US Stock Futures Tread Water Ahead Of PPI Data — Strategist Warns Of 3 Looming Risks To Record Rally

U.S. stock futures flatlined early Thursday as the market was coming from two consecutive record-setting sessions. Traders may also have to contend with the producer price inflation and weekly jobless claims reports, which have read-throughs for the Federal Reserve’s rate decision.

The market has reacted tepidly to the cloud and database giant Oracle (ORCL), with the stock gaining only modestly in extended trading.

As of 1:30 a.m. ET on Thursday, the Dow, S&P 500, Nasdaq 100 and Russell 2000 futures were all marginally lower.

Stocks weathered a mid-session sell-off on Wednesday as traders remained invested, holding onto rate-cut hopes. Eight of the 11 S&P 500 sector classes closed in the green, with IT, consumer staple and communication stocks bucking the uptrend.

The market leadership has shifted to small caps from their larger counterparts, as rate cuts are expected to benefit the former disproportionately.

The Invesco QQQ Trust (QQQ), an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index, ended up 0.05%, and the SPDR S&P 500 ETF (SPY) gained 0.34%. The SPDR Dow Jones Industrial Average ETF Trust (DIA) and iShares Russell 2000 ETF (IWM) rallied 1.07% and 1.94%, respectively.

On Thursday, the Bureau of Labor Statistics is scheduled to release its jobless claims report for the week ended Aug. 9 at 8:30 a.m. ET.  The Producer Price Index report for July is also due at 8:30 a.m. ET.

Richmond Fed President Tom Barkin is scheduled to make a public appearance at 2 p.m. ET.

Advance Auto Parts (AAP), Deere (DE), JD.com (JD), NetEase (NTES), Weibo (WB), Applied Materials (AMAT) and Sandisk (SNDK) are among the noteworthy companies scheduled to report earnings on Thursday.

Even as the market shows exuberance despite the prevalence of multiple headwinds, an investment strategist warned of three looming risks.

Morgan Stanley Chief Investment Officer at the Wealth Management business said the labor market was slowing, as non-farm payroll disappoints, continuing claims rise and hiring rates decline.

She also noted that second-quarter corporate earnings are weaker than the headline metrics would suggest, with only a few sectors showing substantial gains. The tariffs will likely perk up pricing pressure, Shalett added.

The strategist recommended adding exposure to real assets, such as gold, real estate investment trusts (REITs), energy infrastructure, and industrial and agricultural commodities. “It may also be wise to take an active stock-selection approach to U.S. large-cap quality stocks,” she added.

Crude oil futures rebounded modestly early Thursday, and gold futures edged up marginally above the $3,400 level.

The 10-year U.S. Treasury yield fell further after sliding 5.5 basis points to 4.238%. In the currency market, the U.S. dollar traded little changed against most counterparts, although it fell sharply against the yen.

The major Asian markets traded mixed, with the Nikkei 225 average selling off amid the yen’s strength.

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