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Concerns About Second Wave Of Coronavirus May Weigh On Wall Street

The major U.S. index futures are currently pointing to a sharply lower opening on Thursday following the mixed performance seen in the previous session.

Concerns about a second wave of coronavirus cases may weigh on Wall Street as recent data has led to worries about economic reopening leading to a spike in infections.

According to data CNN aggregated from the Covid Tracking Project, the number of coronavirus hospitalizations since Memorial Day has risen in at least a dozen states.

Texas reported 2,504 new coronavirus cases on Wednesday, reflecting the highest one-day total in the state since the pandemic emerged.

The number of confirmed coronavirus cases in the U.S. has also passed the two-million mark, according to data from Johns Hopkins University.

Meanwhile, as businesses reopen, the Labor Department released a report showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

Stocks saw considerable volatility following the Federal Reserve's monetary policy announcement on Wednesday before eventually ending the session mixed.

While the Nasdaq advanced 66.59 points or 0.7 percent to a new record closing high of 10,020.35, the Dow and the S&P 500 extended the pullback seen in the previous session.

The Dow tumbled 282.31 points or 1 percent to 26,989.99 and the S&P 500 slid 17.04 points or 0.5 percent to 3,190.14.

The continued advance by the Nasdaq partly reflected notable gains by big-name tech companies like Apple (AAPL) and Amazon (AMZN), which jumped by 2.6 percent and 1.8 percent, respectively, to new record closing highs.

Meanwhile, the lower closes by the Dow and the S&P 500 came even though both indexes briefly turned positive after the Fed indicated interest rates are likely to remain at current near-zero levels through 2022.

The Fed on Wednesday announced its widely expected decision to maintain the target range for the federal funds rate at zero to 0.25 percent.

The accompanying statement also reiterated that the Fed expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The economic projections provided along with the statement showed most Fed officials expect rates to remain at current levels through 2022, with only a couple predicting an increase in rates.

In his post-meeting press conference, Fed Chair Jerome Powell said the central bank is "not even thinking about thinking about raising rates."

Expectations that rates will remain at record lows come as the Fed projects real GDP to nosedive by 6.5 percent in 2020, as the ongoing public health crisis weighs heavily on economic activity.

However, the Fed's projections call for real GDP to rebound by 5.0 percent in 2021 followed by a 3.5 percent jump in 2022.

Regarding the Fed's asset purchase program, the central bank said it plans to increase its bond holdings at least at the current pace over the coming months but noted it remains prepared to adjust its plans as appropriate.

The Fed announcement largely overshadowed a Labor Department showing a modest decrease in consumer prices in the month of May.

Oil service stocks extended the sell-off seen in the previous session, dragging the Philadelphia Oil Service Index down by 7.4 percent. With the steep drop, the index pulled back further off Monday's three-month closing high.

The weakness among oil service stocks came despite an increase by the price of crude oil. Other energy stocks also came under pressure even though crude oil rebounded after hitting a low of $37.73 a barrel earlier in the day.

Substantial weakness was also visible among banking stocks, as reflected by the 6 nosedive by the KBW Bank Index. The index also continued to give back ground after setting a three-month closing high on Monday.

Brokerage, commercial real estate, transportation and steel stocks also saw considerable weakness on the day, pulling back further off their recent highs.

On the other hand, gold stocks moved sharply higher late in the session, driving the NYSE Arca Gold Bugs Index up by 4.4 percent. The rally by gold stocks came as the price of the precious metal spiked in electronic trading after ending the regular session modestly lower.

Software stocks also showed a significant move to the upside, with the Dow Jones U.S. Software Index surging up by 2.8 percent to a new record closing high.

Commodity, Currency Markets

Crude oil futures are tumbling $2.76 to $36.84a barrel after climbing $0.66 to $39.60 a barrel on Wednesday. Meanwhile, after slipping $1.20 to $1,720.70 an ounce in the previous session, gold futures are jumping $16.30 to $1,737 an ounce.

On the currency front, the U.S. dollar is trading at 106.91 yen versus the 107.12 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1350 compared to yesterday's $1.1374.

Asia

Asian stocks fell on Thursday after the U.S. Federal Reserve projected a sharp contraction by the U.S. economy this year due to the coronavirus pandemic and warned of a "long road" to recovery.

Chinese shares ended lower amid lingering concerns about the economy. The benchmark Shanghai Composite Index ended down 22.86 points, or 0.8 percent, at 2,920.90, as data showed new bank lending in China fell more than expected in May. Hong Kong's Hang Seng Index plunged 569.58 points, or 2.3 percent, to 24,480.15.

Japanese shares saw their biggest single-day drop in six weeks as the safe haven yen hit a one-month high after a dire warning from the Fed. The Nikkei 225 Index slumped 652.04 points, or 2.8 percent, to 22,472.91, marking its largest single-day decline since May 1 and moving further away from a 3-1/2-month closing high hit earlier in the week.

The broader Topix closed 2.2 percent lower at 1,588.92, with financials pacing the decliners. Mitsubishi UFJ Financial Group plunged 4.9 percent, Sumitomo Mitsui Financial gave up 3.5 percent and Dai-ichi Life Holdings plummeted 6.8 percent. Automakers Honda Motor and Mazda Motor fell around 6 percent.

Australian markets fell sharply following the bleak economic projections from the U.S. Federal Reserve. The benchmark S&P/ASX 200 Index tumbled 187.80 points, or 3.1 percent, to 5,960.60, snapping its seven-day winning streak. The broader All Ordinaries Index ended down 189.80 points, or 3 percent, at 6,079.50.

The big four banks lost 4-6 percent, while mining heavyweights BHP and Rio Tinto fell 2 percent and 1.6 percent, respectively.

A decline in crude prices weighed on the energy sector, with Woodside Petroleum, Santos and Oil Search losing around 6 percent. Electronics retailer JB Hi-Fi gave up early gains to end down over 4 percent.

Meanwhile, higher bullion prices sent gold miners soaring, with Evolution surging 4.2 percent and Newcrest Mining adding 5.7 percent. Norther Star Resources advanced 6.8 percent.

Seoul stocks fell sharply after the Fed didn't comment in its statement whether it was likely to undertake stronger emergency asset purchasing programs to keep rates near zero.

Also, Fed Chairman Jerome Powell predicted that the recovery will be slow and the crisis will have long-lasting effects. The benchmark Kospi fell 18.91 points, or 0.9 percent, to 2,176.78.

Market bellwether Samsung Electronics lost 2 percent, No. 2 chipmaker SK Hynix declined 2.5 percent and top automaker Hyundai Motor shed 2.7 percent.

Europe

European stocks have moved sharply lower on Thursday as a downbeat economic outlook from the U.S. Federal Reserve as well as fears of a second wave of Covid-19 infections in the United States dented investors' appetite for riskier assets.

Texas on Wednesday reported 2,504 new coronavirus cases, the highest one-day total since the pandemic emerged, raising alarms and bringing challenges for residents and the economy.

The number of confirmed coronavirus cases in the United States passed the two-million mark, according to data from Johns Hopkins University.

While the French CAC 40 Index has plummeted by 3.3 percent, the German DAX Index is down by 3.1 percent and the U.K.'s FTSE 100 Index is down by 3 percent.

Dutch paints and chemicals maker Akzo Nobel N.V. has fallen. The company said that its revenue for the month of April was down almost 30 percent from last year with strong market headwinds.

Travel and leisure stocks have also come under pressure on fears of a further hit to demand. TUI AG, Carnival and British Airways-owner IAG are posting steep losses.

German airline Lufthansa has also moved sharply lower after confirming that it is planning to cut 22,000 full-time jobs.

B&M European Value Retail has also slumped. The discount retailer warned that a strong start to its new fiscal year was unlikely to continue.

Manufacturing giant Johnson Matthey has also shown a notable move to the downside as it announced plans to cut about 2,500 jobs.

Similarly, energy and services company Centrica has tumbled on news it will cut 5,000 jobs and halve its senior team as part of a restructuring.

Peugeot is also posting a steep loss after reports that Fiat Chrysler and Peugeot maker PSA are likely headed for a lengthier probe of their planned $50 billion merger.

On the other hand, consumer goods giant Unilever has risen after saying it would merge its dual-headed legal structure to a single parent company.

U.S. Economic Reports

With businesses reopening following the coronavirus lockdown, the Labor Department released a report on Thursday showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

The report said initial jobless claims tumbled to 1.542 million, a decrease of 355,000 from the previous week's revised level of 1.897 million.

Economists had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week.

Jobless claims declined for the tenth straight week after reaching a record high of 6.867 million in the week ended March 28th.

A separate report from Labor Department showed a much bigger than expected increase in U.S. producer prices in the month of May.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in May after tumbling by 1.3 percent in April. Economists had expected the index to inch up by just 0.1 percent.

The bigger than expected increase in producer prices reflected sharp jumps in prices for food and energy, which surged up by 6.0 percent and 4.5 percent, respectively.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May after falling by 0.3 percent in April. The dip in core prices matched economist estimates.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $19 billion worth of thirty-year bonds.

Stocks In Focus

Shares of Children's Place (PLCE) may come under pressure after the children's apparel retailer reported a narrower than expected fiscal first quarter loss but weaker than expected revenues.

Apparel maker Oxford Industries (OXM) is also likely to see initial weakness after reporting a steep fiscal first quarter loss on revenues that came in below analyst estimates.

Shares of Amazon (AMZN) may pull back off yesterday's record highs after a report from the Wall Street Journal said the EU plans to file formal antitrust charges against the online retail giant over its treatment of third-party sellers.

Meanwhile, shares of Grubhub (GRUB) are likely to see initial strength after the food delivery company agreed to be acquired by Europe's Just Eat Takeaway.com in an all-stock deal valued at $7.3 billion.

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