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Stocks May Give Back Ground After Yesterday's Rally - U.S. Commentary


Following the rally seen in the previous session, stocks may give back ground in early trading on Friday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 171 points.

Profit taking may contribute to initial weakness on Wall Street after the strong upward move seen on Thursday lifted the Nasdaq and the S&P 500 to new five-month closing highs.

Lingering uncertainty about trade talks between the U.S. and China may also weigh on the markets ahead of another round of high-level negotiations next week.

Meanwhile, traders continue to digest the Federal Reserve's dovish monetary policy announcement earlier in the week.

The Fed's decision to move away from plans to continue raising interest rates this year has been described by some analysts as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

The central bank has also been accused of bending to pressure from President Donald Trump, who has claimed U.S. economic growth would be even stronger if the Fed had not raised rates last year.

Chairman Jerome Powell has continually touted the Fed's independence, however, suggesting the dovish tone could also reflect legitimate concerns about the economic outlook.

Not long after the start of trading, the National Association of Realtors is scheduled to release its report on existing home sales in the month of February.

Economists expect existing home sales to surge up by 3.2 percent to a rate of 5.10 million in February after tumbling by 1.2 percent to a three-year low of 4.94 million in January.

The Commerce Department is also due to release its report on wholesale inventories in the month of January at 10 am ET. Wholesale inventories are expected to rise by 0.2 percent.

After recovering from an initial move to the downside, stocks moved sharply higher over the course of the trading session on Thursday. With the rally on the day, the Nasdaq and the S&P 500 reached their best closing levels in well over five months.

The major averages ended the day firmly in positive territory but off their highs of the session. The Dow climbed 216.84 points or 0.8 percent to 25,962.51, the Nasdaq surged up 109.99 points or 1.4 percent to 7,838.96 and the S&P 500 jumped 30.65 points or 1.1 percent to 2,854.88.

In overseas trading, stock markets across the Asia-Pacific region moved slightly higher during trading on Friday. Japan's Nikkei 225 Index, China's Shanghai Composite Index and Hong Kong's Hang Seng Index all inched up by 0.1 percent.

Meanwhile, the major European markets have shown notable moves to the downside on the day. While the German DAX Index has slid by 0.8 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index have tumbled by 1.3 percent and 1.4 percent, respectively.

In commodities trading, crude oil futures are slumping $0.86 to $59.12 a barrel after slipping $0.25 to $59.98 on Thursday. Meanwhile, after climbing $5.60 to $1,307.30 an ounce in the previous session, gold futures are rising $3.60 to $1,310.90 an ounce.

On the currency front, the U.S. dollar is trading at 110.25 yen compared to the 110.82 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1308 compared to yesterday's $1.1374.

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