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U.S. Stocks Likely To See Initial Strength On Stimulus Optimism


Stocks are likely to move to the upside in early trading on Friday on the heels of the mixed performance seen in the previous session. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 207 points.

The markets may benefit from rising optimism about the world's central banks providing aggressive stimulus in order to prevent a global recession.

European Central Bank official Olli Rehn helped spark confidence after expressing the need for a significant easing package in September to support the flagging eurozone economy.

The expectations for more stimulus have contributed to a pullback by U.S. treasuries and a subsequent increase in bond yields.

The yield on the benchmark ten-year note dropped below the two-year yield on Wednesday, sparking fears of an impending recession and a sell-off on Wall Street.

On the U.S. economic front, the Commerce Department released a report showing an unexpected slump in housing starts in the month of July.

The report said housing starts tumbled by 4.0 percent to an annual rate of 1.191 million from the revised June estimate of 1.241 million.

The drop surprised economists, who had expected housing starts to edge up by 0.3 percent to a rate of 1.257 million from the 1.253 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits spiked by 8.4 percent to a rate of 1.336 million in July from a revised 1.232 million in June.

Building permits, an indicator of future housing demand, had been expected to jump by 4.1 percent to 1.270 million from the 1.220 million originally reported for the previous month.

Shortly after the start of trading, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of August. The consumer sentiment index is expected to drop to 97.2 in August after inching up to 98.4 in July.

Following the sell-off seen on Wednesday, stocks showed a lack of direction throughout the trading day on Thursday. The major averages spent the day bouncing back and forth across the unchanged line before eventually closing mixed.

While the tech-heavy Nasdaq edged down 7.32 points or 0.1 percent to 7,766.62, the Dow climbed 99.97 points or 0.4 percent to 25,579.39 and the S&P 500 rose 7.00 points or 0.3 percent to 2,847.60.

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan's Nikkei 225 Index inched up by 0.1 percent, while South Korea's Kospi slid by 0.6 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the U.K.'s FTSE 100 Index has risen by 0.4 percent, the German DAX Index and the French CAC 40 Index are up by 0.8 percent and 0.9 percent, respectively.

In commodities trading, crude oil futures are rising $0.41 to $54.88 a barrel after falling $0.76 to $54.47 a barrel on Thursday. Meanwhile, after climbing $3.40 to $1,531.20 an ounce in the previous session, gold futures are tumbling $9.30 to $1,521.90 an ounce.

On the currency front, the U.S. dollar is trading at 106.36 yen versus the 106.12 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1072 compared to yesterday's $1.1107.

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