Fed minutes, Threads unveiling, Yellen’s China visit – what’s moving markets

Minutes from the Federal Reserve’s latest meeting fuel expectations that the central bank will likely hike interest rates at its July gathering. Elsewhere, Meta launches its new social media platform Threads as chief executive Mark Zuckerberg takes aim at Elon Musk’s Twitter, while Treasury Secretary Janet Yellen heads to China in a bid to ease tensions between Washington and Beijing.

1. U.S. futures inch lower

U.S. stock futures pointed lower on Thursday, with investors digesting minutes from the Federal Reserve’s latest meeting that suggested some policymakers may be in favor of further interest rate hikes (see below).

At 05:00 ET (09:00 GMT), the Dow futures contract lost 144 points or 0.42%, S&P 500 futures shed 17 points or 0.39%, and Nasdaq 100 futures dropped by 62 points or 0.41%.

The main indices on Wall Street posted modest declines Wednesday in their return from the Fourth of July holiday. The broad-based Dow Jones Industrial Average shed 0.38%, while the benchmark S&P 500 fell by 0.20%, and the tech-heavy Nasdaq Composite dipped by 0.18%.

Second-half trading kicked off earlier this week. Stock markets in the U.S. performed strongly in the opening six months of the year thanks in part to excitement over developments in artificial intelligence, which helped mitigate fears over the outlook for the global economy.

2. More rate hikes ahead?

The Federal Reserve’s policy tightening campaign may have been paused last month but, if the minutes from the central bank’s June gathering are any indication, it may be about to resume soon.

Policymakers widely backed the move to keep borrowing costs temporarily steady, the minutes released on Wednesday showed. The decision ended a string of rate hikes at ten consecutive meetings, an unprecedented cycle brought on by the Fed’s desire to cool red-hot inflation.

The officials judged that a halt was appropriate in order to give them more time to assess how the surge in rates – the most aggressive since the early 1980s – was impacting wider economic activity.

However, “almost all” of them noted that further rate increases will likely be needed, albeit at a slower pace than their recent year-long series of hikes. Inflation, they added, remained “unacceptably high.”

In the wake of the minutes, traders mostly agreed that the Fed will bump up rates by another quarter point at its next meeting later this month. According to Investing.com’s Fed Rate Monitor Tool, the possibility of this hike stands at more than 90%.

3. Threads enters the fold

Facebook-owner Meta (NASDAQ:META) has officially unveiled Threads, a social media platform for short-text posts that is widely seen as a competitor to Elon Musk’s Twitter.

In its first seven hours, Threads, which can be accessed via Meta’s popular photo-sharing app Instagram, garnered some 10 million sign-ups, according to chief executive Mark Zuckerberg. Those included celebrities like Jennifer Lopez and Kim Kardashian and outspoken politicians such as Democratic U.S. Representative Alexandria Ocasio-Cortez.

Meta’s penchant for rolling out copycat services means that skepticism remains over whether Threads, pitched by Zuckerberg as a “friendly” alternative to Twitter, will be a success. That said, Meta’s stock climbed almost 3% on Wednesday.

Hovering in the background of the launch is the ongoing rivalry between Zuckerberg and Musk. The billionaires have exchanged barbs for months, even suggesting that they may settle their differences in a cage fight.

But the battle investors will likely be watching is Threads’ attempt to siphon off Twitter users disgruntled by Musk’s handling of the site.

4. Private payrolls data due as June jobs report looms

The rest of the shortened trading week is set to feature the release of key labor market data points, beginning with private payrolls for June and initial jobless claims later today.

Economists estimate that the ADP National Employment report will show that private payrolls increased by 228,000 last month, which would be a slower uptick than the 278,000 posted in May. Meanwhile, weekly initial jobless claims are seen rising to 245,000.

But the main event will be the publication of the Labor Department’s more comprehensive and closely monitored jobs report for June on Friday. The U.S. economy is expected to have added 225,000 jobs during the month, down from 339,000 in May.

5. Yellen visits China

U.S. Treasury Secretary Janet Yellen will begin a four-day visit to China on Thursday in an attempt to thaw recently frosty relations between Washington and Beijing.

Earlier this week, the latest salvo in the ongoing tensions saw China roll out export controls on key chipmaking materials. Chinese officials said the move aimed to safeguard “national security and interests.”

Export restrictions on semiconductors have become one flashpoint in the rivalry, with both sides attempting to hamstring the other’s development of high-technology industries. But other disagreements, particularly over relations with Taiwan, threaten to upend a decades-long investment and commercial relationship.

The Treasury Department says Yellen will meet with senior figures in China’s government during her trip, although expectations remain low that these discussions will result in any significant mending of the frayed ties.