US pre-open: Stocks seen lower as commodities decline

Stocks on Wall Street looked set for a downbeat open on Thursday, with oil and metals prices under the cosh as the dollar strengthened.

At 1120 GMT, Dow Jones Industrial Average, S&P 500 and Nasdaq futures were all down 0.5%.

Meanwhile, the main European indices were all over 1% weaker.

“The culprits are not difficult to find – a rising US dollar and weaker oil prices. The former continues to benefit from Fed policymaker comments that seem to suggest the dovish view of the recent FOMC meeting was not perhaps the correct one,” said Chris Beauchamp, senior market analyst at IG.

“Oil markets meanwhile seem to have rediscovered the massive supply overhang that, for various reasons, did not seem to matter over the past five weeks.”

Oil prices dropped after a report from the US Department of Energy showed crude stockpiles rose by 9.4m barrels in the previous week – a much larger increase than analysts had expected.

West Texas Intermediate was down 2% to $39.00 a barrel while Brent crude was 1.8% lower at $39.74.

Commodity prices slid on the back of a firmer dollar, which was boosted by recent comments from Federal Reserve officials who have put the possibility of a rate hike as soon as next month back on the table.

Although last week’s statement from the Federal Reserve was dovish, Fed officials have since expressed a much more bullish tone.

The greenback got a boost on Wednesday after St Louis Fed President James Bullard joined Lockhart and Williams in sounding a hawkish note on interest rates. He said “there was a credible case” to move in March and since this was not done, it could happen next month.

The dollar pushed higher on the comments as market participants readjusted their rate-hike expectations.

In corporate news, Yahoo was higher in pre-market trade following a report that hedge fund Starboard Value LP was looking to remove the entire board of the company.

On the data front, investors will eye the release of US initial jobless claims and durable goods orders at 1230 GMT, as well as Markit’s manufacturing PMI at 1345 GMT.

The labour data is expected to show initial jobless claims were unchanged this week compared to the last, with 265,000 Americans filing for unemployment benefits.

Durable goods orders, meanwhile, are expected to have edged down 0.7% in February following a big gain the previous month.