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Futures Pointing To Extended Weakness On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Friday, with stocks likely to extend the downward trend seen over the past several sessions.

Concerns about the outlook for the global economy are likely to continue to weigh on Wall Street following aggressive interest rate hikes by central banks around the world.

Traders remain concerned the central banks' efforts to combat elevated inflation will push the global economy into a recession.

The Federal Reserve raised interest rates by another 75 basis points earlier this week and signaled more significant rate hikes later this year.

While the Fed's projections pointed to an eventually tapering of rate hikes by next year, traders worry about the outlook for the global economy in the months ahead.

Late in the trading day, Fed Chair Jerome Powell is scheduled to give opening remarks before a Fed Listens: Transitioning to the Post-pandemic Economy event.

Stocks once again saw late-day fluctuations but ended Thursday's trading mostly lower, adding to the steep losses posted on Wednesday. The Dow and the S&P 500 fell to three-month closing lows, while the Nasdaq slid to its lowest closing level in well over two months.

The major averages all closed in negative territory, although the Dow posted a relatively modest loss. While the Dow dipped 107.10 points or 0.4 percent to 30,076.68, the S&P 500 shed 31.94 points or 0.8 percent to 3,757.99 and the Nasdaq tumbled 153.39 points or 1.4 percent to 11,066.81.

The weakness on Wall Street reflected continued concerns about the economic outlook following the Federal Reserve's third straight 75 basis point interest rate hike on Wednesday.

While the Fed's economic projections provided a clearer outlook for future rate hikes, traders remain concerned about the impact the aggressive rate increases will have on the economy.

Several other central banks around the world followed the Fed's lead, including the Bank of England, which raised interest rates by 50 basis points in a split decision.

"Global equities are struggling as the world anticipates surging rates will trigger a much sooner and possibly severe global recession," said Edward Moya, senior market analyst at OANDA.

He added, "Most of these rate hikes around the world are not done yet which means the race to restrictive territory won't be over until closer to the end of the year."

The next Fed meeting is over a month away, giving traders a lot of time to analyze incoming economic data and try to determine the effect of the recent string of rate hikes.

Reports on inflation and the labor market are likely to be in focus in the coming weeks, as traders look for signs the Fed could alter the aggressive plan that has been laid out.

The Labor Department released a report this morning showing an uptick in jobless claims in the week ended September 17th.

The report showed initial jobless claims inched up to 213,000, an increase of 5,000 from the previous week's revised level of 208,000.

Economists had expected jobless claims to edge up to 218,000 from the 213,000 originally reported for the previous week.

The modest increase came after jobless claims dropped to their lowest level since the week ended May 28th in the previous week.

Meanwhile, the Conference Board released a separate report showing its index of leading U.S. economic indicators declined for the sixth consecutive month in August.

The Conference Board said its leading economic index fell by 0.3 percent in August after sliding by a revised 0.5 percent in July.

Economists had expected the leading economic index to come in unchanged compared to the 0.4 percent drop originally reported for the previous month.

A strong gain Merck (MRK) helped limit the downside for the Dow, with the drug giant surging by 3.5 percent after a U.S. District Court ruled in the company's favor in a patent infringement suit against Viatris related to sitagliptin, an active ingredient in Januvia.

Fellow Dow component Salesforce (CRM) also posted a strong gain after the business software giant unveiled a plan to operate more efficiently and increase profit margins.

Airline stocks extended the nosedive seen over the two previous sessions, with the NYSE Arca Airline Index plummeting by 2.8 percent to its lowest closing level in over two months.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.8 percent plunge by the Philadelphia Semiconductor Index. The index ended the session at its lowest closing level in well over a year.

Banking stocks also saw significant weakness on the day, dragging the KBW Bank Index down by 2.5 percent to a two-month closing low.

Networking, computer hardware, and housing stocks also saw weakness, while pharmaceutical stocks bucked the downtrend.

Commodity, Currency Markets

Crude oil futures are tumbling $2.58 to $80.91 a barrel after climbing $0.55 to $83.49 a barrel on Thursday. Meanwhile, after inching up $5.40 to $1,681.10 an ounce in the previous session, gold futures are slumping $28 to $1,653.10 an ounce.

On the currency front, the U.S. dollar is trading at 142.89 yen versus the 142.39 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $0.9754 compared to yesterday's $0.9836.

Asia

Asian stocks extended losses for a third day running Friday on concerns about elevated inflation and slowing global growth. Japanese markets were closed for the Autumnal Equinox holiday.

Chinese shares fell notably on growth concerns, with Nomura cutting its China 2023 annual growth forecast further to 4.3 percent from 5.1 percent in light of ongoing COVID woes.

The benchmark Shanghai Composite Index dropped 20.54 points, or 0.7 percent, to 3,088.37, while Hong Kong's Hang Seng Index slumped 1.2 percent to 17,933.27.

Seoul stocks tumbled, with the Kospi average plunging 1.8 percent to 2,290 amid fears that the global recession may deepen. SK Innovation plummeted 6.3 percent and LG Energy Solution lost 5.7 percent.

South Korea's producer prices dropped for the first time in nearly two years in August on the back of a decrease in international crude prices amid recession woes, central bank data showed earlier in the day.

Australian markets fell sharply to hit over two-month lows as traders returned to their desks after a holiday on Thursday.

The benchmark S&P ASX 200 Index dove 1.9 percent to settle at 6,574.70, marking its lowest level since July 1. The broader All Ordinaries Index ended 1.9 percent lower at 6,788.70.

Technology stocks followed their U.S. peers lower, with Xero and Block tumbling 8-9 percent. Financials and energy stocks also ended broadly lower.

Investors ignored the results of a survey showing that the manufacturing sector in Australia expanded at a fractionally higher pace in September.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 Index ended 0.7 percent lower at 11,434.82 - marking its lowest level in nearly two months.

Europe

European stocks have moved sharply lower on Friday, extending losses from the previous session amid concerns about a possible global recession.

S&P Global's Eurozone manufacturing purchasing managers' index fell to 48.5 in September from 49.6 a month earlier, according to preliminary estimates released earlier in the day.

The downturn in British businesses also deepened this month because of soaring costs and faltering demand. The S&P Global/CIPS flash Composite Purchasing Managers' Index (PMI) fell to 48.4 from 49.6 in August.

While the German DAX Index has plummeted by 2.1 percent, the French CAC 40 Index is down by 2.0 percent and the U.K.'s FTSE 100 Index is down by 1.8 percent.

U.K. government bonds have moved sharply lower, as chancellor Kwasi Kwarteng's mini-Budget slashed taxes.

Banks have also declined, with Credit Suisse plunging to a record low on reports that the Swiss bank is sounding out investors for fresh cash.

Meanwhile, French ophthalmic company EssilorLuxottica is marginally higher after launching its share buyback program.

Smiths Group has surged. The engineering business firm posted a decline in pre-tax earnings for the fiscal 2022, though revenue improved from last year.

U.S. Economic Reports

Federal Reserve Chair Jerome Powell is scheduled to give opening remarks before a Fed Listens: Transitioning to the Post-pandemic Economy event at 2 pm ET.

Fed Vice Chair Lael Brainard and Fed Governor Michelle W. Bowman are also due to moderate conversations at the Fed Listens event.

Stocks In Focus

Shares of Costco (COST) are seeing pre-market weakness even though the wholesale retailer reported better than expected fiscal fourth quarter results.

Financial services company Ally Financial (ALLY) may also move to the downside after Wells Fargo downgraded its rating on the company's stock to Equal Weight from Overweight.

On the other hand, shares of CalAmp (CAMP) are likely to see initial strength after the "internet of things" software company reported a narrower than expected fiscal second quarter loss on revenues that exceeded analyst estimates.

Sports-focused streaming service fuboTV (FUBO) may also move to the upside after Wedbush upgraded its rating on the company's stock to Outperform from Neutral.

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