Why US Futures Are Marginally Down on Thursday Ahead of Fed's Stance
Dec 5, 2024 at 11:36 AM
On Thursday, U.S. stocks find themselves on the cusp of a potentially weak opening. This comes after an impressive close at record highs on Wednesday. The futures of all three major indices show a marginal decline, indicating a sense of caution on Wall Street. The tentativeness in these futures is a direct response to Federal Reserve chair Jerome Powell's efforts to downplay expectations of swift rate cuts. Powell cited a strong economy and uncertainty about inflation as key factors. He stated, "The labor market is better, and the downside risks appear to be less in the labor market. Growth is definitely stronger than we thought, and inflation is coming [out] a little higher." This cautious stance has led to a reevaluation of market expectations. Unraveling the Dynamics of U.S. Stocks on Thursday
Performance of Major Indices
In the premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY fell 0.03% to $607.46, and the Invesco QQQ ETF QQQ declined 0.10% to $522.72. Looking at the individual indices, the Nasdaq 100 was down 0.10%, the S&P 500 by 0.02%, and the Dow Jones by 0.01%. The R2K showed a slight increase of 0.06%. These fluctuations in premarket trading give a glimpse into the early market sentiment.The previous session ended on a positive note, with all three major indices registering healthy gains. The Dow Jones settled above 45,000 for the first time, while the S&P 500 and Nasdaq solidified their positions. Crude oil prices also edged up ahead of the OPEC+ decision on production. Treasury yields rose after jobs data revealed that private payrolls came in lower than expected. In terms of economic data, U.S. private businesses added 146K workers to their payrolls in November, compared to a revised 184K gain in October and market estimates of 150K. U.S. factory orders rose by 0.2% from the previous month to $586.7 billion in October. However, the ISM services PMI fell to 52.1 in November from 56 in October and below market estimates of 55.5. Most sectors on the S&P 500 closed in the red, with energy, materials, and financial stocks taking the biggest hits. But consumer discretionary and information technology stocks defied the trend and closed higher.Analysts' Insights
Analysts at BlackRock Investment Institute are optimistic about American companies' growth in the coming year. Wei Li, the chief investment strategist at BlackRock Investment Institute, said during a media roundtable on Wednesday, "Currently, across all the scenarios in the outlook, the platform is gravitating towards the US corporate strength scenario, which is another way of calling for US exceptionalism." This bullish outlook is shared by Wells Fargo strategists, who expect a bull run in 2025 and target an S&P 500 level of 7,007. Christopher Harvey and his team at Wells Fargo believe, "On balance, we expect the Trump Administration to usher in a macro environment that is increasingly favorable for stocks at a time when the Fed will be slowly reducing rates."Ryan Detrick, the chief market strategist at Carson Group, also explained why bears should not bet against equities in December. He pointed out that when the S&P 500 was up 20% or more for the year heading into the final month, December has been up nine of the past 10 times. His analysis shows that big gains in November set equities on a path for a rally in the new year. "Do big monthly gains matter? We'd say yes, as the S&P 500 is up an average of 13.5% a year later and higher nearly 84% of the time after a calendar month gain of more than 5%."Stocks in Focus
MicroStrategy Inc. MSTR stock surged over 8% in premarket trading on Thursday after Bitcoin BTC/USD hit the long-awaited $100,000 mark for the first time in history late on Wednesday. Coinbase Global Inc. COIN also surged over 3%. However, SentinelOne Inc. S stock plunged 15% in premarket trading after the company missed earnings expectations. Synopsys Inc. SNPS stock fell over 7% after the software provider's guidance missed estimates. Five Below Inc. FIVE stock surged over 13% in premarket after the company raised guidance following strong Black Friday sales and a new CEO announcement. Investors are eagerly awaiting earnings results from Dollar General Corporation DG, Kroger Co. KR, and Lululemon Athletica Inc. LULU today.Commodities, Bonds, and Global Equity Markets
Crude oil futures surged in the early New York session, gaining 0.50% to hover around $68.88 per barrel. The 10-year Treasury note yield edged up to 4.207%. Major Asian markets ended mixed on Thursday, while European markets were in the green in early trading.Thursday's economic calendar includes the release of initial jobless claims data for November and U.S. trade deficit data for October, which will be released at 8:30 a.m. ET. This data is expected to provide further insights into the economic landscape and potentially impact market movements.In conclusion, Thursday's U.S. stock market presents a complex picture of cautious sentiment, market movements, and various factors at play. Analysts' expectations and economic data will continue to shape the market's trajectory in the coming days.
