The major U.S. index futures are currently pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction following the rally seen over the course of the previous session.

Traders may take a step back to assess the outlook for the markets following yesterday’s surge, which lifted the Nasdaq and the S&P 500 to new record closing highs.

Trepidation ahead of Friday’s closely watched monthly jobs report may also keep some traders on the sidelines, as the data could have a significant impact on the outlook for interest rates.

The Labor Department report is expected to show employment increased by 185,000 jobs in May after climbing by 175,000 jobs in April, while the unemployment rate is expected to remain at 3.9 percent.

A day ahead of the release of the monthly jobs report, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended June 1st.

The Labor Department said initial jobless claims climbed to 229,000, an increase of 8,000 from the previous week’s revised level of 221,000.

Economists had expected jobless claims to inch up to 220,000 from the 219,000 originally reported for the previous week.

Stocks moved sharply higher over the course of the trading day on Wednesday, adding to the modest gains posted during Tuesday’s session. With the rally on the day, the Nasdaq and the S&P 500 reached new record closing highs.

The Nasdaq and the S&P 500 saw further upside going into the close, reaching new highs for the session. The Nasdaq surged 330.86 points or 2.0 percent to 17,187.90 and the S&P 500 jumped 62.69 points or 1.2 percent to 5,354.03, while the narrower Dow posted a more modest gain, rising 96.04 points or 0.3 percent to 38,807.33.

The surge by the Nasdaq came as tech stocks continued to take their cues from Nvidia (NASDAQ:NVDA), as the AI darling soared by 5.2 percent to a new record closing high.

Last month, Nvidia announced a ten-for-one stock split, with holders of the company’s common stock as of the close of trading on Thursday set receive nine additional shares.

The advance by Nvidia contributed to strength in the broader semiconductor sector, resulting in a 4.5 percent spike by the Philadelphia Semiconductor Index.

Semiconductor equipment manufacturers Applied Materials (NASDAQ:AMAT) and KLA Corp. (NASDAQ:KLAC) also posted standout gains after Barclays upgraded its rating on the stocks to Equal-Weight from Underweight.

Computer hardware stocks are also saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 3.4 percent.

Shares of Hewlett Packard Enterprise (NYSE:HPE) skyrocketed by 12.0 percent after the technology company reported fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

Networking, software and biotechnology stocks also saw notable strength, while gold, housing and airline stocks turned in some of the best performances outside the tech sector.

The strength on Wall Street also came as a report from payroll processor ADP showing private sector job growth in the U.S. slowed by more than expected in the month of May added to optimism about the outlook for interest rates.

ADP said private sector employment climbed by 152,000 jobs in May after jumping by a downwardly revised 188,000 jobs in April.

Economists had expected private sector employment to increase by 173,000 jobs compared to the addition of 192,000 jobs originally reported for the previous month.

Treasury yields moved lower following the release of the jobs data, with the ten-year yield falling to its lowest levels in two months.

Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing service sector activity returned to growth in the month of May after contracting in April for the first time since December 2022.

The ISM said its services PMI jumped to 53.8 in May from 49.4 in April, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 50.8.

With the much bigger than expected increase, the services PMI reached its highest level since hitting 54.1 in August 2023.

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