Market Analysis

The major U.S. index futures are currently pointing to a notably lower open on Thursday, with stocks likely to extend the sell-off seen in the previous session.

Lingering concerns about the global economy are likely to continue to weigh on Wall Street, dragging the S&P 500 closer to bear market territory.

The S&P 500 is currently about 18 percent below its record closing high, just of the 20 percent decline that signals a bear market.

Traders remain worried that aggressive interest rate hikes by the Federal Reserve could lead to a period of stagflation or an outright recession.

After showing a strong upward move in Tuesday’s session, stocks showed a substantial move back to the downside during trading on Wednesday. With the steep drop on the day, the Dow and the S&P 500 ended the session at their lowest closing levels in over a year.

The major averages saw continued weakness late in the session, ending the day near their worst levels. The Dow plunged 1,164.52 points or 3.6 percent to 31,490.07, the Nasdaq plummeted 566.37 points or 4.7 percent to 11,418.15 and the S&P 500 tumbled 165.17 points or 4 percent to 3,923.68.

Retail stocks helped lead the markets lower on the day, with the Dow Jones U.S. Retail Index plunging by 7.7 percent to its lowest closing level in almost two years.

Target (TGT) posted a particularly steep loss after the discount retailer reported quarterly earnings that missed analyst estimates.

Substantial weakness was also visible among transportation stocks, as reflected by the 7.4 percent nosedive by the Dow Jones Transportation Average.

Housing stocks also saw significant weakness on the day, dragging the Philadelphia Housing Sector Index down by 4.6 percent.

Semiconductor, computer hardware, brokerage and steel stocks also showed notable moves to the downside amid broad based weakness on Wall Street.

On the U.S. economic front, a report released by the Commerce Department showed a modest decrease in new residential construction in the month of April.

The Commerce Department said housing starts edged down by 0.2 percent to an annual rate of 1.724 million from a revised rate of 1.728 million in March.

The slight drop in housing starts came as single-family housing starts plunged by 7.3 percent to an annual rate of 1.100 million.

Meanwhile, the report showed building permits, an indicator of future housing demand, tumbled by 3.2 percent to an annual rate of 1.819 million from a revised rate of 1.879 million in March.

Commodity, Currency Markets

Crude oil futures are slumping $2.98 to $106.61 a barrel after plunging $2.81 to $109.59 a barrel on Wednesday. Meanwhile, after slipping $3 to $1,815.90 an ounce in the previous session, gold futures are climbing $17 to $1,832.90 an ounce.

On the currency front, the U.S. dollar is trading at 127.28 yen versus the 128.23 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0536 compared to yesterday’s $1.0464.

Asia

Asian stocks tumbled on Thursday after U.S. retail giants Target and Walmart missed earnings expectations by wide margins and issued back-to-back profit warnings, raising concerns over downside risks to growth.

Chinese shares eked out modest gains amid signs of easing COVID-19 restrictions. The benchmark Shanghai Composite Index rose 0.4 percent to 3,096.96. Hong Kong's Hang Seng Index plunged 2.5 percent to 20,120.68 after Tencent reported a halving in its quarterly profit. Shares of the tech behemoth plummeted 6.5 percent.

Japanese shares lost ground as exports growth data for April fell short of expectations. Separate data showed that the country's core machinery orders rose 7.1 per cent in March from the previous month, versus a 3.7 percent increase expected by economists.

The Nikkei 225 Index tumbled 1.9 percent to 26,402.84, snapping a four-day rally on concerns that surging inflation would eat into corporate profits and usher in an economic slowdown.

Tech and auto issues led losses, with heavyweight SoftBank Group declining 1.6 percent. Staffing agency Recruit Holdings and retailer Seven & i Holdings both fell around 4 percent.

Australian markets gave up last three days of gains as retailers succumbed to heavy selling pressure on fears of rising fuel and freight costs. The benchmark S&P/ASX 200 Index fell 1.7 percent to 7,064.50, while the broader All Ordinaries Index closed 1.7 percent lower at 7,303.30.

Wesfarmers plunged 7.8 percent to hit a one-and-a-half year low, JB Hi-Fi slumped 6.6 percent to reach a five-month low and Harvey Norman lost 5.5 percent to hit a nearly two-year low. Woolworths gave up 5.6 percent and its rival Coles tumbled 3.4 percent.

Banks and Miners also fell broadly while Aristocrat Leisure jumped 6.7 percent on share buyback news. Woodside Petroleum declined 2.8 percent after its shareholders overwhelmingly approved the company's $41 billion merger with BHP Petroleum.

In economic news, data showed Australia posted its lowest jobless rate in 48 years.

New Zealand shares ended modestly lower, with the benchmark NZX-50 Index closing 0.5 percent lower at 11,206.93.

Seoul stocks retreated to snap a two-day winning streak on inflation woes. The Kospi fell 1.3 percent to 2,592.34 after a massive sell-off on Wall Street overnight.

Europe

European stocks have fallen on Thursday, extending losses from the previous session, as mounting concerns over high inflation and slowing global growth sent investors flocking to the safe haven of the dollar and bonds.

It is feared that high inflation and the Fed's tightening monetary policy may weigh on corporate profit margins and consumer spending.

While the U.K.’s FTSE 100 Index has tumbled by 2.2 percent, the French CAC 40 Index is down by 2 percent and the German DAX Index is down by 1.7 percent.

Swiss lender Credit Suisse has moved sharply lower after a ratings downgrade by Fitch.

Budget carrier easyJet has also slumped in London despite reporting second quarter earnings and revenue that topped forecasts.

British Airways owner IAG has also declined after it agreed to buy 50 737 Max jets from Boeing Co., expected to be delivered between 2023 and 2027.

Deutsche Boerse has also fallen. Handelsblatt reported that public prosecutors in Germany have intensified their investigations into the company's possible involvement in alleged illegal cum-ex transactions.

Meanwhile, Italian insurer Assicurazioni Generali has risen after it posted a better-than-expected net profit for the first quarter, despite impairments on its Russian investments.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits unexpectedly increased in the week ended May 14th, according to a report released by the Labor Department on Thursday.

The report showed initial jobless claims rose to 218,000, an increase of 21,000 from the previous week’s revised level of 197,000.

Economists had expected jobless claims to edge down to 200,000 from the 203,000 originally reported for the previous week.

The Labor Department said the less volatile four-week moving average also climbed to 199,500, an increase of 8,250 from the previous week’s revised average of 191,250.

A separate report from the Federal Reserve Bank of Philadelphia showed a significant slowdown in the pace of growth in regional manufacturing activity.

The Philly Fed said its current general activity index tumbled to 2.6 in May from 17.6 in April, hitting its lowest level in two years.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to show a much more modest drop to 16.0.

Looking ahead, the Philly Fed said the survey’s future indexes remained positive but reflect muted optimism for growth over the next six months.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of April. Existing home sales are expected to decrease by 0.7 percent.

The Conference Board is also due to release its report on leading economic indicators in the month of April at 10 am ET. The leading economic index is expected to inch up by 0.1 percent.

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

Minneapolis Federal Reserve President Neel Kashkari is due to participate in an Urban Institute virtual conversation, Inflation and its Consequences for Families with Low and Moderate Incomes, at 4 pm ET.