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Lingering Coronavirus Fears May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower opening on Thursday, with stocks likely to see initial weakness following the lackluster performance in the previous session.

Lingering concerns about a second wave of coronavirus infections may weigh on the markets amid the rising number of cases in Beijing as well as several U.S. states.

Beijing has reportedly closed schools and canceled flights to contain the latest coronavirus outbreak, which has purportedly led to more than 100 new confirmed cases.

Meanwhile, CNN analysis of data from Johns Hopkins University found ten U.S. states are seeing their highest seven-day average of new coronavirus cases per day since the pandemic started.

CNN said the states seeing record-high averages are Alabama, Arizona, California, Florida, Nevada, North Carolina, Oklahoma, Oregon, South Carolina and Texas.

The rising number of new cases in Oklahoma has not dissuaded President Donald Trump from plans to hold a massive indoor rally in Tulsa on Saturday.

Negative sentiment may also be generated in reaction to a report from the Labor Department showing first-time claims for U.S. unemployment benefits fell by much less than expected in the week ended June 13th.

After moving significantly higher over the course of the three previous sessions, stocks turned in a lackluster performance during trading on Wednesday. The major averages spent the day bouncing back and forth across the unchanged line before closing mixed.

Snapping three-day winning streaks, the Dow slid 170.37 points or 0.7 percent to 26,119.61 and the S&P 500 fell 11.25 points or 0.4 percent to 3,113.49, while the tech-heavy Nasdaq rose 14.66 points or 0.2 percent to 9,910.53.

The choppy trading on Wall Street came as traders paused to digest the volatility seen in the markets over the past few weeks.

Stocks showed a strong move to the upside earlier this month, with the tech-heavy Nasdaq hitting a new record high and the Dow and the S&P 500 reaching their best levels in over three months.

Profit taking contributed to a sharp pullback by the markets last week, although the upward move seen over the three previous sessions largely offset the drop.

Traders were also weighing recent data pointing to a quick economic recovery against reports showing a spike in new coronavirus cases and hospitalizations in a number of southern states.

In congressional testimony, Federal Reserve Chair Jerome Powell warned that there continues to be significant uncertainty about the economic outlook.

"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it," Powell said. "Until the public is confident that the disease is contained, a full recovery is unlikely."

On the U.S. economic front, the Commerce Department released a report showing a notable rebound in new residential construction in May, although housing starts still came in well below economist estimates.

The report said housing starts jumped by 4.3 percent to an annual rate of 974,000 in May after plummeting by 26.4 percent to a revised rate of 934,000 in April.

Economists had expected housing starts to soar by 22.9 percent to a rate of 1.095 million from the 891,000 originally reported for the previous month.

Meanwhile, the Commerce Department said building permits spiked by 14.4 percent to an annual rate of 1.220 million in May after plunging by 21.4 percent to a revised rate of 1.066 million in April.

Building permits, an indicator of future housing demand, had been expected to surge up by 14.3 percent to a rate of 1.228 million from the 1.074 million originally reported for the previous month.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Energy stocks showed a substantial move to the downside, however, with a drop by the price of crude oil weighing on the sector.

Reflecting the weakness in the sector, the Philadelphia Oil Service Index plunged by 4.1 percent, the NYSE Arca Oil Index dove by 3.7 percent and the NYSE Arca Natural Gas Index tumbled by 2.9 percent.

Significant weakness was also visible among banking stocks, as reflected by the 2.3 percent slump by the KBW Bank Index.

Telecom, steel and networking stocks also gave back ground following yesterday's gains, while strength among semiconductor and biotechnology stocks contributed to the uptick by the tech-heavy Nasdaq.

Commodity, Currency Markets

Crude oil futures are inching up $0.15 to $38.11 a barrel after falling $0.42 to $37.96 a barrel on Wednesday. Meanwhile, after edged down $0.90 to $1,735.60 an ounce in the previous session, gold futures are sliding $6.20 to $1,729.40 an ounce.

On the currency front, the U.S. dollar is trading at 106.84 yen versus the 107.01 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1228 compared to yesterday's $1.1244.

Asia

Asian stocks fell broadly on Thursday as the rising number of coronavirus cases in Beijing as well as several U.S. states dampened investor euphoria over the potential economic recovery.

With the road back from recession likely to take some time, Federal Reserve Chair Jerome Powell urged Congress on Wednesday not to pull back too quickly on federal relief for households and small businesses.

Chinese shares recovered from an early slide to end on a positive note after China's central bank governor said he wants the flow of credit in the economy to increase to at least 30 trillion yuan ($4.2 trillion) this year.

The benchmark Shanghai Composite Index crept up 3.44 points, or 0.1 percent, to 2,939.32, while Hong Kong's Hang Seng Index edged down 16.47 points, or 0.1 percent to 24,464.94.

Japanese shares extended losses from the previous session as the yen strengthened on concerns over a second wave of coronavirus infections in Beijing and the U.S.

The Nikkei 225 Index ended down 100.30 points, or 0.5 percent, at 22,355.46, while the broader Topix closed down 4 points, or 0.3 percent, at 1,583.09.

Automakers Honda Motor, Toyota and Nissan fell between 0.6 percent and 1.7 percent. Mazda Motor shares tumbled 2.7 percent.

Market heavyweight SoftBank Group rallied 2.9 percent, while Fast Retailing shed 1.7 percent. Oil company Inpex lost 1.8 percent and Japan Petroleum gave up 0.8 percent.

Australian markets declined, with mining and energy stocks succumbing to heavy selling pressure on news of a spike in coronavirus cases across the United States and China.

The benchmark S&P/ASX 200 Index shed 55.30 points, or 0.9 percent, to close at 5,936.50 as Australia's trade minister warned of a possible ban on international travelers until 2021. The broader All Ordinaries Index ended down 57.20 points, or 0.9 percent, at 6,051.90.

Mining heavyweights BHP and Rio Tinto fell around 1 percent as prices of Chinese iron ore futures on the Dalian Commodity Exchange declined on worries about surplus risks. Smaller rival Fortescue Metals Group tumbled 4.2 percent.

The big four banks fell between 0.3 percent and 1 percent, while energy companies ended on a mixed note.

Ampol, previously known as Caltex Australia, declined 2.4 percent. The refiner and fuel retailer said it will not provide any profit outlook for the half year ending June 30 due to the business disruption from the Covid-19 pandemic and continued hydrocarbon market volatility.

The unemployment rate in Australia came in at a seasonally adjusted 7.1 percent in May - missing forecasts for 7.0 percent and up from the upwardly revised 6.4 percent in April (originally 6.2 percent).

The Australian economy shed 227,700 jobs last month to 12,154,100 - again missing estimates for a decline of 125,000 following the loss of 594,300 in the previous month.

Seoul stocks ended modestly lower on concerns over a second wave of coronavirus infections and the country's tensions with North Korea. The benchmark Kospi ended down 7.57 points, or 0.4 percent, at 2,133.48.

Europe

European stocks have moved significantly lower during trading on Thursday amid continued worries about a second wave of coronavirus infections.

The markets came under pressure after the Bank of England increased the size of its quantitative easing program and left its record low interest rate unchanged.

The monetary policy committee headed by Andrew Bailey decided to lift the asset purchase program by 100 billion pounds to 745 billion pounds.

While the U.K.'s FTSE 100 Index has slumped by 0.9 percent, the German DAX Index and the French CAC 40 Index are down by 1.2 percent and 1.3 percent, respectively.

Homebuilder Taylor Wimpey has come under pressure after it raised 522 million pounds ($655.2 million) in a share placing, subscription and retail offer to pursue additional land-acquisition opportunities.

Wirecard AG shares have also moved sharply lower. The payments firm said the auditor EY has informed the company that an audit certificate for financial statements for fiscal 2019 requires additional audits.

Wind turbine maker Siemens Gamesa Renewable Energy has also slumped after terminating CEO Markus Tacke's contract.

On the other hand, shares of Wincanton have risen after the third-party logistics company announced that it has received an additional contract from Wm Morrison Supermarkets Plc.

German online fashion retailer Zalando has also surged higher. The company said it is expecting a bigger increase in sales and operating profit in the second quarter than analysts are forecasting.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 13th, although claims fell by much less than expected.

The Labor Department said initial jobless claims dropped to 1.508 million, a decrease of 58,000 from the previous week's upwardly revised level of 1.566 million.

Economists had expected jobless claims to tumble to 1.300 million from the 1.542 million originally reported for the previous week.

Meanwhile, the Philadelphia Federal Reserve released a separate report showing an unexpected expansion in regional manufacturing activity in the month of June.

The Philly Fed said its diffusion index for current general activity soared to a positive 27.5 in June from a negative 43.1 in May, with a positive reading indicating an expansion in regional manufacturing activity.

Economists had expected the index to show a much more modest increase to a negative 23.0, which would have still indicated a contraction.

The Conference Board is due to release its report on leading economic indicators in the month of May at 10 am ET. The leading economic index is expected to climb by 1.7 percent in May after tumbling by 4.4 percent in April.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month's auctions of two-year, five-year and seven-year notes.

Minneapolis Federal Reserve President Neel Kashkari is also due to give opening remarks at a "Higher Ed: Who Pays?" Opportunity & Inclusive Growth Institute virtual conference hosted by the Minneapolis Fed at 11 am ET.

At 12:15 pm ET, Cleveland Fed President Loretta Mester is scheduled to speak at the Global Interdependence Center on the Fed's response to Covid-19.

San Francisco Fed President Mary Daly is due to deliver a virtual commencement address to the Preuss School at the University of California, San Diego, at 7 pm ET.

Stocks In Focus

Shares of Carnival Corp. (CCL) are moving sharply lower in pre-market trading after the cruise line operator reported a much wider than expected preliminary fiscal second quarter loss.

U.S. Steel (X) is also likely to come under pressure after the steelmaker forecast a much wider than expected second quarter loss.

On the other hand, shares of Spotify (SPOT) may see initial strength amid news the music streaming service has struck deals with Kim Kardashian West and DC Entertainment for exclusive podcasts.

For comments and feedback contact: editorial@rttnews.com

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