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Profit Taking May Lead To Initial Weakness On Wall Street

The major U.S. index futures are pointing to a lower opening on Thursday after stocks moved modestly higher over the course of the two previous sessions.

Profit taking may contribute to initial weakness on Wall Street after the major averages ended Wednesday's trading at new record closing highs.

Traders are also digesting earnings news from financial giants Citigroup (C) and JPMorgan Chase (JPM) as the earnings season gets underway.

Stocks turned in another relatively lackluster performance during trading on Wednesday but managed to end the session modestly higher. With the gains on the day, the major averages climbed to new record closing highs.

The major averages ended the session at their best levels of the day. The Dow edged up 42.21 points or 0.2 percent to 22,872.89, the Nasdaq rose 16.30 points or 0.3 percent to 6,603.55 and the S&P 500 crept up 4.60 points or 0.2 percent to 2,555.24.

The modestly higher close on Wall Street came following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes of the Fed's September meeting said many participants expressed concern that the low inflation readings this year might reflect not only transitory factors but also the influence of developments that could prove more persistent.

"A few of these participants thought that no further increases in the federal funds rate were called for in the near term or that the upward trajectory of the federal funds rate might appropriately be quite shallow," the Fed said.

The central bank added, "Some other participants, however, were more worried about upside risks to inflation arising from a labor market that had already reached full employment and was projected to tighten further."

The Fed subsequently said many participants thought that another increase in interest rates later this year is likely to be warranted if the medium-term outlook remained broadly unchanged.

"In short, the majority of Fed officials are worried that core inflation might not rebound quickly, but that isn't going to stop them from continuing to normalize interest rates, particularly not when the unemployment rate is getting so low," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "A few wanted to delay the next rate hike until there were clear signs of a rebound in core inflation, but most were content to simply wait for the next few inflation reports."

Most of the major sectors showed only modest moves on the day, contributing to the lackluster performance by the broader markets.

Railroad, semiconductor, and internet stocks saw some strength, contributing to the higher close by the major averages.

Commodity, Currency Markets

Crude oil futures are sliding $0.69 to $50.61 a barrel after rising $0.38 to $51.30 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,294.70, up $5.80 compared to the previous session's close of $1,288.90. On Wednesday, gold fell $4.90.

On the currency front, the U.S. dollar is trading at 112.40 yen compared to the 112.50 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1846 compared to yesterday's $1.1859.

Asia

Asian stocks finished mostly higher on Thursday after the latest FOMC minutes showed Fed officials expressing some caution over the timing of future interest rate increases.

Chinese shares ended little changed ahead of the Communist Party Congress starting next week. Hong Kong's Hang Seng Index rose 69.46 points or 0.2 percent to 28,459.03.

Japanese shares closed at a more than two-decade high as polls suggesting that Prime Minister Shinzo Abe's ruling coalition is heading for a two-thirds majority in the forthcoming election helped offset concerns over a firmer yen.

The Nikkei 225 Index climbed 73.45 points or 0.4 percent to finish at 20,954.72, while the broader Topix Index closed 0.2 percent higher at 1,700.13.

Kobe Steel shares closed half a percent higher on bargain hunting after losing over 35 percent this week on data fabrication news. Toshiba rallied 3.8 percent after announcing an additional investment of 110 billion yen to expand flash memory production at its Yokkaichi plant.

Australian shares eked out modest gains, driven by banks after home loan data beat estimates. The benchmark S&P/ASX 200 Index rose 22.40 points or 0.4 percent to 5,794.50, and the broader All Ordinaries Index ended 23.30 points or 0.4 percent higher at 5,864.10.

Banks ANZ, NAB and Westpac rose between half a percent and 0.9 percent. Bank of Queensland rallied 1.2 percent as it announced a surprise special dividend after posting impressive earnings numbers.

Energy stocks also closed mostly higher after crude oil prices rose for a third straight session overnight. Woodside Petroleum, Origin Energy and Santos climbed 1-2 percent.

Bellamy's Australia soared as much as 4.6 percent after the infant formula maker raised its outlook for full-year revenue growth.

Meanwhile, miners BHP Billiton, Fortescue Metals Group and Rio Tinto lost 1-2 percent after iron ore prices sank on concerns over falling demand during the winter amid impending steel output cuts in China. Whitehaven Coal tumbled 2.8 percent after unveiling its production and sales figures for the September quarter.

Europe

The major European markets are turning in a mixed performance on the day as investors have kept an eye on currency movements.

While the U.K.'s FTSE 100 Index has advanced by 0.4 percent, the German DAX Index is just below the unchanged line and the French CAC 40 Index is down by 0.2 percent.

Lufthansa has moved to the upside the German airline said it would sign an agreement to buy large parts of bankrupt carrier Air Berlin.

Sky Plc shares have rallied after the company reported better-than-expected first quarter results and said it is on track to meet its full-year targets.

Just Eat shares have also soared after the Competition and Markets Authority approved its planned 200 million pound purchase of rival Hungryhouse.

Meanwhile, banks Deutsche Bank, BNP Paribas and Societe Generale have moved to the downside after the European Commission proposed new measures to strengthen the EU banking sector against future crises.

On a light day on the economic front, final data from statistical office Insee showed that French consumer inflation rose to a five-month high of 1 percent in September, as estimated earlier. This was the fastest rate since April, when inflation was 1.2 percent.

U.S. Economic Reports

The Labor Department released a report showing that producer prices increased in line with economist estimates in the month of September.

The producer price index for final demand climbed by 0.4 percent in September after edging up by 0.2 percent in August.

Excluding food and energy prices, core producer prices still rose by 0.4 percent in September after inching up by 0.1 percent in August. Core prices had been expected to rise by 0.2 percent.

A separate Labor Department report showed first-time claims for unemployment benefits fell by more than anticipated in the week ended October 7th.

The report said initial jobless claims dropped to 243,000, a decrease of 15,000 from the previous week's revised level of 258,000. Economists had expected jobless claims to dip to 251,000.

At 10:30 am ET, Federal Reserve Governor Jerome Powell is scheduled to deliver the keynote address on emerging markets at the 2017 IIF Annual Membership Meeting in Washington.

Fed Governor Lael Brainard is also due to participate in a panel on monetary policy at the Conference on Rethinking Macroeconomic Policy in Washington at 10:30 am ET.

At 11 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended October 6th. Crude oil inventories are expected to drop by 1.8 million barrels.

The Treasury Department is due to announce the results of its auction of $12 billion worth of thirty-year bonds at 1 pm ET.

Atlanta Fed President Raphael Bostic is due to deliver a speech on "Balance Sheet Normalization in the United States" at the conference on "Unconventional Monetary Policy: Lessons Learned" in Hong Kong at 9:15 pm ET.

Stocks In Focus

Shares of Ardelyx (ADRX) are moving sharply higher in pre-market trading after the drug developer reported positive results in a late-stage trial of its drug for the treatment of irritable bowel syndrome with constipation.

Mobile game developer Glu Mobile (GLUU) is also seeing pre-market strength after announcing details about the launch of The Swift Life, a new digital entertainment project in partnership with Taylor Swift.

Shares of Citigroup (C) may also move to the upside after the financial giant reported better than expected third quarter earnings.

Financial giant JPMorgan Chase (JPM) also reported third quarter earnings that beat analyst estimates, although its bond trading revenue slumped by 27 percent.

Meanwhile, shares of AcelRx Pharmaceuticals (ACRX) are moving substantially lower in pre-market trading after the FDA rejected its drug Dsuvia for the management of acute pain in trauma and ambulatory settings.

Biopharmaceutical company Trevena (TRVN) is also seeing pre-market weakness after saying its halting its investment in early stage research in order to focus its resources on the potential approval and commercialization of Olinvo.

Shares of Blackhawk Network Holdings (HAWK) may also come under pressure after the pre-paid card company reported better than expected adjusted third quarter earnings but provided disappointing guidance.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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