The major U.S. index futures are pointing to a higher opening on Friday, with sentiment holding up despite the strong advances posted in the previous session. A Commerce Department report released earlier in the day presented a mixed picture, with the headline reading suggesting strength, while the underlying trend showed weakness. The market attention now turns to the Federal Reserve's industrial production report to see to gauge the strength in the manufacturing strength. The dollar is continuing to see weakness against the euro, reflecting the prevalence of risk appetite. That said, some degree of profit taking cannot be ruled out.
The Fed delivered in line with expectations, sending investors swarming into risky bets on Thursday. U.S. stocks participated in the rally and ended notably higher.
After nervously hugging the unchanged line until the Fed decision, the major U.S. averages rose sharply until late afternoon trading. Thereafter, amid the Federal Reserve Chairman Ben Bernanke's press conference, the averages consolidated their gains, ending at fresh multi-year high.
The Dow Industrials ended up 206.51 points or 1.55 percent at 13,540 and the S&P 500 Index closed 23.43 points or 1.63 percent higher at 1,460, while the Nasdaq Composite added 41.51 points or 1.33 percent before closing at 3,156.
All thirty of the Dow components closed higher, with Bank of America (BAC), JP Morgan (JPM), Alcoa (AA) and American Express (AXP) leading the Dow's advance.
Resource, financial, housing, utility and retail stocks were among the best performing sectors of the session.
The FOMC announced QE III by way of its decision to buy additional Mortgage Backed Securities at a rate of $40 billion each month. As expected, the Fed extended the timeframe for its extremely accommodative policy stance pledge to mid-2015. Meanwhile, the Operation Twist program as well as the Fed's policy of re-investing principal payments from the Fed's holdings are set to continue.
The jobless claims report showed that the number of individuals claiming unemployment benefits rose 12,000 to 382,000 in the week ended September 8th. The claimant count faced upward pressure due to hurricane Isaac. Meanwhile, continuing claims for the week ended September 1st declined by 49,000.
The Labor Department also reported that producer prices rose by 1.7 percent month-over-month in July. Economists expected a more modest increase. The producer price inflation was boosted by a 6.4 percent jump in energy prices and a 0.9 percent increase in food prices. The annual producer price inflation rate was 2 percent. The core reading was at 0.2 percent, in line with estimates, rendering the annual rate of the core inflation measure at 2.5 percent.
Currency, Commodity Markets
Crude oil futures are trading up $1.17 at $99.48 a barrel after surging up $1.30 to $98.31 a barrel on Thursday amid the Fed decision. Gold futures are currently slipping $0.70 to $1,771.40 an ounce. In the previous session, the precious metal rose $38.40 to $1,772.10 an ounce.
Among currencies, the U.S. dollar is trading at 78.05yen compared to the 77.48 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is trading at $1.3093 compared to yesterday's $1.2989.
The Asian markets benefited from the optimism relayed by the Fed decision to offer stimulatory support and advanced strongly. The South Korean market led the gains in the region, with the nation's key average advancing close to 3 percent.
Japan's Nikkei 225 average opened higher and showed a steady advance until late trading before giving back some of the gains. The index closed up 164.24 points or 1.83 percent at 9,159, closing above the key '9,000' level for the first time since August 29th.
Resource stocks led the rally, with Sumitomo Metal Mining, Mitsubishi Materials and Pacific Metals among the leading gainers of the session. On the other hand, utilities, banking and pharma stocks retreated.
Australia's All Ordinaries opened higher and rose sharply in early trading. The index moved sideways thereafter, closing up 50.40 points or 1.18 percent at 4,410. Material and energy stocks rallied strongly, while defensive stocks came under selling pressure.
Hong Kong's Hang Seng Index closed at , up points or percent.
On the economic front, Japan's Cabinet Office said in its monthly report that the economic recovery appears to be pausing due to the deceleration of global economic activity. The report noted that both industrial production and exports are in a weak state. Private consumption is almost flat with some weak movements seen of late.
Meanwhile, S&P raised its foreign- and local-currency long-term credit ratings on the Republic of Korea to A+/AA- from A/A+ with a 'stable' outlook. The agency also upgraded the local-currency short term rating to A-1+ from A-1 and affirmed its foreign-currency short-term ratings at A-1. The revision was attributed to waning geopolitical threats on the Korean peninsula amid stable political conditions in North Korea.
A revised report showed that Japan's industrial production fell 1 percent month-over-month in July, upwardly revised from the 1.2 percent drop initially estimated. Annually, industrial output declined 0.8 percent.
European stocks are also trading higher, capitalizing on the Fed decision.
U.S. Economic Reports
The Labor Department said its consumer price index rose by 0.6 percent in August after coming in flat in three of the four previous months. The increase in prices matched the expectations of economists.
Core consumer prices, which exclude food and energy prices, edged up by a more modest 0.1 percent in August, matching the increase seen in July. Economists had expected core prices to rise by 0.2 percent.
Commerce Department figures put the advance estimate of retail sales for August at a seasonally adjusted level of $406.7 billion, a 0.9 percent increase from revised July levels and the strongest monthly growth since February.
Although July retail sales were revised down to 0.6 percent growth from the 0.8 percent growth initially reported, the August growth was nevertheless higher than even the strong 0.8 percent growth predicted by most economists.
Excluding the automotive sector, retail sales for August remained up a strong 0.8 percent, matching the expectations of most economists. Excluding gasoline sales, the retail growth was a weaker 0.3 percent. Excluding sales in both the automotive and gasoline sectors, August retail sales were up a mere 0.1 percent, notably below the 0.4 percent growth predicted by most economists.
The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate a 0.1 percent drop in the industrial production performance for August, while manufacturing output is estimated to have increased by 0.2 percent. Capacity utilization may have edged down by 0.2 points to 79.2 percent.
Industrial output rose 0.6 percent month-over-month in July, marking, the fourth straight month of gains. That said, June's growth was downwardly revised to 0.1 percent from the 0.4 percent growth initially estimated. Manufacturing output climbed 0.5 percent, the same pace as in June, mining output was up 1.2 percent and utilities output was 1.3 percent higher. Reflecting the shorter summer shut downs, motor vehicle and parts output rose 3.3 percent. Capacity utilization edged up 0.4 percentage points to 79.3 percent, the highest in four years.
The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for September is scheduled to be released at 9.55 am ET. The consumer sentiment index is expected to have edged down to 73.5 from 74.3 in the previous month.
The Commerce Department is scheduled to release its business inventories report for July at 10 am ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.5 percent increase in business inventories for the month.
Business inventories at the end of June were up 0.1 percent from the previous month, while business sales slipped 1.1 percent. On a year-over-year basis, business inventories and business sales were up 5 percent and 3 percent, respectively. The business inventories to sales ratio was at 1.29 compared to 1.26 in the year-ago period.
Atlanta Federal Reserve Bank President Dennis Lockhart is scheduled to deliver welcoming remarks to the Bank's Center for Human Capital Studies conference on "employment Consequences of the Great Recession" at 1 pm ET.
Stocks in Focus
Teva Industries (TEVA) and Bayer Healthcare announced a deal under which Bayer would buy the U.S.-based animal business health business of Teva for up to $145 million, including an upfront of $60 million plus a $85 million in milestone payments.
Western Digital (WDC) said at its investor day that it now expects first quarter revenues of about $3.9 billion to $4 billion, down from its previous guidance of $4.2 billion to $4.3 billion. The company attributed the reduced forecast to muted demand and inventory rebalancing. That said, the company reiterated its full year non-GAAP earnings guidance of $10 per share. The company also unveiled a capital allocation program that includes the adoption of a cash dividend by its board and an increase in its share repurchase program by $1.5 billion.
Akamai (AKAM) announced it has acquired content acceleration software provider FastSoft in a cash transaction.
Standard & Poor's announced that UnitedHealth (UNH) will replace Kraft Foods (KFT) in the Dow Industrials average.
by RTT Staff Writer
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