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U.S. Stocks May See Early Strength As Traders Digest Fed Announcement

Stocks are likely to move to the upside in early trading on Thursday as traders continue to digest yesterday’s Federal Reserve announcement. The major index futures are currently pointing to a notably higher open for the markets, with the S&P 500 futures up by 0.8 percent.

The upward momentum on Wall Street comes amid easing concerns the Fed’s next monetary policy move could actually be an interest rate hike rather than a cut, which Fed Chair Jerome Powell called “unlikely” in his post-meeting press conference.

“A market concern coming into [yesterday’s] FOMC meeting was that the Fed might shift gears to a more hawkish tone, including potential rate hikes, based on recently hotter CPI readings,” said Larry Tentarelli, Chief Technical Strategist, Blue Chip Daily Trend Report.

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“Powell seemed to push back on the idea of rate hikes,” he added. “His early commentary today was that the FOMC believes that current rates are restrictive and are weighing on demand. Powell also stated that the Fed believes that ‘policy stance is appropriate to the current situation.'”

The Fed’s next monetary policy meeting is scheduled for June 11-12, with the central bank likely to leave rates unchanged once again.

On the U.S. economic front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits remained flat in the week ended April 27th.

The report said initial jobless claims came in 208,000, unchanged from the previous week’s upwardly revised level. Economists had expected jobless claims to inch up to 212,000 from the 207,000 originally reported for the previous week.

A separate report released by the Labor Department showed labor productivity in the U.S. increased by less than expected in the first quarter of 2024.

The Labor Department said labor productivity rose by 0.3 percent in the first quarter after spiking by a revised 3.5 percent in the fourth quarter.

Economists had expected productivity to climb by 0.8 percent compared to the 3.2 percent surge that had been reported for the previous quarter.

Meanwhile, the report said unit labor costs soared by 4.7 percent in the first quarter following a revised unchanged reading in the fourth quarter.

Economists had expected labor costs to shoot up by 3.2 percent compared to the 0.4 percent increase that had been reported for the previous quarter.

The Commerce Department also released a report showing the U.S. trade deficit narrowed to $69.4 billion in March from a revised $69.5 billion in February

Economists had expected the trade deficit to inch up to $69.1 billion from the $68.9 billion originally reported for the previous month.

Not long after the start of trading, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of March. Factory orders are expected to surge by 1.6 percent in March after jumping by 1.4 percent in February.

After turning in a lackluster performance for much of the session, stocks saw substantial volatility following the Federal Reserve’s monetary policy announcement Wednesday afternoon. The major averages initially surged in reaction to the Fed announcement but pulled back going into the close.

The major averages eventually finished the day mixed. While the Dow rose 87.37 points or 0.2 percent to 37,903.29, the Nasdaq fell 52.34 points or 0.3 percent to 15,605.48 and the S&P 500 dipped 17.30 points or 0.3 percent to 5,018.39.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday. While Hong Kong’s Hang Seng Index surged by 2.5 percent, Japan’s Nikkei 225 Index edged down by 0.1 percent and South Korea’s Kospi dipped by 0.3 percent.

The major European markets have also turned mixed on the day. While the French CAC 40 Index is down by 0.6 percent, the German DAX Index is up by 0.1 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.

In commodities trading, crude oil futures are climbing $0.63 to $79.63 a barrel after plummeting $2.93 to $79 a barrel on Wednesday. Meanwhile, after rising $8.10 to $2,311 an ounce in the previous session, gold futures are edging down $2.10 to $2,308.90 an ounce.

On the currency front, the U.S. dollar is trading at 154.51 yen versus the 154.57 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0710 compared to yesterday’s $1.0712.

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