Market Snapshot: U.S. stock futures in holding pattern as attention turns to possible policy shift at ECB

MarketWatch - Financial Services Industry News

U.S. stock futures swung between small gains and losses on Thursday, with traders erring on the side of caution ahead of what could be a major announcement from the European Central Bank on its bond-buying program.

Investors were also digesting Wednesday’s rate rise from the Federal Reserve, while monitoring trade tensions between the U.S. and China.

What are markets doing?

Futures for the Dow Jones Industrial Average
YMU8, -0.01%
 dropped 4 points to 25,204, while those for the S&P 500 index
ESU8, +0.00%
rose 0.25 point to 2,779.25. Futures for the Nasdaq-100 index
NQU8, -0.09%
 fell 10.75 points, or 0.2%, to 7,220.25.

The mixed trading action premarket came after declines on Wednesday, when the main benchmarks ended near session lows. Stocks fell after the Fed raised interest rates and struck an unexpectedly hawkish tone for the rest of 2018. The central bank hinted at two more hikes this year, rather than the one additional move that had previously been predicted

The Dow
DJIA, -0.47%
 fell 0.5%, while the S&P 500
SPX, -0.40%
 dropped 0.4% and Nasdaq Composite Index
COMP, -0.11%
 ended 0.1% lower.

What is driving the market?

The listless trade in stock futures on Thursday came as central banks remained the order of the day. Meeting just a day after the Fed lifted interest rates for the second time this year, the ECB will be in the spotlight on Thursday with investors waiting eagerly for any comments on the bank’s quantitative easing program.

The €30 billion-a-month bond buys are slated to run at least until the end of September, but the ECB could extend it to continue supporting the economy and gradually taper the purchases. ECB President Mario Draghi may lay out the details at this meeting, but analysts say it’s a close call and that the central bank boss could postpone the QE announcement to July.

Read: Investors brace for ECB ‘close call’ on when to start winding down quantitative easing

Aside from the central banks, trade worries continued to be on traders’ minds on Thursday. President Donald Trump’s administration is preparing to announce tariffs on tens of billions of dollars in Chinese goods as early as Friday, a move that is feared to trigger retaliatory action by China.

What’s on the economic calendar?

Weekly jobless claims are on the docket at 8:30 a.m. Eastern Time, along with data on retail sales and the import-price index for May.

Business inventories for April are due at 10 a.m.

What are analysts saying?

“Four rate hikes for 2018 does not necessarily suggest that the end of the great bull market is at hand, but it has been enough to knock equities back this morning. After years of stasis in central banks, the developments are coming positively thick and fast,” said Chris Beauchamp, chief market analyst at IG, in a note.

“Jerome Powell’s Fed is clearly happy with the situation, feeling confident enough to knock the pace up a notch, and later today we will see if the ECB are in the mood to make a few changes too,” he added.

Which stocks are in focus?

Shares of Tailored Brands Inc.
TLRD, -2.76%
 tanked 18% ahead of the bell after the retailer late Wednesday reported comparable sales below analyst forecasts.

21st Century Fox Inc.
FOX, +7.48%
 added 2.4% premarket after Comcast Corp.
CMCSA, -0.19%
 on late Wednesday offered to buy a big chunk of Fox’s entertainment and international assets for $65 billion. That offer was about 19% higher than Walt Disney Co.’s
DIS, +1.90%
 offer. Disney shares were 0.4% lower before Thursday’s market open, while Comcast shared didn’t move.

Adobe Systems Inc.
ADBE, +1.40%
 is slated to report earnings after the market closes.

What are other markets doing?

Stocks in Asia closed lower across the board as traders there reacted to the Fed decision. The People’s Bank of China decided not to follow the Fed in raising interest rates, defying expectations that the Chinese policy makers would follow their usual pattern and respond with small hikes to Fed moves.

Europe was also covered in red, with the Stoxx Europe 600 index
SXXP, -0.50%
 down 0.5%.

The dollar declined against most other major currencies, sending the ICE U.S. Dollar Index
DXY, -0.23%
 0.4% lower to 93.343.

Crude oil prices
CLN8, +0.26%
 were slightly higher, while gold
GCQ8, +0.55%
 gained 0.6%.

U.S. yields were mostly lower, with the 10-year Treasury rate
TMUBMUSD10Y, -0.59%
 down 2.8 basis points at 2.952%.

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