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U.S. Stock Futures Edge Up as Jobless Claims Fall

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05/28/2020 | 08:55am EDT

By Joe Wallace and Frances Yoon

The rally in U.S. stocks appeared set to continue Thursday, with futures holding small gains after data showed a drop in the number of Americans filing for unemployment -- albeit from historically high levels.

Futures tied to the S&P 500 ticked up 0.2%, suggesting the benchmark could open higher. Contracts linked to the Dow Jones Industrial Average rose 0.7%. The blue-chips gauge closed above 25000 for the first time since early March on Wednesday, and posted its largest two-day advance in over a month.

U.S. workers filed just over 2.1 million jobless claims last week, extending a downward trend, but remaining multiple times higher than before coronavirus.

Investors were also monitoring growing strains between the U.S. and China, which have prompted concerns about a revival in the trade war that rocked markets last year. The House passed a bill late Wednesday that would sanction Chinese officials involved in the suppression of Muslim minority groups.

The move came just hours after the State Department determined that Hong Kong no longer has a high degree of autonomy from China, opening the way for President Trump to take a range of steps including revoking special arrangements on trade. China on Thursday hardened its stance, forging ahead with a resolution to impose national-security laws on Hong Kong in a bid to crush anti-Beijing protests.

"It's just another potential concern on top of Covid," said Brian O'Reilly, head of market strategy at Italian asset manager Mediolanum. "Whether we actually get into trade war 2.0 -- I think even in a second term for Trump, they'd be reticent to go down that path."

Hong Kong's Hang Seng Index fell 0.7% by the close of trading. The resolution passed by China's legislature would allow senior lawmakers in Beijing to write legislation to prevent and punish acts of separatism, subversion, terrorism and foreign interference in Hong Kong. The laws would then be promulgated by the city's leader. The resolution would also allow mainland Chinese state-security agencies to operate officially in Hong Kong, according to the draft.

"Investors are worried about whether that means there could be new trade barriers introduced," said Chang Wei Liang, a strategist at DBS Bank. "This will be lingering on investors' minds until we get clarity on what the U.S. intends to do with Hong Kong."

Other international markets climbed. The Stoxx Europe 600 rose 1.2%, led by gains in health care and telecommunication stocks. Japan's Nikkei 225 jumped 2.3% by the close of trading.

Before the bell in New York, shares in Boeing rose 6% after the aerospace giant laid out plans to cut more than 13,000 jobs. Shares in HP Inc. fell 6.5% after the information-technology company's first-quarter profit fell and it pulled financial projections for the year.

Among European stocks, easyJet rose 4% after the airline said it plans to cut 30% of its workforce.

Stocks are likely to pull back at some point given the degree of uncertainty surrounding the global economy as lockdown measures are relaxed, said Michael Drummey, head of U.S. equity risk trading at Mizuho Americas LLC. "The market is acting in a way that doesn't really line up with that uncertainty," he said. "We have a FOMO rally -- a fear of missing out."

A key question for investors is whether economically sensitive stocks can extend their recent rally, said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "It's been the most beaten-up sectors that have really caught the bounce," he said, pointing to gains for shares in U.S. banks and travel companies.

Shares in technology companies have paused in recent days, having powered much of the recovery in U.S. stocks since March. They could come under further pressure in response to a draft executive order that Mr. Trump is expected to sign Thursday, Mr. Gimber said. The order would seek to limit the broad legal protection that federal law currently provides social-media and other online platforms, according to people familiar with the draft.

China's yuan weakened to as low as 7.1872 to the U.S. dollar in offshore markets, putting it close to its weakest levels since offshore trading was allowed in 2010. Later in the day, the currency regained ground, rallying to 7.1681 per dollar.

Tensions between Washington and Beijing have pushed the yuan lower, said Paul Sandhu, head of multiasset quantitative solutions for Asia-Pacific at BNP Paribas Asset Management. Another factor building pressure on the currency: Chinese investors are pursuing returns in overseas markets.

Write to Joe Wallace at Joe.Wallace@wsj.com and Frances Yoon at frances.yoon@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BNP PARIBAS -0.89% 36.28 Real-time Quote.-30.71%
BOEING COMPANY (THE) 0.27% 180.81 Delayed Quote.-44.65%
DJ INDUSTRIAL 0.36% 25827.36 Delayed Quote.-9.82%
DRAFT INC. -1.43% 1035 End-of-day quote.0.00%
EASYJET PLC 2.25% 699.6 Delayed Quote.-51.97%
EURO / US DOLLAR (EUR/USD) 0.08% 1.12437 Delayed Quote.0.35%
HANG SENG 1.03% 25351.9 Real-time Quote.-10.99%
HP INC. 0.41% 17.07 Delayed Quote.-16.93%
NASDAQ 100 0.61% 10341.891881 Delayed Quote.18.42%
NASDAQ COMP. 0.52% 10207.628547 Delayed Quote.13.76%
NIKKEI 225 0.72% 22306.48 Real-time Quote.-6.39%
S&P 500 0.45% 3130.01 Delayed Quote.-3.12%
SEEK LIMITED 1.27% 22.27 End-of-day quote.-1.24%
STOXX EUROPE 600 -0.78% 365.43 Delayed Quote.-11.43%
STOXX EUROPE 600 NR -0.77% 800.22 Delayed Quote.-10.14%
THE GLOBAL LTD. 0.97% 209 End-of-day quote.-55.63%
THE NEW HOME COMPANY INC. 0.63% 3.2 Delayed Quote.-31.33%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.00% 7.06855 Delayed Quote.1.52%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.01% 7.0656 Delayed Quote.1.56%
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