Bigger Than Expected Increase In Jobless Claims May Generate Buying Interest
April 04 2024 - 9:05AM
IH Market News
The major U.S. index futures are currently pointing to a higher
open on Thursday, with stocks likely to move to the upside after
ending the previous session little changed.
The futures climbed more firmly into positive territory
following the release of a Labor Department report showing
first-time claims for U.S. unemployment benefits rose by more than
expected in the week ended March 30th.
The report said initial jobless claims climbed to 221,000, an
increase of 9,000 from the previous week’s revised level of
212,000.
Economists had expected jobless claims to inch up to 214,000
from the 210,000 originally reported for the previous week.
With the bigger than expected increase, jobless claims reached
their highs level since hitting 225,000 in the week ended January
27th.
The advance by jobless claims may generate optimism about the
outlook for interest rates, although traders may be reluctant to
make significant moves ahead of the release of the more closely
watched monthly jobs report on Friday.
Economists currently expected employment to jump by 200,000 jobs
in March after surging by 275,000 jobs in February, while the
unemployment rate is expected to hold at 3.9 percent.
A separate report released by the Commerce Department showed the
U.S. trade deficit unexpectedly widened in the month of
February.
Stocks recovered from an initial move to the downside and spent
most of Wednesday’s trading session in positive territory. Buying
interest waned in the latter part of the session, however, with the
major averages eventually ending the day narrowly mixed.
While the Dow edged down 43.10 points or 0.1 percent to
39,127.14, closing lower for the third consecutive session, the
S&P 500 crept up 5.68 points or 0.1 percent to 5,211.49 and the
Nasdaq rose 37.00 points or 0.2 percent to 16,277.46.
The early turnaround on Wall Street came following the release
of a report from the Institute for Supply Management showing an
unexpected slowdown in the pace of U.S. service sector growth in
the month of March.
The ISM said its services PMI dipped to 51.4 in March from 52.6
in February. While a reading above 50 still indicates growth in the
sector, economists had expected the index to inch up to 52.7.
Notably, the report also showed a substantial slowdown in the
pace of price growth in the sector, with the prices index tumbling
to 53.4 in March from 58.6 in February. The index fell to its
lowest level since March 2020.
The data helped ease recent concerns about the outlook for
interest rates, which contributed to a steep drop by stocks on
Tuesday.
Worries the Federal Reserve may hold off on lowering interest
rates also contributed to the early weakness on Wall Street after
payroll processor ADP released a report this morning showing
stronger than expected private sector job growth in the U.S. in the
month of March.
ADP said private sector employment jumped by 184,000 jobs in
March after climbing by an upwardly revised 155,000 jobs in
February.
Economists had expected private sector employment to increase by
148,000 jobs compared to the addition of 140,000 jobs originally
reported for the previous month.
Meanwhile, Fed Chair Jerome Powell reiterated during remarks at
Stanford University that the central bank is not in a hurry to
begin lowering interest rates.
Powell pointed to higher inflation data over January and
February as a reason for the Fed to be cautious but acknowledged it
is “too soon to say whether the recent readings represent more than
just a bump.”
“We do not expect that it will be appropriate to lower our
policy rate until we have greater confidence that inflation is
moving sustainably down toward 2 percent,” Powell said.
He added, “Given the strength of the economy and progress on
inflation so far, we have time to let the incoming data guide our
decisions on policy.”
The modest lower close by the Dow partly reflected steep drop by
shares of Intel (NASDAQ:INTC), with the semiconductor giant
plunging by 8.2 percent.
Intel came under pressure after disclosing a $7 billion
operating loss by its semiconductor manufacturing business in 2023,
wider than the $5.2 billion operating loss the year before.
Gold stocks saw significant strength on the day, driving the
NYSE Arca Gold Bugs Index up by 2.3 percent to its best closing
level in over ten months.The rally by gold stocks came as the price
of the precious metal jumped to a new record high.
Considerable strength was also visible among computer hardware
stocks, as reflected by the 2.1 percent jump by the NYSE Arca
Computer Hardware Index.
An increase by the price of crude oil also contributed to
notable strength among energy stocks, while housing stocks also
moved to the upside.
Intel (NASDAQ:INTC)
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