Investing.com — Wall Street is set to open higher on Thursday, although recent U.S. retail data may dampen lingering optimism. Cisco is likely to take center stage after unveiling a restructuring plan, while the U.K. economy showed signs of growth in the second quarter.
1. Economic data in the spotlight
The parade of US economic data continues on Thursday as investors look for clues about the likely pace of interest rate cuts by the US Federal Reserve.
This week’s weak US inflation figures have largely cemented market confidence that the Fed will cut borrowing costs in September for the first time in over four years. However, the extent of the cut – the usual 25 basis points or a more aggressive 50 basis points – is still hotly debated.
The estimated probability of a 50 basis point cut fell to 36% after Wednesday’s release from 50% a day earlier. It rose to 71% earlier this month in the wake of surprisingly weak US labor market data.
The data list includes weekly data and that for August, but the July release will attract most attention since consumption accounts for about two-thirds of U.S. economic growth.
Monthly growth is expected to be 0.4%, a slight improvement from the previous month’s unchanged figure.
The central bank has kept its key overnight interest rate in the current range of 5.25 to 5.50 percent since last July, after raising its key rate by 525 basis points since 2022.
2. Futures rise ahead of data dump
U.S. stock futures rose on Thursday amid growing confidence that moderate inflation will prompt the Federal Reserve to cut interest rates next month.
At 04:20 ET (08:20 GMT), the contract was up 100 points, or 0.3 percent, climbing 8 points, or 0.1 percent, and rising 52 points, or 0.3 percent.
Major Wall Street indexes closed higher on Wednesday after the consumer price index for July showed an annual inflation rate of 2.9%, the lowest since 2021.
The blue-chip index rose by more than 240 points, or 0.6%, while the broad-based index rose by 0.4% and the technology-heavy stocks recorded only very slight gains.
Retail sales for July (see above) will be in the spotlight on Thursday as investors look for evidence of the strength of the overall economy, with easing inflation seemingly providing an opportunity for the Federal Reserve to cut interest rates in September.
In the corporate sector, retail giant Walmart (NYSE:) will release its earnings results before the market opens and provide further indications on the strength of consumer spending.
In addition, Ulta Beauty (NASDAQ:) shares rose premarket after Warren Buffett’s Berkshire Hathaway (NYSE:) announced a new stake in the cosmetics company. Nike (NYSE:) shares rose after Bill Ackman’s Pershing Square (NYSE:) disclosed a position in the athletic shoe retailer.
3. Cisco benefits from the restructuring plan
Cisco Systems (NASDAQ:) shares rose sharply in extended trading late Wednesday after the networking equipment giant reported better-than-expected fourth-quarter earnings and announced a restructuring plan.
At 8:20 a.m. ET, Cisco shares were up over 6% in premarket trading.
For the fourth quarter ended July 27, the company reported revenue of $13.64 billion, compared to an estimate of $13.54 billion. Adjusted earnings per share were 87 cents, compared to the estimate of 85 cents.
Cisco also announced plans for job cuts, announcing that the company will cut 7% of its global workforce. The company expects severance and other one-time compensation to cost up to $1 billion before taxes. The company also expects to take approximately $700 million to $800 million in charges in the first quarter of fiscal 2025.
“We completed fiscal 2024 with flying colors,” said Chuck Robbins, Cisco chairman and CEO. “In our fourth quarter, we saw robust customer demand with order growth across the company as customers trust Cisco to connect and protect all aspects of their organizations in the age of AI.”
4. The British economy grew by 0.6% in the second quarter
There is also great uncertainty over whether the ECB will cut interest rates at its next meeting after it launched a rate-cutting campaign with a narrow decision earlier this month.
A flood of earnings releases released on Thursday did little to clear up the confusion.
The UK recorded growth of 0.6% in the second quarter of this year, following a 0.7% increase in the first quarter, continuing the country’s cautious recovery from recession.
However, economic growth stagnated in June, declining from the previous month’s growth of 0.4 percent. Both industrial and manufacturing production fell sharply on an annual basis in the same month.
The UK economy has grown slowly since the Covid-19 pandemic, growing by just 2.3 percent between the fourth quarter of 2019 and the second quarter of 2024.
5. Crude oil price rises due to optimism about US interest rate cut
Crude oil prices rose on Thursday, buoyed by optimism that potential interest rate cuts in the US will boost the economy. However, gains were capped by a surprise increase in US inventories.
By 04:20 ET, futures (WTI) rose 0.3 percent to $77.19 a barrel, while the contract rose 0.43 percent to $79.97 a barrel.
Risk appetite has increased recently as favorable inflation data boosted expectations that the U.S. Federal Reserve will cut interest rates next month, which is likely to boost demand from the world’s largest consumer of crude oil.
However, both benchmarks fell more than 1% on Wednesday and gains in the session were capped by data showing that U.S. oil prices rose unexpectedly last week.
U.S. crude oil inventories rose by 1.4 million barrels in the week ended August 9, raising concerns about weaker demand in the future as the summer driving season draws to a close.
