U.S. stock index futures edged lower on Thursday, signaling potentially heightened market volatility in the second year of the latest presidential term, as recent interventions in Venezuela were followed by new actions targeting the U.S. housing industry and defense sector.
As of writing, Dow Jones futures fell 0.36%, S&P 500 futures declined 0.20%, and Nasdaq futures dropped 0.28%.
Following calls for increased U.S. defense spending, European weapons manufacturers saw their shares climb to record highs on Thursday. On Wednesday, it was indicated that, after negotiations with U.S. senators and political representatives, next year's military budget had been set at $1.5 trillion.
S&P 500 futures retreated by 0.2%. This came after the benchmark index recorded its first daily decline of 2026 on Wednesday. Nasdaq 100 futures had dropped by as much as 0.7% at one point.
It was stated on Wednesday that an executive order would be signed to impose penalties on defense contractors lagging in fulfilling Pentagon contracts, including restrictions on stock returns (such as dividends and buybacks) and executive compensation. Simultaneously, measures were announced to prohibit large investors from purchasing single-family homes.
Meanwhile, traders were also digesting the latest U.S. actions regarding Venezuela, which included proposals to take a leading role in the country's oil industry and the seizure of two tankers.
The latest developments in Venezuela are currently a focal point of geopolitical tensions, with investors closely monitoring Washington's attempts to assert control over Greenland alongside the evolving situation in Venezuela.
When questioned about the potential duration of direct U.S. oversight in Venezuela, the response was, "Only time will tell." It was added, "We will rebuild it in a very profitable way... Oil will take some time; but we will use the oil, we will take the oil... We are pushing oil prices down, and we will also give Venezuela money – they desperately need it."
Asked if U.S. oversight might last six months or a year, the reply was, "I would say much longer."
Venezuela is rich in natural resources—not just oil. However, the primary focus remains on oil, with an apparent aim to extract maximum value from what has been termed a "non-invasion" for U.S. benefit. Earlier in the day, a desire to push oil prices back down to $50 per barrel was also mentioned.
The possibility of deploying additional military personnel to Venezuela was not ruled out if access to oil was blocked or if Russian and Chinese presence persisted. The response to this was: "I can't tell you. I really don't want to tell you. But they have great respect for us. And, you know, we work very well with the current government there. They are giving us everything we think is necessary."
Investors are also awaiting the U.S. non-farm payrolls data scheduled for release on Friday. Data released so far this week has painted a picture of an uneven U.S. economy: employment is under pressure, yet business activity remains resilient.
"After a strong start to 2026, markets are taking a breather, and no one wants to add new risk exposure ahead of Friday's U.S. jobs report," said Charu Chanana, Chief Investment Strategist at Saxo Bank. "The debate over the Fed's policy path is not yet settled, and regional security headlines are also keeping positions cautious."
On Thursday, the global bond rally paused. European bonds gave back some gains, while U.S. Treasuries were largely unchanged, with the 10-year yield at 4.15%.
The U.S. dollar was poised for a third consecutive day of gains on Thursday, though mixed U.S. economic data fostered caution ahead of the non-farm payrolls report. The dollar index, which measures the greenback against a basket of six major currencies, rose 0.08% to 98.807, set for a third straight day of increases. The dollar has just endured its worst annual performance since 2017, and analysts anticipate potential further weakness this year.
"The U.S. economy still looks pretty good. A significant portion of the short-dollar positioning has already been established, which I think will prevent any pronounced further weakness in the dollar going forward," said Jack Janasiewicz, Chief Portfolio Strategist at Natixis. He added, "I think the beneficiaries are more likely to be some emerging market currencies, rather than the euro or the yen."
Traders are currently pricing in expectations for at least two Fed rate cuts this year, despite divergent signals in December suggesting the possibility of only one cut in 2026. The Fed is expected to hold rates steady at its meeting later this month.
Furthermore, risk resurfaced that a potential Supreme Court ruling this week deeming certain tariff measures illegal could force the administration to compensate importers, which would negatively impact the dollar.
"Across the Atlantic, U.S. labor market data also hasn't significantly shifted the (interest rate) policy debate," said Stefan Koopman, Senior Macro Strategist at Rabobank.
Precious metals declined, with silver retreating towards $75 and gold pulling back near $4,400. Brent crude oil held steady around $60 per barrel.
Meanwhile, data compiled by Bloomberg shows that so far this year, corporations and governments in the U.S., Europe, and Asia have raised a combined total of approximately $260 billion across various currency markets, a record high for the period. On Thursday, Asian borrowers launched another intensive round of bond issuance, expected to push this figure even higher.
As concerns grow about the cooling of the artificial intelligence (AI) trading frenzy, Wall Street strategists are actively searching for new engines of growth for the U.S. stock market rally.
A team of analysts at Goldman Sachs, led by Ben Snider, has set its sights on companies benefiting from increased spending by the middle class. Snider's team is bullish on healthcare providers, materials producers, and essential consumer goods manufacturers, showing particular optimism towards companies selling discretionary, "nice-to-have" non-essential goods.
Analysis from the Goldman team indicates that an anticipated acceleration in U.S. economic growth will lead to improved earnings for a cohort of stable-growth but lower-margin companies.
Concurrently, the bank released its five key predictions for U.S. stocks in 2026, forecasting the S&P 500 to climb to 7,600 by year-end (a gain of approximately 12%), with merger and acquisition activity expected to remain robust due to easier financial conditions.
Defense stocks rallied collectively, with Lockheed Martin and Northrop Grumman surging over 7%, and RTX Corp gaining over 4%. This followed the call for the 2027 military budget to increase from around $1 trillion to $1.5 trillion.
Beverage giant Constellation rose 2.3% in premarket trading after reporting Q3 profit that exceeded expectations and maintaining its fiscal 2026 profit guidance.
Cancer drug developer Revolution Medicines fell 9% premarket after AbbVie denied acquisition rumors.
Elbit Systems continued its rise, gaining nearly 3% premarket and potentially hitting new highs at the open, following the award of a $150 million contract.
Brain再生科技 surged another 16.3% premarket, after a 157% cumulative gain over the previous three days, as the brain-computer interface concept attracted speculative buying.
Bilibili gained 3% premarket, with Morgan Stanley noting the company's solid advertising growth and potential continued collaboration with CCTV in 2026.
XPeng Motors rose nearly 2% premarket after unveiling four new models, all equipped with its second-generation VLA large model.
Tencent Music Entertainment advanced over 1% premarket, with Daiwa expressing optimism about the company's ability to monetize moderate to heavy users.
Taiwan Semiconductor Manufacturing climbed over 1% premarket amid reports of supply constraints for its 3nm process technology.
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