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Profit Taking May Lead To Early Weakness On Wall Street

The major U.S. index futures are pointing to a modestly lower open on Friday following the mixed performance seen in the previous session. Profit taking may contribute to some early weakness on Wall Street after the Dow reached new record highs in the previous session. Nonetheless, trading activity may be somewhat subdued due to the Veterans Day holiday.

Following the broad based rally seen on Wednesday, stocks turned in a mixed performance during trading on Thursday. While the Dow advanced to a new record closing high, the tech-heavy Nasdaq ended the day firmly in negative territory.

The Dow jumped 218.19 points or 1.2 percent to 18,807.88 and the S&P 500 rose 4.22 points or 0.2 percent to 2,167.48, but the Nasdaq slid 42.28 points or 0.8 percent to 5,208.80.

The jump by the Dow was partly due to substantial gains by JPMorgan (JPM) and Goldman (GS), which was indicative of strength throughout the financial sector amid optimism about reduced regulation under Trump.

Reflecting the strength in the financial sector, the Dow Jones Banks Index soared by 4.7 percent and the NYSE Arca Broker/Dealer Index shot up by 3.7 percent.

Dow component Pfizer (PFE) also posted a standout gain after a report from Reuters said the drug giant is evaluating a potential sale or spin-off of its consumer health division that could value the unit at as much as $14 billion.

Along with financial stocks, biotechnology, oil service, transportation, and steel stocks also added to recent gains amid optimism they will benefit in the new Trump administration.

Meanwhile, Apple (AAPL) and Microsoft (MSFT) posted notable losses on the day, weighing on the tech-heavy Nasdaq.

Gold stocks also came under pressure, dragging the NYSE Arca Gold Bugs Index down by 7.8 percent. The weakness in the sector came as the price of gold for December delivery slid $7.10 to $1,266.40 an ounce.

Significant weakness was also visible among utilities stocks, which have fallen sharply along with treasuries following Trump's upset victory.

Semiconductor, software, internet and stocks also showed notable declines, reflecting overall weakness in the tech sector.

On the U.S. economic front, the Labor Department released a report before the start of trading showing a bigger than expected drop in initial jobless claims in the week ended November 5th.

The report said initial jobless claims fell to 254,000, a decrease of 11,000 from the previous week's unrevised level of 265,000. Economists had expected jobless claims to edge down to 263,000.

Commodity, Currency Markets

Crude oil futures are falling $0.84 to $43.82 a barrel after sliding $0.61 to $44.66 a barrel on Thursday. Gold futures are currently trading at $1,259.50 an ounce, down $6.90 from the previous session's close of $1,266.40 an ounce. On Thursday, gold dropped $7.10.

On the currency front, the U.S. dollar is trading at 106.45 yen compared to the 106.83 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0902 compared to yesterday's $1.0893.

Asia

Stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday following the mixed closed on Wall Street overnight.

China's Shanghai Composite Index rose 24.76 points or 0.78 percent to 3,196.04, a 10-month high, after news that the long-awaited Shenzhen-Hong Kong Stock Connect will be officially launched on November 21st. Meanwhile, Hong Kong's Hang Seng Index tumbled 308.02 points or 1.35 percent to 22,531.09.

Japanese shares ended a tad firmer as the dollar continued to rise against the yen on expectations of expansionary fiscal policy under Trump. The Nikkei 225 Index edged up 30.37 points or 0.18 percent to 17,374.79, taking its gain for the week to 2.8 percent. The broader Topix index closed 0.14 percent higher at 1,378.28.

Financials led the gainers amid the rise in U.S. Treasury yields. Mitsubishi UFJ Financial, Japan's largest bank, soared as much as 9 percent, Mizuho Financial rallied 3.7 percent and Sumitomo Mitsui Financial climbed 4.1 percent.

Mitsubishi Materials Corp shares soared 7 percent after London copper prices jumped 4 percent to hit their highest level in nearly 16 months on Thursday. However Pioneer Corp slumped 8.4 percent after the car electronics maker reported a net loss for the second quarter.

Australian shares eked out modest gains, as stronger commodity prices lifted miners and financials also gained ground on expectations of higher interest rates globally.

The benchmark S&P/ASX 200 moved in a tight range before seeing a late surge to end the session 41.90 points or 0.79 percent higher at 5,370.70. The broader All Ordinaries Index climbed 37.70 points or 0.70 percent to finish at 5,446.60.

Europe

The major European markets have also turned mixed over the course of the trading session. While the German DAX Index has risen by 0.4 percent, the French CAC 40 Index is down by 0.5 percent and the U.K.'s FTSE 100 Index is down by 1.2 percent.

After digesting Donald Trump's historic victory, investors are now taking stock of his positions on a range of domestic and foreign policy issues.

Donald Trump winning the U.S. presidential election is a major event, but it is too early to say if that will affect the Federal Reserve's policy decision in December, European Central Bank Executive Board member Benoit Coeure said today.

"It is not for the ECB to assess the political consequences," Coeure said in an interview to the newspaper Le Progrès de Lyon and other French newspapers.

Brexit worries also returned to the fore after some members of Parliament told the BBC they are prepared to vote against triggering Article 50.

On a light day on the economic front, final data from Destatis showed that German consumer inflation climbed an annual 0.8 percent in October, a two-year high and faster than the 0.7 percent rise seen in September.

At the same time, the wholesale price index increased for the first time in more than three years. Wholesale prices climbed 0.5 percent in the month from last year, reversing a 0.3 percent drop in September.

U.S. Economic Reports

The University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of November at 10 am ET.

The consumer sentiment index is expected to inch up to 87.5 in November from 87.2 in October, which matched the low recorded last September.

Stocks in Focus

Entertainment giant Disney (DIS) reported fiscal fourth quarter earnings and revenues that came in below analyst estimates amid a drop in ESPN subscribers. However, CEO Bob Iger forecast a return to robust growth in fiscal 2018 and beyond.

J.C. Penney (JCP) reported a third quarter loss that matched analyst estimates but on weaker than expected sales. The retailer also lowered its forecast for full-year comparable store sales growth.

Meanwhile, Nvidia (NVDA) reported better than expected third quarter results and provided upbeat guidance. The graphics chip maker also announced a $2 billion stock buyback and a 22 percent dividend increase.

High-end department store Nordstrom (JWN) also reported third quarter results that exceeded analyst estimates and raised its full-year profit forecast.

Waste Management, Inc. (WM) announced the appointment of James Fish, Jr. as president and chief executive officer. Fish succeeds David Steiner as the chief executive.

Shares of Photronics (PLAB) are moving sharply lower in pre-market trading after the semiconductor equipment maker slashed its fourth quarter guidance.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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