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Wall Street May Benefit From Recent Upward Momentum

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move back to the upside following the pullback seen over the course of the previous session.

The markets may benefit from recent upward momentum, which has lifted the major averages well off their June lows to their highest levels in three months.

Optimism that inflation has peaked may also contribute to continued strength on Wall Street following this week's tamer than expected readings on consumer and producer prices.

Potentially adding to the positive sentiment about inflation, the Labor Department released a report showing U.S. import prices fell by more than expected in the month of July.

The Labor Department said import prices slumped by 1.4 percent in July after rising by an upwardly revised 0.3 percent in June.

Economists had expected import prices to decline by 1.0 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also showed export prices tumbled by 3.3 percent in July after climbing by 0.7 percent in June. Export prices were expected to decrease by 1.1 percent.

Shortly after the start of trading, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of August.

The consumer sentiment index is expected to inch up to 52.5 in August from 51.5 in July, although traders may pay closer to attention to the readings on inflation expectations.

Stocks showed a strong move to the upside in early trading on Thursday but gave back ground over the course of the session. The major averages showed a notable downturn after reaching their best intraday levels in three months.

The major averages eventually finished the day mixed. The tech-heavy Nasdaq jumped as much as 1.3 percent but ended the day down 74.89 points or 0.6 percent to 12,779.92. The S&P 500 also edged down 2.97 points or 0.1 percent to 4,207.27, while the narrower Dow inched up 27.16 points or 0.1 percent to 33,336.67.

The extended rally in early trading came after the Labor Department released a report showing an unexpected decrease in producer prices in the month of July.

The Labor Department said its producer price index for final demand fell by 0.5 percent in July after surging by a revised 1.0 percent in June. The decrease marked the first drop in producer prices since April 2020.

The pullback came as a surprise to economists, who had expected producer prices to edge up by 0.2 percent compared to the 1.1 percent jump originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 9.8 percent in July from 11.3 percent in June. Economists had expected the annual rate of growth to slow to 10.4 percent.

Meanwhile, the Labor Department said core producer prices, which exclude prices for food, energy and trade services, crept up by 0.2 percent in July after rising by 0.3 percent in June.

The annual rate of core producer price growth also slowed to 5.8 percent in July from 6.4 percent in the previous month.

Following Wednesday's tamer than expected consumer price inflation data, the report initially added to optimism that the Federal Reserve will slow the pace of its interest rate hikes next month.

Subsequent comments from Fed officials seemed to downplay the importance of the data, however, with Chicago Fed President Charles Evans saying inflation remains "unacceptably high."

"After a little pushback from the Fed, Wall Street is starting to second guess how soon the Fed will be in a position to pivot," said Edward Moya, senior market analyst and OANDA.

He added, "Fed rate hike expectations will bounce between a half-point and 75 basis-points ahead of the September policy meeting, but it is way too early to continue to expect the next round of inflation readings to keep that declining pace.

Biotechnology stocks came under pressure over the course of the session, dragging the NYSE Arca Biotechnology Index down by 1.5 percent.

Considerable weakness also emerged among gold stocks, as reflected by the 1.4 percent drop by the NYSE Arca Gold Bugs Index. The weakness in the sector came amid a modest decrease by the price of gold.

Pharmaceutical stocks also showed a notable move to the downside on the day, with the NYSE Arca Pharmaceutical Index falling by 1.4 percent.

On the other hand, energy stocks held on to substantial gains, benefiting from a sharp increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 3.9 percent, the NYSE Arca Oil Index shot up by 3.2 percent and the NYSE Arca Natural Gas Index surged by 3 percent.

Banking stocks also saw continued strength on the day, driving the KBW Bank Index jumping by 1.6 percent to a two-month closing high.

Commodity, Currency Markets

Crude oil futures are slumping $1.74 to $92.60 a barrel after surging $2.41 to $94.34 a barrel on Thursday. Meanwhile, after falling $6.50 to $1,807.20 an ounce in the previous session, gold futures are edging down $0.60 to $1,806.60 an ounce.

On the currency front, the U.S. dollar is trading at 133.62 yen versus the 133.02 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0282 compared to yesterday's $1.0320.

Asia

Asian stocks ended mixed on Friday, with Japanese markets posting strong gains in a catch-up rally following a holiday on Thursday.

A cautious undertone prevailed after comments from Federal Reserve officials pointed to aggressive interest rate hikes to bring inflation down to the Fed's 2 percent target.

U.S. producer prices for July slowed at a faster than expected pace, reinforcing investors' views that inflation has peaked.

San Francisco Federal Reserve Bank president Mary Daly warned on Thursday it is far too early for the U.S. central bank to "declare victory" in its fight against inflation.

Chicago Fed President Charles Evans said he believes the Fed has plenty more work to do.

Minneapolis Fed President Neel Kashkari said he is sticking to his view that the U.S. central bank will need to raise its policy rate another 1.5 percentage points this year and more in 2023, even if that causes a recession.

Chinese stocks fell as several COVID-hit cities imposed fresh restrictions and lockdowns after an increase in cases.

Yiwu, a major commodity and manufacturing hub in Zhejiang Province, asked all its residents to stay home for three days — starting early Thursday morning — to contain flare-ups.

The benchmark Shanghai Composite Index slipped 0.2 percent to 3,276.89, while Hong Kong's Hang Seng Index closed 0.5 percent higher at 20,175.62.

Japanese shares ended at a seven-month high amid signs that U.S. inflation may be slowing. The Nikkei 225 Index jumped 2.6 percent to 28,546.98, marking its highest close since January 12. The broader Topix closed 2 percent higher at 1,973.18.

Tech stocks such as Advantest, Screen Holdings and Tokyo Electron surged 4-5 percent. Heavyweight SoftBank Group spiked 5.6 percent after the technology investor said it would book a $34.1 billion gain by cutting its stake in Alibaba Group Holding.

Automaker Honda Motor rallied 3.8 percent after raising the outlook for its full-year operating profit.

Seoul stocks ended a choppy session slightly higher. The Kospi edged up 0.2 percent to 2,527.94. Posco's trading arm, Posco International, soared 9.3 percent on news that it is absorbing Posco Energy to accelerate the shift to green energy business.

Market behemoth Samsung Electronics rose half a percent after its Vice Chairman and de facto head Lee Jae-yong received a presidential pardon over a bribery case.

Australian markets declined, with miners and tech stocks leading losses. Higher oil prices lifted energy stocks, with Woodside Energy rallying 3.7 percent.

Coal explorer Stanmore Resources jumped 10.9 percent on news its unit would buy Mitsui & Co's remaining 20 percent stake in BHP Mitsui Coal.

The benchmark S&P ASX 200 Index dropped 0.5 percent to 7,032.50 but posted its fourth straight weekly gain. The broader All Ordinaries Index ended half a percent lower at 7,288.80.

Europe

European stocks have risen on Friday after data showed Eurozone industrial production in June grew three times more than expected on the back of a jump in the output of capital goods.

Industrial production rose 0.7 percent sequentially in June, while analysts had predicted a 0.2 percent rise. Year-on-year, output rose 2.4 percent.

Elsewhere, the U.K. economy contracted less than expected in the second quarter.

Data from the Office for National Statistics showed that GDP fell 0.1 percent sequentially in the second quarter after a revised 0.8 percent increase in the previous quarter. Economists had forecast GDP to drop 0.2 percent.

While the German DAX Index has climbed by 0.6 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are both up by 0.3 percent.

Roche has risen after the Swiss drug maker announced it has received approval from the U.S. FDA for its Xofluza drug to treat influenza in children.

Sanofi has also moved to the upside following two days of losses on growing worries about U.S. litigation focused on a heartburn drug that contained a probable carcinogen.

GSK has also jumped. In a statement on Zantac (ranitidine) litigation and N-nitrosodimethylamine, the drug maker said U.S. and European regulators have concluded there is no evidence of a causal association between ranitidine therapy and the development of cancer.

Flutter Entertainment has also soared. After posting lower first-half earnings, the world's largest online betting firm said it expects a turnaround in the second half of the year.

Freenet, a telecommunications and web content provider, has also moved notably higher after raising its full-year EBITDA outlook.

Meanwhile, German shopping center investor Deutsche EuroShop has slumped after reporting flat revenue for the first half of 2022.

Knorr-Bremse has also tumbled. The manufacturer of braking systems for rail and commercial vehicles reported that its operating EBIT for the first half of 2022 declined to 365 million euros from the prior year's 495 million euros.

U.S. Economic Reports

Reflecting a sharp pullback in prices for fuel imports, the Labor Department released a report on Friday showing U.S. import prices fell by more than expected in the month of July.

The Labor Department said import prices slumped by 1.4 percent in July after rising by an upwardly revised 0.3 percent in June.

Economists had expected import prices to decline by 1.0 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also showed export prices tumbled by 3.3 percent in July after climbing by 0.7 percent in June. Export prices were expected to decrease by 1.1 percent.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of August. The consumer sentiment index is expected to inch up to 52.5 in August from 51.5 in July.

Stocks In Focus

Shares of Illumina (ILMN) are moving sharply lower in pre-market trading after the gene-sequencing technology company reported weaker than expected second quarter results and provided disappointing guidance.

Restaurant software maker Olo Inc. (OLO) is also seeing substantial pre-market weakness after reporting second quarter revenues that missed expectations and forecasting current quarter and full-year revenues below analyst estimates.

On the other hand, shares of Toast (TOST) are likely to see initial strength after the restaurant payment technology company reported a narrower than expected second quarter loss and raised its full-year guidance.

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