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Stocks May See Early Strength On Tame Inflation Data - U.S. Commentary


Stocks seem likely to extend their recent upward trend in early trading on Friday following the release of tame inflation data. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 49 points.

The upward momentum for the markets comes following the release of a report from the Labor Department showing only a modest uptick in producer prices in the month of July.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in July after climbing by 0.4 percent in June. The modest increase by the index matched economist estimates.

Excluding food and energy prices, core producer prices rose by 0.2 percent in July, matching economist estimates as well as the increase seen in the previous month.

The modest price growth is likely to offset some of the recent concerns about inflation and its potential impact on the outlook for monetary policy.

Meanwhile, the Federal Reserve Bank of New York released a separate report showing a notable slowdown in the pace of growth in New York manufacturing activity in the month of August.

The New York Fed said its general business conditions index dropped to 14.7 in August from 25.6 in July, although a positive reading continues to indicate an increase in regional manufacturing activity. The index has been expected to dip to a reading of 20.0.

Shortly before the start of trading, the Federal Reserve is also scheduled to release its report on industrial production in the month of July. Production is expected to increase by about 0.3 percent.

Thomson Reuters and the University of Michigan are also scheduled to release their preliminary consumer sentiment report for August not long after the open. Economists expect the consumer sentiment index to edge up to 82.3.

In corporate news, shares of Monster Beverage (MNST) have moved sharply higher in pre-market trading after announcing a long-term strategic partnership with beverage giant Coca-Cola (KO). As part of the agreement, Coca-Cola will acquire an approximately 16.7% ownership interest in Monster.

Retail giant J.C. Penney (JCP) could also see some early strength after reporting a significantly narrower than expected second quarter loss. The company's quarterly sales also came in above estimates.

On the other hand, shares of JD.com (JD) are under pressure in pre-market trading after the Chinese e-commerce company reported a wider second quarter loss.

After ending Wednesday's trading notably higher, stocks saw some further upside over the course of the trading day on Thursday. The markets continued to benefit from easing geopolitical concerns, although buying interest was somewhat subdued.

The major averages continued to move higher going into the close, ending the session at their best levels of the day. The Dow climbed 61.78 points or 0.4 percent to 16,713.58, the Nasdaq rose 18.88 points or 0.4 percent to 4,453.00 and the S&P 500 advanced 8.46 points or 0.4 percent to 1,955.18.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index inched up by less than a tenth of a percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

The major European markets have also moved to the upside on the day. While the French CAC 40 Index is up by 1 percent, the German DAX Index is up by 0.9 percent and the U.K.'s FTSE 100 Index is up by 0.7 percent.

In commodities trading, crude oil futures are inching up $0.05 to $95.63 a barrel after plunging $2.01 to a seven-month low of $95.58 a barrel on Thursday. Meanwhile, gold futures are sliding $17.10 to $1,298.60 an ounce. In the previous session, gold rose $1.20 to $1,315.70 an ounce.

On the currency front, the U.S. dollar is trading at 102.68 yen compared to the 102.45 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3399 compared to yesterday's $1.3365.

by RTTNews Staff Writer

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