The major U.S. index futures are currently pointing to a modestly higher open on Thursday, with stocks likely to add to yesterday’s gains in early trading.
The markets may continue to benefit from optimism about the outlook for interest rates following the release of the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday.
The minutes reinforced expectations of a rate cut next month, as a “vast majority” of participants said it would “likely be appropriate” to lower rates at the next meeting if inflation data continued to come in “about as expected.”
Trading activity may be somewhat subdued, however, as the Kansas City Fed’s Jackson Hole Economic Symposium gets underway later in the day.
Fed Chair Jerome Powell is scheduled to speak at the symposium in Jackson Hole, Wyoming, on Friday, with traders looking for the central bank chief’s comments to provide further clarity about the outlook for rates.
Ahead of Powell’s remarks, CME Group’s FedWatch Tool indicate a 71.5 percent of a quarter point rate cut next month and a 28.5 percent chance of a half point rate cut.
Following the modest pullback seen in Tuesday’s session, stocks moved back to the upside during trading on Wednesday. The major averages fluctuated over the course of the trading day but managed to close in positive territory.
The Nasdaq and the S&P 500 closed higher for the ninth time in the past ten sessions. The Nasdaq climbed 102.05 points or 0.6 percent to 17,918.99 and the S&P 500 rose 23.73 points or 0.4 percent to 5,620.85, while the narrower Dow inched up 55.52 points or 0.1 percent to 40,890.49.
The higher close on Wall Street came after the Federal Reserve released the minutes of its latest monetary policy meeting, which seemingly provided additional support for expectations of an interest rate cut in September.
The minutes of the Fed’s late July meeting revealed that the “vast majority” of participants believed it would “likely be appropriate” to lower rates at the next meeting if inflation data continued to come in “about as expected.”
Reports released by the Labor Department last week showed the annual rates of consumer and producer price growth slowed in line or slightly more than economists had forecast in July.
Fed officials unanimously agreed to leave interest rates unchanged at the meeting, although the minutes noted several participants observed that the progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range by 25 basis points at the July meeting.
“The Fed minutes removed all doubt about a September rate cut,” said Jamie Cox, Managing Partner for Harris Financial Group. “The Fed’s communication strategy is to make its meetings less of a market moving event, and they are following the script to the letter.”
Stocks saw considerable volatility early in the session after the Bureau of Labor Statistics released revised data showing job growth in the U.S. was weaker than previously reported in the twelve months ended March 2024.
The BLS said the U.S. economy added 818,000 fewer jobs from March 2023 to March 2024 than initially reported, reflecting 0.5 percent weaker job growth.
While the data added to recent optimism about an interest rate cut next month, the slower than previously reported job growth also rekindled concerns about the strength of the labor market.
Housing stocks saw substantial strength on the day amid optimism about lower interest rates, resulting in a 2.7 percent surge by the Philadelphia Housing Sector Index.
Toll Brothers (NYSE:TOL) helped lead the sector higher, with the homebuilder spiking by 5.6 percent after reporting better than expected fiscal third quarter results and raising its full-year guidance.
Significant strength was also visible among steel stocks, as reflected by the 2.5 percent jump by the NYSE Arca Steel Index.
Semiconductor, retail and computer hardware stocks also saw notable strength on the day, while networking stocks gave back ground after moving sharply higher in recent sessions.