French CAC 40 Index is up by 0.7 percent.

In commodities trading, crude oil futures are jumping $1.74 to $55.50 a barrel after dipping $0.14 to $53.76 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,383.60, up $34.80 compared to the previous session's close of $1,348.80. On Wednesday, gold slipped $1.90.

On the currency front, the U.S. dollar is trading at 107.72 yen compared to the 108.10 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1296 compared to yesterday's $1.1226.

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