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Beyond the Numbers

Futures Pointing To Initial Strength On Wall Street
11/24/2017 8:44 AM

The major U.S. index futures are pointing to a higher opening on Friday as markets reopen following the Thanksgiving Day holiday on Thursday. The markets may benefit from recent upward momentum, which helped to lift the major averages to new record closing highs earlier this week.

Trading activity is likely to remain subdued, however, as many traders remain away from their desks following the holiday. An early close on Wall Street may also contribute to choppy trading, with the U.S. stock markets due to close at 1 pm ET.

Following the strong upward move seen on Tuesday, stocks turned in a relatively lackluster performance during trading on Wednesday. Despite the choppy trading, the tech-heavy Nasdaq inched up to a new record closing high.

The major averages eventually ended the session mixed. While the Nasdaq crept up 4.88 points or 0.1 percent to 6,867.36, the Dow dipped 64.65 points or 0.3 percent to 23,526.18 and the S&P 500 edged down 1.95 points or 0.1 percent to 2,597.08.

The choppy trading on Wall Street came as many traders looked to get a head start on the Thanksgiving Day holiday on Thursday.

Stocks continued to show a lack of direction following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes said many participants thought that another near-term increase in interest rates was likely to be warranted if incoming information left the medium-term outlook broadly unchanged.

However, several participants indicated their decision about raising rates would depend on whether incoming data boosted their confidence that inflation was headed toward the Fed's 2 percent objective.

Following the release of the minutes, Paul Ashworth, Chief U.S. Economist at Capital Economics said, "A December rate hike is still the most likely outcome."

On the U.S. economic front, the Labor Department released a report showing a pullback in initial jobless claims in the week ended November 18th.

The report said initial jobless claims fell to 239,000, a decrease of 13,000 from the previous week's revised level of 252,000. Economists had expected jobless claims to drop to 240,000.

A separate report from the Commerce Department showed an unexpected drop in durable goods orders in the month of October, although the decrease primarily reflected a sharp pullback in volatile orders for transportation equipment.

The Commerce Department said durable goods orders tumbled by 1.2 percent in October after surging up by an upwardly revised 2.2 percent in September.

The decrease surprised economists, who had expected orders to edge up by 0.3 percent compared to the 2.0 percent increase that had been reported for the previous month.

Excluding the steep drop in orders for transportation equipment, durable goods orders rose by 0.4 percent in October after jumping by 1.1 percent in September. Ex-transportation orders had been expected to climb by 0.5 percent.

The University of Michigan also released a report showing a bigger than expected upward revision to its consumer sentiment index for November.

The report said the consumer sentiment index for November was upwardly revised to 98.5 from the preliminary estimate of 97.8. Economists had expected the index to be upwardly revised to 98.0.

While the consumer sentiment index was upwardly revised by more than expected, it remains below the thirteen-year high of 100.7 seen in October.

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

Energy stocks saw considerable strength, however, benefiting from a sharp increase by the price of crude oil. Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index advanced by 1.4 percent and the Philadelphia Oil Service Index rose by 1 percent.

Significant strength was also visible among gold stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Gold Bugs Index. The gains by gold stocks came amid a notable increase by the price of the precious metal.

Telecom and steel stocks also saw notable strength on the day, while moderate weakness was visible among brokerage and semiconductor stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.70 to $58.72 a barrel after spiking $1.19 to $58.02 a barrel on Wednesday. Meanwhile, after jumping $10.50 to $1,292.20 an ounce in the previous session, gold futures are falling $4.60 to $1,287.60 an ounce.

On the currency front, the U.S. dollar is trading at 111.36 yen compared to the 111.22 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1879 compared to Wednesday’s 1.1851.

Asia

Asian markets were mostly subdued on Friday as investors once again refrained from making significant moves, choosing to wait for a clear signal.

There were some positive economic data from the region, but trading was thin once again as the U.S. markets, which were closed on Thursday, will have just a short trading session today.

Chinese stocks rebounded a bit, erasing some of the losses posted in the previous session. After a solid start, the market tumbled but recovered swiftly and held in positive territory until the end of the session. Hong Kong’s Hang Seng Index climbed 158.38 points or 0.5 percent to 29,866.32.

In mainland China, the Shanghai Composite Index moved in a very narrow range around the unchanged line before closing up 1.90 points or 0.1 percent at 3,353.82.

Japanese stocks recovered after initial weakness and edged up to close marginally higher. The Nikkei 225 Index settled at 22,550.85, gaining 22.70 points or 0.1 percent.

While stocks from the automobile and manufacturing sectors were largely weak, some buying was witnessed in the technology space.

Mitsubishi Materials plunged more than 8 percent following an announcement from the company that some of its units falsified product data to meet requirements.

In economic news, Japanese manufacturing activity expanded at the strongest pace in more than three-and-a-half years in November, data released by IHS Markit showed. The flash Manufacturing Purchasing Managers' Index climbed to a 44-month high of 53.8 in November from 52.8 in October.

Meanwhile, the benchmark Australian indices ended virtually unchanged. The S&P/ASX 200 Index edged down 0.1 percent to 5,982.55 and the broader All Ordinaries index ended 4.40 points lower at 6,063.10.

Europe

European stocks have moved mostly higher on the day, with positive German business confidence data generating some buying interest. Investors are treading cautiously due to political uncertainty.

While the U.K.’s FTSE 100 Index has crept up by 0.1 percent, the French CAC 40 Index is up by 0.6 percent and the German DAX Index is up by 0.9 percent.

According to the German Research Institute, business confidence improved to a seasonally adjusted 117.5 in November, edging up from 116.7 in the preceding month.

In corporate news, Bayer shares are trading lower after the German conglomerate said that an INHALE Phase III clinical study program investigating Amikacin Inhale did not demonstrate superiority.

U.S. Economic Reports

There are no major U.S. economic reports scheduled to be released on the day following the Thanksgiving Day holiday on Thursday.

Stocks In Focus

Shares of SandRidge Energy (SD) are moving sharply higher in pre-market trading on news activist investor Carl Icahn bought a 13.51 percent stake in the oil driller and opposes the company’s acquisition of Bonanza Creek Energy (BCEI).

Generic drug maker Teva Pharmaceutical (TEVA) may also see early strength after financial news website Calcalist reported the company plans to cut 20 percent to 25 percent of its workforce in Israel.

On the other hand, shares of Nektar Therapeutics (NKTR) are seeing significant pre-market weakness after the experimental pneumonia treatment the biopharmaceutical company is developing with Bayer did not meet its primary goal in a phase III study.
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