Stocks retreated Thursday as investors’ attention remained focused on the health of the economy, and how it could affect the Federal Reserve’s monetary policy pathway
Futures for the Dow Jones Industrial Average slipped 40 points, or 0.1%, after the index advanced 416 points Wednesday to close at 32,812. S&P 500 futures signaled a start less than 0.1% into the red with the tech-stock-heavy Nasdaq set to lose 0.2%; the S&P 500 and Nasdaq rallied 1.6% and 2.6% on Wednesday, respectively.
After notching gains on Wednesday in a session that snapped two days of losses, stocks were more muted Thursday as investors readied for the U.S. jobs report on Friday, which has loomed as one of the most important events of the week.
“One thing we can say for sure is that August hasn’t been dull so far and we’ve only had three days,” said Jim Reid, a strategist at Deutsche Bank. “Stock futures in the U.S. are pausing for breath.”
The economy remains in sharp focus amid expectations that the Fed will continue its pathway of aggressively tightening monetary policy in a bid to tame red-hot inflation, which is at its highest in four decades.
The Fed has already raised interest rates four times this year, including two mega-size, 75 basis-point rate increases in June and July—the biggest since 1994—and is expected to keep raising rates this year before cooling off in 2023. The risk is that denting economic demand, while it should bring inflation under control, could cause a recession.
Signs that the economy is weakening, such as a deterioration of the labor market that would be revealed in U.S. payrolls data, could stem the pace of the Fed’s tightening. Before Friday’s jobs data, the day ahead includes more economic indicators including jobless claims for last week and the trade deficit for June.
“The narratives at the moment are struggling to be consistent though as equities have recently rallied on weaker growth that has been seen as helping to limit how far the Fed can hike,” said Reid. “However yesterday equities rallied on stronger economic data regardless of the potential Fed impact.”
Earnings season remains in sharp focus, with companies including Alibaba (ticker: BABA), ConocoPhillips (COP), AMC Entertainment (AMC), Block (SQ), Lyft (LYFT), and Warner Bros Discovery (WBD) reporting results.
In the commodity space, oil prices were slipping again after plummeting on Wednesday following a surprise surge in inventories and the OPEC+ group of national producers’ decision to increase production by 100,000 barrels a day.
Futures for U.S. benchmark West Texas Intermediate crude fell less than 0.5% to below $90.50 a barrel, having traded as high as $96 on Wednesday.
“A break below $90 is now a very real possibility which is quite remarkable given how tight the market remains and how little scope there is to relieve that,” said Craig Erlam, an analyst at broker Oanda. “But recession talk is getting louder and should it become reality, it will likely address some of the imbalance.”
Here are five stocks on the move Thursday:
SoftBank Group (9984.Japan) gained 2.6% in Tokyo and Alibaba rose 1% in U.S. premarket trading following a report that the Japanese tech investor has positioned itself to sharply sell down its 24% stake in the Chinese e-commerce giant.
Fortinet (FTNT) tumbled 8% in the premarket, after the software group slashed its forecast for fiscal-year service revenue to $2.62 billion to $2.67 billion, down from previous guidance as high as $2.7 billion. The company said it expects full-year adjusted earnings in the range of $1.01 to $1.06 a share, compared with Wall Street’s consensus estimate of $1.03. Fortinet guided for revenue in the range of $4.35 billion to $4.4 billion, while analysts expected $4.39 billion.
Booking Holdings (BKNG) dropped 3% in the premarket, after the online travel agency posted better-than-expected financial results but provided a cautious outlook for the September quarter. The company’s CEO said on the earnings call that the pace of bookings growth has moderated since the end of the quarter.
Albemarle (ALB) jumped 5% in the premarket, after the lithium miner crushed second-quarter earnings expectations as well as its own guidance, posting a per-share profit of $3.45 from $1.48 billion in sales. Wall Street had been expecting a per-share profit of $3.04 from sales of $1.43 billion.
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