The major U.S. index futures are pointing to a higher opening on Friday, with mood optimistic as traders have begun digesting stimulatory props from central banks and governments. The U.K. has announced some measures to ease strains in the financial system and more is expected from other nations as well. A domestic report released earlier in the day showed a notable slowdown in the pace of manufacturing activity in the New York region.
The weak data may give strength to expectations of quantitative easing when the U.S. FOMC meets next week. Meanwhile, the Greek elections due over the weekend could introduce some caution among traders.
U.S. stocks advanced on Thursday despite the encircling economic gloom, as traders bid up stocks on stimulus hopes. The major averages showed some apprehension in early trading following the release of a report showing an unexpected increase in weekly jobless claims and amid the simmering eurozone debt crisis. But the averages rose sharply in early trading before going about a consolidation move till late trading.
After a short spike in late trading and some volatility thereafter, the averages ended notably higher. The Dow Industrials added 155.53 points or 1.24 percent to close at 12,652 and the S&P 500 Index closed up 14.22 points or 1.08 percent at 1,329, while the Nasdaq Composite closed at 2,836, up 17.72 points or 0.63 percent.
Twenty-eight of the thirty Dow components closed higher, with Alcoa (AA), Bank of America (BAC), McDonald's (MCD), AT&T (T), Travelers (TRV), Exxon Mobil (XOM) and General Electric (GE) advancing strongly in the session.
Biotechnology, housing, energy, transportation, banking and retail stocks were among the best performers of the session.
On the economic front, jobless claims rose by 6,000 in the week ended June 9th to 386,000 from the upwardly revised reading of 380,000 for the previous week. The four-week average rose to a 6-week high of 382,000. Meanwhile, continuing claims calculated with a week's lag slipped 33,000 to 3.278 million in the week ended June 2nd.
At the same time, consumer prices fell by a slightly steeper than expected 0.3 percent month-over-month in May, marking the biggest drop since December 2008. Much of the decline was due to a 4.3 percent drop in energy prices. Excluding food and energy prices, consumer prices rose 0.2 percent, in line with expectations.
Currency, Commodity Markets
Crude oil futures are gaining $0.29 to $84.20 a barrel after advancing $1.29 to $83.91 a barrel on Thursday. Thursday's gain came against the backdrop of intensifying stimulus hopes and a decision by OPEC to leave its output quota unchanged at 30 million barrels per day.
Gold futures are currently adding $11.10 to $1,630.70 an ounce. In the previous session, the precious metal edged up $0.20 to $1,619.60 an ounce.
Among currencies, the U.S. dollar is trading at 78.68yen compared to the 79.36 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2615 compared to yesterday's $1.2633.
The major Asian markets advanced, as rumors about additional stimulus measures by central banks and governments gained ground. The Bank of England and the U.K. government made a pre-emptive move in announcing measures to boost the credit and financial markets.
Japan's Nikkei 225 average went about a volatile run, moving back and forth across the unchanged line before closing up merely 0.43 points or 0.01 percent at 8,569.
After some initial volatility, Australia's All Ordinaries moved decisively into positive territory in late morning trading. Thereafter, the index continued to hover in positive territory, closing up 17.20 points or 0.42 percent at 4,107.
Hong Kong's Hong Seng Index closed 425.54 points or 2.26 percent higher at 19,234. After the markets closed, Hong Kong Exchanges & Clearing Ltd. said it made a recommended offer to buy the London Metal Exchange for 1.39 billion pounds in cash.
The Bank of Japan announced no change in its policy stance following the conclusion of a 2-day monetary policy meeting. The size of its asset purchase program was also kept unchanged. The central bank noted that the domestic economic recovery has been strengthening in recent months.
The major European markets are also advancing, with the UK's announcement cementing hopes concerning stimulus. Steel makers and banks are leading the advances in the region, with only some defensive stocks moving to the downside.
In corporate news, Swedish retailer H&M reported that its total sales, including VAT, increased by 12 percent year-over-year in May. Comparable unit sales were up by 3 percent.
U.K. power company Aggreko is down over 4 percent on the LSE after it said it expects underlying group revenues to grow by around 15 percent, slower than the 20 percent growth in the first quarter.
On the economic front, a report released by the U.K. Office for National Statistics showed that the U.K.'s trade balance widened to 10.1 billion pounds in April from 8.7 billion pounds in March. Economists had expected a narrowing in the trade deficit to 8.5 billion pounds. Exports fell 8.6 percent month-over-month compared to a more modest 2.5 percent drop in imports.
Eurostat reported that the euro area's trade surplus fell to 5.2 billion euros in April from 7.5 billion euros in March. A separate report released by Eurostat showed that the number of people employed in the euro area declined for the third straight quarter. The number of employed persons fell 0.2 percent sequentially in the first quarter following a 0.3 percent decline in the fourth quarter.
Late Thursday, Moody's downgraded its ratings on 5 Dutch banks, including ING. Meanwhile, the U.K. government and the Bank of England announced new monetary policy measures to ease the tightness in the credit and financial markets.
Acknowledging the need for further quantitative easing, the central bank decided to activate a 6-month liquidity facility offering loans at below-market rates to banks in exchange for a wide range of collateral. Additionally a new lending for funding scheme is to be launched to offer an estimated 80 billion pounds of long-term loans in exchange for lending commitments, indemnified by the government.
U.S. Economic Reports
New York manufacturing activity has seen only a slight expansion in the month of June, according to a report released by the Federal Reserve Bank of New York on Friday, with the index of activity in the sector falling by much more than economists had anticipated.
The New York Fed said its general business conditions index fell to 2.3 in June from 17.1 in May, although a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 13.8.
The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate a flat industrial production performance for May, while manufacturing output is estimated to have declined by 0.3 percent. Capacity utilization may have remained unchanged at 79.2 percent.
U.S. industrial output rose a better than expected 1.1 percent month-over-month in April, thanks to a 4.6 percent jump in utility output. Manufacturing output also rebounded, rising 0.6 percent on solid support lent by motor vehicle and parts and business equipment. Capacity utilization rose by a better than expected 0.8 points to 79.2 percent.
The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for June is scheduled to be released at 9.55 am ET. The consumer sentiment index is expected to have declined to 77.5 from 79.3 in the previous month.
Stocks in Focus
AAR Corp. (AIR) announced preliminary fourth quarter results, forecasting earnings of 44-46 cents per share on revenues of $560 million to $565 million. After adjusting for some special items, the company expects earnings of 30-32 cents per share.
DTE Energy (DTE) announced a 5.5 percent increase in its quarterly dividend to 62 cents per share.
Nordson (NDSN) announced the completion of its acquisition of Wisconsin-based EDI Holdings, a maker of slot coating and flat polymer extrusion dies for plastic processors and web converters.
GlaxoSmithKline (GSK) announced that the FDA has approved its combination vaccine MenHibrix to help prevent meningococcal serogroups C and Y and Hib disease.
by RTT Staff Writer
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