The U.S. pre-market futures are showing a mildly positive outlook this morning, mirroring the upward trend observed at yesterday’s closing bell. Despite the seasonal decline in overall trading volume, the gains are encouraging. The Dow Jones Industrial Average has risen by 45 points, the S&P 500 by 11 points, and the Nasdaq by 63 points in early trading. Bond yields are also experiencing a slight cooling, with the 10-year yield at 3.83% and the 2-year yield at 3.97%.
On the economic front, new weekly jobless claims have remained relatively flat compared to last week’s figures. Initial jobless claims came in at 232,000 last week, slightly higher than the anticipated 230,000 and exceeding the revised 228,000 figure from the previous week. While a jump to 250,000 claims at the end of July initially suggested a potential unraveling in the labor market, that trend hasn’t materialized yet. Continuing claims, reported a week behind the new claims, reached 1.863 million, slightly above the revised 1.859 million from the previous week. This marks the 11th consecutive week with longer-term jobless claims exceeding 1.8 million, although there seems to be a plateau at current levels instead of a sharp rise towards 2 million. The psychological impact of a weakening labor market will become apparent once that threshold is crossed, but for now, we’re not there yet.
In the retail sector, high-end home furnishings retailer Williams-Sonoma (WSM) reported mixed results in its second-quarter report. Earnings of $1.74 per share exceeded expectations by a significant margin, but revenue for the quarter, at $1.79 billion, fell slightly short of the Zacks consensus of $1.82 billion. Same-store sales declined by 3.3% year over year, and guidance for the next quarter predicts flat earnings growth and a 3% decline in sales. This news has led to a 7% sell-off in early trading, although shares are still up more than 30% year to date.
At the other end of the consumer goods spectrum, discount warehouse club BJ’s Wholesale (BJ) outpaced estimates on both top and bottom lines. Earnings of $1.09 per share beat the Zacks consensus by 9 cents, while revenues of $5.21 billion surpassed expectations by 0.95%. Membership increased by 9% year over year. However, pre-market shares are down by 6% as investors seem to be taking a ‘sell the news’ approach following the stock’s impressive 30% gain year to date.
Later today, we can expect key economic data releases that could offer further insights into the state of the economy. The S&P flash PMI Services and Manufacturing results for August are anticipated, aiming to improve upon last month’s figures. In July, the Services PMI index came in at 55.0, indicating growth, while the Manufacturing PMI index reached 49.6. While strong numbers would be positive, weaker figures could provide support for a Fed rate cut next month, making this a ‘win-win’ scenario for some market participants. Existing Home Sales for July are projected to rise slightly from the 3.89 million seasonally adjusted, annualized units reported in June (the lowest monthly tally in 2024) to 3.95 million. However, a significant shift towards higher existing home sales levels is more likely to occur following a loosening of mortgage rate policy, directly tied to a Fed interest rate reduction at its meeting on September 18th. The last time existing home sales surpassed 4 million was in May of this year, and the last time they exceeded 5 million was in June of 2022.
