Inventory futures are flat as unemployment claims rise unexpectedly
US stock index futures were unchanged as an unexpected surge in unemployment claims kept investors nervous about the economy.
Futures contracts pegged to the Dow Jones Industrial Average fell 22 points from their night session highs. S&P 500 futures were flat. Nasdaq 100 futures added 0.06%.
Unemployment claims rose unexpectedly last week to 419,000, higher than Dow Jones’ 350,000 estimate and more than the previous period’s revised upward of 368,000, the Department of Labor reported Thursday.
The 10-year government bond yield ticked lower after the report.
“There is no question that the rise in unemployment claims is an unwelcome surprise and a dent in further improving the employment front,” Mike Loewengart, managing director of investment strategy at E-Trade, told CNBC. “The disappointing number could be an initial shock to the system, but many might view this as short-term volatility in the labor market until the benefits wear off. For the most part, the market has shaken off Monday’s sell-off in favor of strong gains, allowing market watchers to see the forest from the trees in this scenario. “
The Dow is up 0.3% over the week and is less than 1% off a record high. The 10-year Treasury yield rose slightly to 1.29% on Thursday, after falling to 1.17% earlier in the week that startled stocks.
A strong reporting season for the second quarter continues, with AT&T stock up 1% after earnings and sales surpassed analyst estimates. CSX rose 2% after railroad profits more than doubled in the second quarter.
However, Texas Instruments will weigh on technology stocks, which fell more than 4% in early trading. The chipmaker beat expectations for the second quarter, but cautioned that third-quarter results could fall short of analysts’ estimates.
On Wednesday, the Dow gained 286 points, or 0.83%, while the S&P climbed 0.82%. The Nasdaq Composite was the relative outperformer with a gain of 0.92%. Energy was the top performing S&P group, gaining 3.5% as oil prices rebounded.
Wednesday’s gains built on Tuesday’s strong session, and large averages have now offset losses from Monday’s sell-off. The Dow lost more than 700 points earlier in the week as rising Covid cases worldwide depressed sentiment. The 10-year Treasury yield fell to a five-month low at the beginning of the week, which also led investors to sell stocks. On Wednesday, the 10-year yield rose 8 basis points to 1.29%.
“The truth is that investors have been very spoiled by recent stock market performance,” said Ryan Detrick, LPL Financial’s chief market strategist. “Incredibly, we haven’t seen as much as a 5% decline since October. While we firmly believe this bull market is alive, we shouldn’t pretend trees grow forever. The risk is undoubtedly decreasing to when we approach “the difficult months of August and September.”
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A busy week of earnings continues on Thursday. DR Horton, Southwest Air, Abbott Labs and Union Pacific are among the names on deck before the opening bell. Intel, Twitter, Snap and Capital One will post quarterly updates after the market closes.
American Airlines posted a profit in the second quarter and posted a streak of five consecutive quarters of losses thanks to the recovery in travel demand and state aid. The stock, which was up 8% this week, was down more than 1% in pre-trading hours.
So far, according to Refinitiv, 15% of the S&P 500 has reported gains, with 88% beating earnings estimates. 84% of the companies reported exceeded their sales expectations.
“We expect the sloppy trade to continue in the seasonally weak summer months; however, our baseline scenario remains that the primary trend remains higher for the next 12 months, ”Keith Lerner, Chief Market Strategist at Truist, wrote in a customer note. “The S&P 500, which hit a new record high last week, has had one of the longest periods in the last decade without a decline of just 5%,” he added.
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