In overnight trading on Thursday, stock futures remained relatively unchanged following a significant market surge that pushed indices to new heights. Investors are interpreting recent indicators of a weakening job market and subdued inflation as signs that the Federal Reserve may lower interest rates in the upcoming week. Futures for the Dow Jones Industrial Average showed little movement, while S&P 500 futures and Nasdaq 100 futures also hovered near the flatline.
On Thursday, the blue-chip Dow surged by more than 600 points, marking a historic close above 46,000 for the first time. Meanwhile, the S&P 500 saw an uptick of 0.9%, and the Nasdaq Composite advanced by 0.7%. All three major averages concluded the day at record levels, showcasing a robust market performance.
The latest Consumer Price Index (CPI) report indicated a month-to-month increase of 0.4% for August, exceeding the 0.3% forecast set by economists surveyed by Dow Jones. However, the 12-month increase of 2.9% aligned with expectations, suggesting a stable inflation rate in the long term. Despite this, the inflation report took a back seat to the latest weekly jobless claims data.
The weekly jobless claims report revealed a surprising jump to the highest level since October 2021, with claims for unemployment compensation increasing by 27,000 to a total of 263,000. This figure surpassed the expected total of 235,000. According to Seema Shah, chief global strategist at Principal Asset Management, the importance of the CPI report was overshadowed by the increase in jobless claims. She noted, "While the CPI report is slightly hotter than expected, it will not give the Fed a moment of hesitation when they announce a rate cut next week." Furthermore, the rise in jobless claims could heighten the urgency in the Fed's decision-making process.
Futures markets are currently pricing in a quarter percentage point rate cut at the conclusion of the Fed's meeting on September 17, according to the CME FedWatch tool. As a result, all three major averages have increased by approximately 1.6% week to date. The S&P 500 is on track for its best weekly performance since early August and its fifth positive week out of six. The Nasdaq is expected to achieve its second consecutive winning week, while the Dow is poised for its first positive week in three, indicating a sustained upward trend in the market.
