US stock futures rally ahead of Jackson Hole session

U.S. stock index futures rose early Thursday amid thin summer trading as investors awaited an update on the Federal Reserve’s thinking on Friday.

How stock index futures are traded
  • S&P 500 ES00 Futures,
    rose 37 points, or 0.9%, to 4,180

  • Dow Jones Industrial Average futures YM00,
    added 225 points, or 0.7%, to 33183

  • Nasdaq 100 NQ00 futures,
    rose 136 points, or 1.1%, to 13,066

On Wednesday, the Dow Jones Industrial Average DJIA,
The S&P 500 SPX rose 60 points, or 0.18%, to 32,969.
rose 12 points, or 0.29%, to 4141, and the Nasdaq Composite COMP,
gained 50 points, or 0.41%, to 12432. The S&P 500 is up 12.9% from its mid-June low, but remains down 13.1% for the year to date.

What drives the markets

S&P 500 futures rose in the early hours of Thursday, helped by signs that the world’s fourth-largest economy may be doing better than expected.

Stock index futures started to move higher after revised data showed Germany’s gross domestic product rose 0.1 percent in the second quarter. Analysts had not forecast growth due to fears that rising energy prices were curbing activity. Germany’s Ifo business sentiment index also did not fall as much as expected.

Also helping sentiment was news that Beijing is implementing an additional 1 trillion yuan ($146 billion) in measures to help revive an economy struggling with a severe slump in the real estate sector, a drought-related slowdown in output and extended COVID-19 outages.

However, the move in futures came in limited trading conditions. For example, in the previous session on Wall Street, only 8.8 billion shares were traded on the various exchanges. That was the lowest volume so far this year and was 26% below the daily average in 2022, according to Dow Jones data.

Activity was also limited by the reluctance of some investors to make bold bets ahead of Fed Chairman Jay Powell’s speech on Friday at the Jackson Hole conference.

Investors will analyze Powell’s comments for clues about the Fed’s policy direction, an issue that has largely determined the market’s trajectory of late.

“Markets have maintained a holding pattern, ahead of two important days that should provide further near-term guidance,” said Richard Hunter, head of markets at Interactive Investor.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said “the nervousness that swept through the indices earlier in the week has been kept at bay. The expectation that the Federal Reserve will keep interest rates on hold to reduce inflation has already been priced in to some extent.”

Investors were also treated to a decidedly mixed set of earnings reports from some old tech favorites that came out after the closing bell on Wednesday. Shares in Nvidia NVDA,
and Salesforce CRM,
were lower but Snowflake SNOW,
rose 17.3% after the numbers and forecasts were well received.

The tendency of many companies to highlight economic uncertainty when giving their earnings updates has colored the thinking of stock analysts and made some reluctant to see much more upside for the market for now.

“Our year-end S&P 500 target of 4200 reflects a balance of soft landing and recession scenarios,” Citi U.S. equities analyst Scott Chronert said in a note.

“With several months to go in the year, volatility related to the market’s interpretation of incremental macroeconomic and interest rate data points should be expected,” Chronert added.

US economic reports for Thursday include weekly initial jobless claims and the second reading of second-quarter GDP data, both due at 8:30am. east. The GDP data will also include the preliminary reading on corporate earnings for the second quarter.

How other assets work
  • Oil futures were flat with US crude CL.1,
    rose just 0.1% to $94.96 a barrel.

  • The yield on the 10-year Treasury TMUBMUSD10Y,
    fell 2 basis points to 3.088%

  • The ICE DXY Dollar Index,
    fell 0.4% to 108.27 points, helping gold GC00 rise;
    which rose 0.9% to $1,777 an ounce.

  • Bitcoin BTCUSD,
    rose 0.1% to $21721.

  • Asian markets received an additional boost from the latest stimulus measures in China. Hang Seng HSI of Hong Kong,
    the Shanghai Composite SHCOMP also rose 3.6%,
    rose 1%. In Europe, the Stoxx 600 SXXP,
    increased 1%.

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