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Rate Cut Optimism May Lead To Continued Strength On Wall Street

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to add to the gains posted in the previous session.

The markets may continue to benefit from renewed optimism about a near-term interest rate cut following Federal Reserve Jerome Powell's Congressional testimony.

Powell told lawmakers that crosscurrents, such as trade tensions and concerns about global growth, have continued to weigh on the U.S. economic outlook since the central bank's June meeting.

The Fed chief pointed out that increased uncertainties about the economic outlook and muted inflation pressures led the central bank to pledge after the June meeting to "act as appropriate to sustain the expansion."

Powell noted that many meeting participants saw that the case for a somewhat more accommodative monetary policy had already strengthened.

"Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook," Powell said in his prepared remarks.

Powell is scheduled to testify before the Senate Banking Committee this morning, although his prepared remarks will likely mirror those he delivered on Wednesday.

Stocks gave back some ground after an early move to the upside but managed to remain mostly positive throughout the trading session on Wednesday. The major averages all reached record intraday highs, although only the Nasdaq managed to end the session at a record closing high.

The Dow rose 76.71 points or 0.3 percent to 26,860.20, the Nasdaq advanced 60.80 points or 0.8 percent to 8,202.53 and the S&P 500 climbed 13.44 points or 0.5 percent to 2,993.07.

Early buying interest was generated in reaction to Powell's prepared remarks before the House Financial Services Committee.

The comments from Powell led to renewed optimism about a potential rate cut by the Fed at its next meeting later this month.

However, traders seemed wary of making more substantial bets on stocks, as a rate cut would only be necessary in the face of a slowing economy.

Largely mirroring Powell's remarks, the minutes of the central bank's June meeting released later in the day said many participants believe the case for lowering interest rates has strengthened.

The minutes of the latest Fed meeting noted nearly all participants downwardly revised their assessment of the appropriate path for rates due to global developments that led to heightened uncertainties about the economic outlook.

"Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook," the Fed said.

The central bank added, "Several others noted that additional monetary policy accommodation could well be appropriate if incoming information showed further deterioration in the outlook."

Gold stocks moved sharply higher over the course of the trading session, resulting in a 2.8 percent spike by the NYSE Arca Gold Bugs Index. With the jump, the index reached its best closing level in well over a year. The rally by gold stocks came amid a notable increase by the price of the precious metal.

Significant strength also emerged among energy stocks, which moved higher along with the price of crude oil following the release of a report showing a steep drop in crude oil inventories.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 2.5 percent, the NYSE Arca Natural Gas Index climbed by 1.6 percent and the NYSE Arca Oil Index rose by 1.3 percent.

Tobacco, computer hardware, and software stocks also saw considerable strength on the day, while banking stocks came under pressure over the course of the session.

Commodity, Currency Markets

Crude oil futures are inching up $0.07 to $60.50 a barrel after spiking $2.60 to $60.43 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,418.40, up $5.90 compared to the previous session's close of $1,412.50. On Wednesday, gold jumped $12.

On the currency front, the U.S. dollar is trading at 108.21 yen compared to the 108.46 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1272 compared to yesterday's $1.1251.

Asia

Asian stocks rose on Thursday as dovish remarks from U.S. Federal Reserve Chairman Jerome Powell reignited hopes of a U.S. interest rate cut later this month.

China's Shanghai Composite Index inched up 2.46 points or 0.1 to 2,917.76, while Hong Kong's Hang Seng Index advanced 227.11 points or 0.8 percent to 28,431.80.

Japanese shares climbed even as the yen strengthened in reaction to Powell's downbeat tone on the economy. The Nikkei 225 Index rose 110.05 points or 0.5 percent to 21,643.53, while the broader Topix closed 0.5 percent higher at 1,578.63.

Gaming giant Nintendo surged 4.2 percent after announcing a smaller, cheaper version of the Switch. Exporters turned in a mixed performance, with Canon rising 0.8 percent and Nissan Motor adding 0.3 percent, while Honda Motor and Toyota moved lower.

Among tech stocks, Advantest advanced 1.5 percent and Tokyo Electron gained 1.6 percent. Oil firm Japan Petroleum jumped over 3 percent and Inpex Corp. added 2.3 percent.

On the other hand, shares of Japan Post Insurance slumped 6.4 percent after the company admitted mismanagement in connection with more than 90,000 insurance policies.

Australian markets advanced on Fed policy expectations. The benchmark S&P/ASX 200 Index rose 26.30 points or 0.4 percent to 6,716.10, while the broader All Ordinaries Index ended up 28.10 points or 0.4 percent at 6,805.80.

Gold miners Newcrest Mining and Evolution Mining jumped over 2 percent as gold prices scaled a more than one-week high on dollar weakness after Powell's dovish remarks.

Santos, Origin Energy and Oil Search climbed 1-3 percent after a 4.5 percent jump in oil prices overnight.

Banks ended on a mixed note after they were slapped with tougher capital requirements. Also, the lenders were warned of action over the sale of consumer credit insurance that has "consistently failed consumers."

Shares of Virgin Australia Holdings tumbled 2.9 percent. The airline said Affinity Equity Partners, the fund manager that purchased a 35 percent stake in its frequent flyer program in August 2014, is looking to sell its stake.

Seoul stocks rallied as rising expectations of a Fed cut outweighed concerns over Tokyo's move to tighten controls on high-tech exports. The benchmark Kospi surged up 21.80 points or 1.1 percent to 2,080.58.

Tech stocks extended gains, with Samsung Electronics rising 1.4 percent and SK Hynix climbing 3.6 percent after the ruling party called for a 300 billion won ($254.8 million) extra budget to cope with the export restrictions.

Europe

European stocks have turned mixed on Thursday even though Federal Reserve Chair Jerome Powell signaled that the U.S. central bank is likely to cut interest rates soon.

While the French CAC 40 Index is up by 0.1 percent, the U.K.'s FTSE 100 Index is down by 0.1 percent and the German DAX Index is down by 0.3 percent.

Energy stocks are moving higher as oil prices hit seven-week highs. BP Plc, Total SA and Tullow Oil are posting notable gains.

Reckitt Benckiser Group has also rallied after it reached agreements to settle investigations related to the sales and marketing of Suboxone Film.

Shares of Indivior have also shown a substantial move to the upside after the company raised its annual profit and revenue forecast.

On the other hand, Swiss Re has come under pressure after suspending the $4.1 billion IPO of its U.K. life insurance business.

Ryanair Holdings has also moved to the downside. The boss of the airline warned on Wednesday that the prolonged grounding of Boeing's 737 MAX may weigh on the airline's growth plans.

U.S. Economic Reports

With a steep drop in gas prices offset by an increase in the cost of shelter, the Labor Department released a report showing an unexpected uptick in U.S. consumer prices in the month of June.

The Labor Department said its consumer price index inched up by 0.1 percent in June, matching the slight increase seen in May. Economists had expected consumer prices to come in unchanged.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in June after inching up by 0.1 percent for four consecutive months. Core prices had been expected to edge up by 0.2 percent.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits unexpectedly fell in the week ended July 6th.

The report said initial jobless claims dropped to 209,000, a decrease of 13,000 from the previous week's revised level of 222,000. Economists had expected jobless claims to inch up to 223,000.

At 10 am ET, Federal Reserve Chairman Jerome Powell is due to start his second day on Capitol Hill with testimony before the Senate Banking Committee.

The Treasury Department is scheduled to announce the results of its auction of $16 billion worth of thirty-year bonds at 1 pm ET.

At 1:30 pm ET, New York Fed President John Williams is due to give the keynote address on the regional economy at the conclusion of a Hudson Valley and Albany regional visit in Albany, New York.

Fed Vice Chairman for Supervision Randal Quarles is also scheduled to speak at the Special Patriot Award Ceremony Recognizing Alice Rivlin at the Bipartisan Policy Center in Washington, D.C., at 1:30 pm ET.

At 5 pm ET, Minneapolis Fed President Neel Kashkari is slated to participate in a town hall meeting in Aberdeen, South Dakota.

Stocks In Focus

Shares of Fastenal (FAST) have come under pressure in pre-market trading after the industrial and construction supplies distributor reported second quarter results that missed analyst estimates.

Retailer Bed Bath & Beyond (BBBY) may also see initial weakness after reporting fiscal first quarter earnings that beat expectations but provided disappointing guidance.

On the other hand, shares of AAR Corp. (AIR) are seeing significant pre-market strength after the aviation services provider reported fiscal fourth quarter results that beat estimates on both the top and bottom lines.

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