Trading in U.S. index futures indicates a potential strong rebound in stocks on Thursday, as traders gear up for the traditional Santa Claus rally that typically extends from the week following Christmas to the first two sessions of the new year. Micron Technology, Inc.’s MU positive earnings report could provide a catalyst to buy the dip seen in stocks on Wednesday.

The jobless claims report, third-quarter GDP inflation readings, and the leading economic index may influence trading decisions. Traders might exercise caution until the release of the personal consumption expenditure index on Friday, known as the Fed’s preferred inflation gauge.

Cues From Wednesday’s Trading:

U.S. stocks experienced a significant pullback on Wednesday as profit-taking triggered a sell-off. Given that major averages entered the session at either record highs or the highest levels in two years, traders demonstrated restraint. The Dow Industrials and the Nasdaq Composite had enjoyed a nine-session winning streak before the session, and the S&P 500 had risen in eight out of the past seven sessions.

While the indices initially opened lower, they later recovered and traded mostly sideways, slightly above the unchanged line. However, in late afternoon trading, they pulled back and experienced a notable decline to close significantly lower.

The selling was widespread, affecting consumer, financial, and utility stocks, which faced the most significant losses.

US Index Performance On Wednesday

Index Performance (+/-) Value
Nasdaq Composite -1.50% 14,777.94
S&P 500 Index -1.47% 4,698.35
Dow Industrials -1.27% 37,082.00
Russell 2000 -1.89% 1,982.84

Analyst Color

Fund Strat’s Tom Lee, who has the best S&P 500 forecast, said he sees Wednesday’s sell-off as a profit-taking. “Are bears gonna get ‘face ripped’ next 6 days?” he asked. Lee is optimistic about the momentum continuing into the new year, attributing his optimism to a capex cycle that is getting started, the Fed’s pivot, and pessimism of investors giving way to optimism.

On the other hand, Comerica Chief Investment Officer John Lynch is not that optimistic. “We look for equity market growth to approximate profit growth next year as elevated market interest rates suggest little-to-no room for P/E multiple expansion,” he said. 

“Our below consensus S&P 500® EPS forecast of 8.0% suggests the Index would be fairly valued in the 4,750 range by the end of 2024,” he added.
Futures Today

Futures Performance On Thursday

Futures Performance (+/-)
Nasdaq 100 +0.69%
S&P 500 +0.42%
Dow +0.42%
R2K +0.88%

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY rose 0.46% to $470.40 and the Invesco QQQ ETF QQQ gained 0.68% to $405.82, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is scheduled to release the weekly jobless claims report for the recent reporting week at 8:30 a.m. ET. The number of individuals claiming unemployment benefits may have risen from 202,000 in the week ended December 9 to 214,000 in the week ended December 16.

The Bureau of Economic Analysis is due to release the revised third-quarter GDP report at 8:30 a.m. ET. Economists, on average, expect the third-quarter growth to be left unrevised at 5.2%.

The Philadelphia Federal Reserve will release the results of its regional manufacturing survey at 8:30 a.m. ET. The diffusion index of business activity, the headline number of the report, is expected to show continued contraction for December. The index is expected to improve from -5.9 in November to -3 in December. A reading of ‘0’ demarcates expansion and contraction.

The Conference Board is scheduled to release its leading economic index at 10 a.m. ET. The index for November is expected to decline 0.4% month-over-month, a smaller drop than October’s 0.8% drop.

The Treasury will auction four-week and eight-week notes at 11:30 a.m. ET and five-year TIPS at 1:30 p.m. ET.

See also: Futures Vs. Options

Stocks In Focus:

  • Micron climbed about 6% in premarket trading in reaction to its quarterly results.
  • Apogee Enterprises, Inc. APOG, CarMax, Inc. KMX, Carnival Corporation & plc CCL, Cintas Corporation CTAS, and Paychex, Inc. PAYX are among the companies due to release their quarterly results before the market open.
  • AAR Corp. AIR, Nike, Inc. NKE, and Worthington Steel, Inc. WS are scheduled to report after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 0.44% to $73.89 in early European session on Thursday following Wednesday’s 1.06% gain.

The benchmark 10-year Treasury note rose 0.006 percentage points to 3.883% on Thursday.

The major Asian markets were mixed yet again on Thursday, with the Japanese Nikkei plummeting amid profit-taking. On the other hand, the Chinese market rebounded from its recent losses.

European stocks traded lower in late trading on Thursday, with the Euro STOXX 50 Index declining 0.50%.

Read Next: 5 ETFs To Keep An Eye On As Market Anticipates Fed’s Preferred Inflation Gauge This Friday