logo
  

Futures Pointing To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a notably lower open on Friday, with stocks likely to come under pressure after ending yesterday's choppy session modestly higher.

Traders may once again look to cash in on recent strength in the markets, which has lifted the major averages well off their June lows.

Recent profit taking efforts have not gained much traction, however, with the major averages holding near their best levels in almost four months.

Nonetheless, a lack of trading activity could exaggerate any early moves by the markets, as traders look ahead to next week's economic symposium in Jackson Hole, Wyoming.

Traders are likely to keep a close eye on comments from Federal Reserve officials at the annual symposium, looking for additional clues about the pace of future rate hikes.

A lack of major U.S. economic may also keep traders on the sidelines ahead of next week's reports on durable goods orders, new home sales, and personal income and spending.

The personal income and spending report due next Friday is likely to attract particular attention, as it includes a reading on inflation said to be preferred by the Fed.

Following the pullback seen during trading on Wednesday, stocks showed a lack of direction throughout the session on Thursday. The major averages spent most of the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session modestly higher. The Dow inched up 18.72 points or 0.1 percent to 33,999.04, the Nasdaq rose 27.22 points or 0.2 percent to 12,965.34 and the S&P 500 edged up 9.70 points or 0.2 percent to 4,283.74.

The choppy trading on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets following recent strength.

The major averages have shown a substantial recovery from their June lows, reaching their highest levels in almost four months.

Lingering concerns about the outlook for the economy, interest rates and inflation have raised questions about whether the markets can sustain the upward move.

"Stocks will most likely struggle for direction for the rest of the summer as Wall Street is still uncertain with how aggressive the Fed will be in September," said Edward Moya, senior market analyst at OANDA.

The lackluster performance on Wall Street also came following the release of a mixed batch of U.S. economic data.

Before the start of trading, the Labor Department released a report unexpectedly showing a modest pullback in first-time claims for U.S. unemployment benefits in the week ended August 13th.

The Labor Department said initial jobless claims edged down to 250,000, a decrease of 2,000 from the previous week's revised level of 252,000.

Economists had expected jobless claims to inch up to 265,000 from the 262,000 originally reported for the previous week.

The Federal Reserve Bank of Philadelphia also released a report showing regional manufacturing activity unexpectedly returned to growth in the month of August.

The Philly Fed said its diffusion index for current activity jumped to a positive 6.2 in August from a negative 12.3 in July, with a positive reading indicating growth. Economists had expected the index to rebound to a negative 5.0.

Meanwhile, the National Association of Realtors released a report showing another significant decrease in existing home sales in the month of July.

NAR said existing home sales plunged by 5.9 percent to an annual rate of 4.81 million in July after tumbling by 5.5 percent to a revised rate of 5.11 million in June.

Economists had expected existing home sales to slump by 4.5 percent to a rate of 4.89 million from the 5.12 million originally reported for the previous month.

Existing home sales declined for the sixth consecutive month, falling to their lowest annual rate since May 2020.

A separate report released by the Conference Board showed a continued decrease by its reading on leading U.S. economic indicators in the month of July.

The Conference Board said its leading economic index fell by 0.4 percent in July following a revised 0.7 percent decrease in June.

Economists had expected the index to decline by 0.5 percent compared to the 0.8 percent drop originally reported for the previous month.

"The US LEI declined for a fifth consecutive month in July, suggesting recession risks are rising in the near term," said Ataman Ozyildirim, Senior Director, Economics, The Conference Board.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster performance by the broader markets.

Energy stocks moved sharply higher, however, benefiting from a substantial increase by the price of crude oil. Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 4.7 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index shot up by 2.5 percent and 2.2 percent, respectively.

Significant strength was also visible among networking stocks, as reflected by the 2.9 percent jump by the NYSE Arca Networking Index.

Cisco Systems (CSCO) led the networking sector higher, soaring by 5.8 percent after reporting better than expected fiscal fourth quarter results and providing upbeat guidance for the current quarter.

Semiconductor and computer hardware stocks also saw considerable strength on the day, while commercial real estate and biotechnology stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slumping $1.52 to $88.98 a barrel after surging $2.39 to $90.50 a barrel on Thursday. Meanwhile, after slipping $5.50 to $1,771.20 an ounce in the previous session, gold futures are edging down $3.80 to $1,767.40 an ounce.

On the currency front, the U.S. dollar is trading at 136.91 yen versus the 135.98 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0054 compared to yesterday's $1.0087.

Asia

Asian stocks ended mixed on Friday as Federal Reserve officials continued to talk up the need for further interest rate hikes ahead of the Fed's annual Jackson Hole economic symposium in Wyoming next week.

St. Louis Fed president James Bullard said he expects a third straight 75 basis point interest rate hike in September, while San Francisco Fed colleague Mary Daly said that raising rates by 50 or 75 basis points next month would be "reasonable."

Kansas City Fed president Esther George argued that the drop in inflation registered in July was not evidence the underlying problem was fixed.

The dollar hit a one-month high as recession clouds gather over Europe. Oil prices fell over 1 percent to trade below $90 per barrel in Asian trading, snapping a two-day rally.

China's Shanghai Composite Index closed 0.6 percent lower at 3,258.08 as concerns about the economic outlook intensified. Hong Kong's Hang Seng Index ended marginally higher at 19,773.03 after a choppy ride.

Japanese shares ended little changed as investors booked profits after a recent rally. The Nikkei 225 Index finished marginally lower at 28,930.33, while the broader Topix edged up 0.2 percent to 1,994.52.

Uniqlo owner Fast Retailing fell 1.3 percent and pharma major Daiichi Sankyo lost 2.9 percent, while tech stocks such as Advantest, Tokyo Electron and Screen Holdings rose between half a percent and 1.5 percent.

Seoul stocks ended lower for a third straight session and the Korean won hit a yearly low against the dollar amid uncertainties over future U.S. rate hikes. The Kospi shed 0.6 percent to close at 2,492.69.

Australian markets gave up early gains to end on a flat note but posted their fifth consecutive weekly gain. Energy stocks surged, with Whitehaven Coal climbing 6.2 percent and New Hope Corp adding 4 percent as thermal coal prices soared on rising demand from Europe.

Gold miner Newcrest Mining rallied 3.6 percent after beating annual profit estimates.

Europe

European stocks have moved mostly lower on Friday after U.S. central bankers offered divergent signals over the size of the next interest rate hike.

Inflation and recession worries were back in focus after data showed German producer price inflation unexpectedly accelerated to a new record high in July, primarily driven by higher energy costs.

Producer prices grew 37.2 percent year-over-year in July, well above the 32.7 percent surge in June, Destatits reported.

The upward trend in July was largely caused by a 105.0 percent jump in energy prices amid soaring natural gas and electricity costs.

Elsewhere, U.K. retail sales unexpectedly recovered in July, while consumer sentiment hit a new record low in August amid the deepening cost of living crisis caused by rising inflation and the bleak economic prospects, separate data revealed.

Investors now look ahead to a Federal Reserve conference next week for indications of how much the U.S. central bank might raise rates.

The German DAX Index is down by 0.7 percent and the French CAC 40 Index is down by 0.5 percent, although the U.K.'s FTSE 100 Index has bucked the downtrend and inched up by 0.2 percent.

Swedish commercial vehicle manufacturer Volvo Group has fallen on news that Deputy CEO Jan Gurander will step down from his role as of December 31, 2022.

French catering and food services group Sodexo has also shown a notable move to the downside after Jefferies cut its rating on the stock.

Greatland Gold has also tumbled. The mining company said it had retained 30 percent ownership of the Haverion project following Newcrest's decision to not buy an additional 5 percent interest in the joint venture at the agreed price of $60 million.

On the other hand, Danish mining equipment and cement maker FLSmidth has surged after raising its annual sales outlook.

Kingspan Group has also jumped. The Irish building materials company delivered a record trading performance in the first six months of the year.

U.S. Economic Reports

Richmond Federal Reserve President Thomas Barkin is due to participate in panel, Riding the Wave: Maryland's Economic Forecast in Stormy Seas, before the Maryland Association of Counties 2022 Summer Conference at 9 am ET.

Stocks In Focus

Shares of Bed Bath & Beyond (BBBY) are poised to extend the sell-off seen in the previous session following news activist investor Ryan Cohen has completed the sale of his entire stake in the housewares retailer.

Heavy equipment maker Deere (DE) is also likely to come under pressure after reporting weaker than expected fiscal third quarter earnings and cutting its full-year profit forecast.

Meanwhile, shares of Foot Locker (FL) are moving sharply higher in pre-market trading after the athletic footwear and apparel retailer reported second quarter earnings that beat analyst estimates and announced the appointment of former Ulta Beauty (ULTA) CEO Mary Dillon as its news president and CEO.

Cloud-based financial software provider Bill.com (BILL) is also likely to see initial strength after reporting better than expected fiscal fourth quarter results and providing upbeat guidance.

For comments and feedback contact: editorial@rttnews.com

Follow RTT