Market Analysis

The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction following the rally seen in the previous session.

Traders may be reluctant to make significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

The report is expected to show employment increased by 250,000 jobs in July after jumping by 372,000 jobs in June. The unemployment rate is expected to hold at 3.6 percent.

The strength of the jobs report could impact the outlook for interest rates, although the Federal Reserve will have much more data to digest before their next meeting in September.

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 30th.

The report showed initial jobless claims crept up to 260,000, an increase of 6,000 from the previous week’s revised level of 254,000.

Economists had expected jobless claims to inch up to 259,000 from the 256,000 originally reported for the previous week.

The Commerce Department released a separate report this morning showing the U.S. trade deficit narrowed by more than expected in the month of June.

Stocks moved sharply higher during trading on Wednesday, offsetting the pullback seen over the first two sessions of the week. The rally lifted the tech-heavy Nasdaq to a three-month closing high, while the S&P 500 reached its best closing level in almost two months.

The major averages pulled back off their highs going into the close but held on to strong gains. While the Nasdaq spiked 319.40 points or 2.6 percent to 12,668.16, the S&P 500 surged 63.98 points or 1.6 percent to 4,155.17 and the Dow jumped 416.33 points or 1.3 percent to 32,812.50.

The rebound on Wall Street partly reflected a positive reaction to some upbeat U.S. economic data, which helped ease concerns about a recession.

A report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July.

The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to economists, who had expected the index to dip to 53.5.

The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month.

"Looking ahead, services activity will be fairly muted as hot inflation, tighter financial conditions, supply chain stress, downbeat sentiment and softening spending restrain growth," said Oren Klachkin, Lead US Economist at Oxford Economics.

"The recovery's best days are clearly in the rear-view mirror, but this doesn't mean an economic downturn has begun," he added. "We think fundamentals are strong enough to prevent a recession this year, though the window to achieving a softish landing is narrowing."

A separate report from the Commerce Department showed a significant increase in new orders for U.S. manufactured goods in the month of June.

The report showed factory orders shot up by 2.0 percent in June after surging by an upwardly revised 1.8 percent in May.

Economists had expected factory orders to advance by 1.1 percent compared to the 1.6 percent jump originally reported for the previous month.

Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 3.9 percent to its best closing level in almost two months.

Substantial strength was also visible among biotechnology stocks, as reflected by the 3.8 percent spike by the NYSE Arca Biotechnology Index.

Moderna (MRNA) helped lead the biotech sector higher, surging by 16 percent after reporting better than expected second quarter results.

Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 2.7 percent to a nearly two-month closing high.

Brokerage, retail and computer hardware stocks also saw considerable strength on the day, while energy and gold stocks the uptrend amid decreases in commodities prices.

Commodity, Currency Markets

Crude oil futures are inching up $0.19 to $90.85 a barrel after plunging $3.76 to $90.66 a barrel a barrel on Wednesday. Meanwhile, after falling $13.30 to $1,776.40 an ounce in the previous session, gold futures are jumping $22.90 to $1,799.30 an ounce.

On the currency front, the U.S. dollar is trading at 133.86 yen versus the 133.49 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0187 compared to yesterday’s $1.0166.

Asia

Asian stocks ended mostly higher on Thursday as encouraging U.S. data and earnings helped ease recession concerns.

The dollar index held steady, while U.S. Treasury yields pulled back somewhat after touching two-week highs on Wednesday.

Oil traded flat in Asian trading after falling around 4 percent to almost six-month lows in the U.S. trading session overnight as data showed crude and gasoline stockpiles unexpectedly surged last week.

Chinese shares rose notably as U.S. House Speaker Nancy Pelosi left Taiwan after a trip that defied a series of stark threats from Beijing. China said military exercises by its navy, air force and other departments are underway in six zones surrounding Taiwan.

The benchmark Shanghai Composite Index climbed 0.8 percent to 3,189.04, while Hong Kong's Hang Seng Index jumped 2.1 percent to settle at 20,174.04, led by gains in the tech sector.

Japanese shares advanced despite Toyota Motor, the country's largest automaker, posting a large drop in quarterly earnings

The Nikkei 225 Index gained 0.7 percent to finish at 27,932.20, while the broader Topix closed marginally lower at 1,930.73 after swinging between gains and losses throughout the session.

Casio Computer surged 6.3 percent and Subaru added 8.5 percent after reporting positive earnings.

Advantest and Tokyo Electron both rose over 3 percent after the Philadelphia Semiconductor Index gained 2.7 percent overnight.

Toyota lost 3 percent as it reported a 42 percent decline in quarterly operating profits, hit by supply constraints and rising costs.

Seoul shares gained ground on foreign buying. The Kospi rose 0.5 percent to 2,473.11. Korean Air Lines jumped 5.2 percent and LG Electronics climbed 2.4 percent.

Australian markets ended a choppy session on a flat note. Financials and tech stocks topped the gainers list, offsetting losses in the mining and energy sectors. Altas Arteria gained 3.5 percent after IFM Investors increased its stake in the toll road developer.

Europe

European stocks are broadly higher on Thursday after data showed German factory orders fell less than feared in June. Orders declined by 0.4 percent from May, while analysts had predicted a 0.9 percent drop.

On an annual basis, factory orders fell 9 percent following a revised 3.2 percent decrease a month earlier, according to data released by Destatis.

U.S.-China tensions remained on investors' radar after China said that it conducted "precision missile strikes" in the Taiwan Strait as part of military exercises that have raised tensions in the region to their highest level in decades.

The German DAX Index is up by 1 percent and the French CAC 40 Index is up by 0.8 percent, while the U.K.’s FTSE 100 Index is up by 0.6 percent after the Bank of England announced its biggest interest rate hike since 1995.

The Bank of England’s monetary policy committee voted 8-1 to raise the bank rate by 50 basis points to 1.75 percent, the highest rate since December 2008. This marked the sixth consecutive rate hike.

Credit Agricole has surged after the French lender posted better-than-expected quarterly profits, driven by record activity in its investment banking division.

Commodity trader Glencore has also advanced in London after profits more than doubled to a record in the first half of the year.

Fashion retailer Next has also shown a significant move to the upside after raising its profit forecast.

Lufthansa shares have also jumped after the German airline returned to operating profit in the second quarter, thanks to booming demand for air cargo flights.

Sportswear firm Adidas has also rallied despite second-quarter earnings and revenue falling short of expectations.

On the other hand, Dutch lender ING Group has moved notably lower after reporting a decline in second-quarter net profit.

Rolls-Royce shares have also slumped. The aero-engine maker has warned of looming economic challenges after reporting a bigger-than-expected decrease in first-half profit.

Danish medical device company Ambu has also moved to the downside after slashing its margin forecast and announcing job cuts.

U.S. Economic Reports

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 30th.

The report showed initial jobless claims crept up to 260,000, an increase of 6,000 from the previous week’s revised level of 254,000.

Economists had expected jobless claims to inch up to 259,000 from the 256,000 originally reported for the previous week.

The Commerce Department released a separate report this morning showing the U.S. trade deficit narrowed by more than expected in the month of June.

The report showed the trade deficit narrowed to $79.6 billion in June from a revised $84.9 billion in May. Economists had expected the trade deficit to shrink to $81.9 billion from the $85.5 billion originally reported for the previous month.

The decrease in the size of the trade deficit came as the value of exports surged by 1.7 percent to $260.8 billion, while the value of imports edged down by 0.3 percent to $340.4 billion.

At 12 pm ET, Cleveland Federal Reserve President Loretta Mester is scheduled to participate in a fireside chat conversation before the Economic Club of Pittsburgh.

Stocks In Focus

Shares of Alibaba (BABA) are moving notably higher in pre-market trading after the Chinese e-commerce giant reported better than expected quarterly results.

Insurance company Cigna (CI) is also likely to see initial strength after reporting second quarter results that beat analyst estimates and raising its full-year guidance.

Meanwhile, shares of Clorox (CLX) may come under pressure after the consumer products company reported fiscal fourth quarter earnings that matched analyst estimates but weaker than expected revenues.

Drug maker Eli Lilly (LLY) is also likely to see initial weakness after reporting second quarter results that missed expectations and lowering its full-year forecast.