Cautious optimism hangs in the air on Thursday morning as index futures traded up moderately in early hours. The earnings season also heats up with more financial companies and streaming giant Netflix, Inc. (NASDAQ:NFLX) scheduled to release quarterly results. Economic data on the housing market and the manufacturing sector, along with comments from Federal Reserve officials, may also impact the market.

Cleveland Fed President Loretta Mester, in a speech after the market closed on Wednesday, said the central bank needn’t rush to cut rates, but at some point when inflation eases closer to the 2% target, it could loosen its monetary policy stance. Meanwhile, Fed Governor Michelle Bowman commented that progress on curbing inflation has slowed and may have even stalled.

Futures Performance On Thursday ( as of 6:00 a.m. EDT)

Cues From Previous Session:

The lean patch on Wall Street continued on Wednesday despite the bond yields coming off recent highs. The culprit this time around was the premonition of potential earnings slowdown, especially from red-hot AI-levered companies, after Dutch semiconductor-equipment maker ASML Holding N.V. (NASDAQ:ASML) was disappointed with a first-quarter revenue miss.

Mortgage Bankers’ Association’s weekly mortgage applications volume data showed that 30-year fixed mortgage rates rising to their highest level since December 2023, also stirred inflation worries and weighed down on sentiment.

The major indices opened higher but reversed course immediately after, declining through the morning and hitting the day’s low by the mid-session. Although the averages recouped some of the losses, they languished in the red for much of the remainder of the session.

The S&P 500 Index and the Nasdaq Composite extended the losing streak to four and settled at fresh two-month lows.

Insights From Analysts:

The recent market shakeout should not sound alarm bells, according to LPL Chief Technical Strategist Adam Turnquist. But he conceded that there has been some technical damage. “The S&P 500 is experiencing its first real bout of volatility this year. The April showers — bringing a 3.9% decline thus far,” he said. The analyst sees the psychological level of 5,000 as the next major downside support for the S&P 500 Index.

The shorter-term breadth, according to the analyst, appeared oversold but the longer-term breadth metrics have held up well. Nearly 70% of the S&P 500 constituents remained above their 200-day moving average, he noted.

Turnquist also derived encouragement from the fact that cyclical/offensive sectors are leading the way, with financials, energy, industrials, technology, and materials reporting the highest breadth readings. “The lack of major damage to longer-term breadth across the offensive sectors suggests bullish leadership is still on stable ground despite the recent shakeout,” he said.

Carson Group’s Ryan Detrick pointed to another encouraging historical trend. Sharing a chart on X, formerly Twitter, the analyst said, “Election years tend to chop around until Memorial Day, then a summer rally is quite normal.”

Morgan Stanley’s Lisa Shalett recommended investors should consider rebalancing their portfolios, taking profits in richly valued equities, and adding yield and value. This is based on the assumption that the Fed is left with two options amid inflation that is not slowing anymore, she said.

“The central bank could either keep rates high, causing potential pain for certain sectors, or preemptively cut rates, risking policy predictability,” she said.

Upcoming Economic Data:

The Labor Department is scheduled to release its weekly jobless claims data at 8:30 a.m. EDT. The number of individuals claiming unemployment benefits may have come in at 215,000 in the week ended April 13, up from 211,000 in the previous week.

The results of the Philadelphia Fed’s manufacturing survey, due at 8:30 a.m. EDT, may show that the diffusion index of manufacturing activity slipped from 3.2 in March to 2.5 in April. A reading above “0” indicates expanding activity.

The National Association of Realtors is scheduled to release its existing home sales for March at 10 a.m. EDT. Economists, on average, expect the reading to come in at 4.17 million units, down from February’s 4.38 million units.

The Conference Board will release its leading economic index for March at 10 a.m. EDT. The index is expected to slip 0.1% month-over-month, reversing the 0.1% increase in February, when it rose for the first time in two years.

The Treasury will auction four- and eight-week bills at 11:30 a.m. EDT and 5-year TIPS at 1 p.m. EDT.

Among the Fed speeches due for the day are:

• Bowman: 9:05 a.m. EDT
• New York Fed President John Williams: 9:15 a.m. EDT
• Atlanta Fed President Raphael Bostic: 11:00 a.m. EDT, 5:45 p.m. EDT

See also: Best Futures Trading Software

Stocks In Focus:

• Jabil, Inc. (NYSE:JBL) rose over 5% in premarket trading after the company’s board declared a dividend.
• Micron Technology, Inc. (NASDAQ:MU) added about 2% after a Bloomberg report said the Biden administration could announce $6 billion in grants to the company under the CHIPS Act.
• Alaska Air Group, Inc. (NYSE:ALK), Blackstone Inc. (NYSE:BX), Comerica, Inc. (NYSE:CMA), Ally Financial Inc. (NYSE:ALLY), D.R. Horton, Inc. (NYSE:DHI), KeyCorp (NYSE:KEY) and Marsh & McLennan Companies, Inc. (NYSE:MMC) are among those reporting earnings ahead of the market open.
• Notable names reporting after the close are Intuitive Surgical, Inc. (NASDAQ:ISRG) and Netflix.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures have pulled back toward the $81-a-barrel mark, dragged by four straight sessions of losses. Gold futures, meanwhile, rebounded from Wednesday’s decline, but traded shy of the $2,400 mark. The yield on the U.S. 10-year note was little changed under the 4.60% mark.

Bitcoin (CRYPTO: BTC) fell about 2.75% over the past 24 hours and traded near the $61,600 level.

While Asian stocks recovered from their recent weakness, the European markets were mostly higher in early trading. The Euro STOXX 50 Index was up 0.40% at the last check.

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