U.S. stock futures higher after upward GDP revision, jobless claims data

What’s driving markets

U.S. stock index futures rose on Thursday morning after data showed the economy grew at a solid 2% annual rate in the first quarter of 2023, while the weekly jobless benefit claims dropped to four-week low, pointing to continued strength in the U.S. labor market.

Gross domestic product was revised up from a previously reported 1.3% growth rate, the Commerce Department said Thursday, undercutting widespread expectations that the U.S. economy is heading toward a recession.

The U.S. economy is also expected to expand between 1% to 2% in the second quarter that ends on Friday, based on the most recent Wall Street forecasts.

Meanwhile, the number of Americans who applied for unemployment benefits last week fell to a one-month low of 239,000. New jobless claims declined by 26,000 from a revised 265,000 in the prior week.

Earlier Federal Reserve Chair Jerome Powell, as well as his colleagues from Europe and Japan, each reinforced their willingness to combat inflation at the ECB annual forum in Sintra, Portugal on Wednesday. Powell reiterated the theme in Madrid, Spain on Thursday the risks of “overdoing” or “underdoing” rate hikes still are not in the balance yet.

“In the beginning, there was a little risk of overdoing it and a lot of risk of underdoing it. As you get closer and closer to where you think you’re going to your destination, those risks begin to become more into balance,” said Powell, in comments made during a panel discussion at the Bank of Spain’s financial stability conference. “I wouldn’t say they’re in balance yet.”

See: Powell says risks of ‘overdoing’ or ‘underdoing’ rate hikes still aren’t in balance yet

The yield on the 2-year Treasury
TMUBMUSD02Y,
4.865%
gained 17 basis points to trade at 4.878% on Thursday morning from 4.77% in the previous session.

Late Wednesday the Fed also published the results of its annual bank stress tests and all 23 banks passed after looking at how lenders would fare against a cumulative $541 billion of losses. “The events of the past couple of months would have been much more difficult to manage had the largest banks been undercapitalized or illiquid,” said Powell.

The broader backdrop is a market in which the S&P 500 index has gained 14% this year. Mark Newton, head of technical strategy at Fundstrat, says the S&P 500 looks ready to get to 4,500, while small caps could outperform. “While some view this current rally as being unusual, it rarely pays to fade rallies which many don’t understand, and have been fighting,” said Newton.

“Rather, it’s wise to wait until real speculative behavior gets underway, and/or a drying up in buying. Neither one has occurred at present,” he said.

Companies in focus

• Micron Technology shares
  MU,
  +0.42%
   gained in premarket trade after the chip maker’s results came in better than anticipated.

• Rite Aid Corp.’s
  RAD,
  -4.40%
   stock rose after the drugstore chain surprised investors with a narrower-than-expected loss for its fiscal first quarter and better-than-expected revenue.

• Overstock.com Inc.
  OSTK,
  +6.11%
   were up after the company said it had acquired Bed Bath & Beyond’s brand and intellectual property.

• American Outdoor Brands Inc. 
  AOUT,
  +4.32%
   jumped after hours after the maker of outdoor products and accessories reported a surprise quarterly adjusted profit and said it sees long-term, positive trends for its business.

• Virgin Galactic Holdings Inc.’s 
  SPCE,
  +9.22%
   stock rose in premarket trades as the company was making its preparations for its first commercial spaceflight Thursday.