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Tech Stocks May Lead Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Friday, with stocks poised to regain ground after moving sharply lower over the two previous sessions.

Traders may look to pick up stocks at relatively reduced levels following recent weakness, which reflected ongoing concerns about the outlook for the economy and interest rates.

The Dow has shown a particularly steep drop so far this week, with the blue chip index turning negative for the New Year.

Tech stocks may help lead a rebound on Wall Street amid a positive reaction to quarterly results from streaming giant Netflix (NFLX).

Shares of Netflix are surging by 6.3 percent in pre-market trading after the company reported fourth quarter earnings that missed analyst estimates but stronger than expected subscriber growth.

Netflix also announced Reed Hastings is stepping down as co-CEO, with COO Greg Peters assuming the post of co-CEO alongsideTed Sarandos.

Google parent Alphabet (GOOGL) is also likely to see initial strength after announcing plans to cut about 12,000 jobs or 6 percent of its workforce.

After ending Wednesday's session sharply lower, stocks saw further downside during trading on Thursday. The major averages fluctuated after coming under pressure in early trading but remained stuck in the red.

The major averages all finished the day firmly in negative territory. The Dow slid 252.40 points or 0.8 percent to 33,044.56, the Nasdaq slumped 104.74 points or 1.0 percent to 10,852.27 and the S&P 500 fell 30.01 points or 0.8 percent to 3,898.85.

Concerns about the economic outlook continued to weigh on the markets following Wednesday's disappointing retail sales and industrial production data.

Traders also remain concerned about the outlook for interest rates amid worries the Federal Reserve will continue aggressively raising rates despite signs of a slowdown in inflation.

While the Fed is widely expected to further slow the pace of rate hikes to 25 basis points at its next meeting, traders are expressing some uncertainty about the possibility of further rate hikes.

Adding to the concerns about interest rates, a report released by the Labor Department unexpectedly showed a decrease in first-time claims for U.S. unemployment benefits in the week ended January 14th.

The Labor Department said initial jobless claims fell to 190,000, a decrease of 15,000 from the previous week's unrevised level of 205,000. The dip surprised economists, who had expected jobless claims to rise to 214,000.

"While initial jobless claims continue to be noisy due to seasonal adjustment factors, the unexpected drop in the latest week is a frustrating reminder for the Fed that the labor market remains tight as employers hold onto workers," said Matthew Martin, US Economist at Oxford Economics.

He added, "Our forecast assumes one more 25bps rate hike at the conclusion of the upcoming FOMC meeting, but we see risks as skewed toward additional rate hikes."

Meanwhile, the Commerce Department released a report showing new residential construction in U.S. fell for the fourth straight month in December, although the decrease was much smaller than expected.

The report said housing starts slumped by 1.4 percent to an annual rate of 1.382 million in December after tumbling by 1.8 percent to a revised rate of 1.401 million in November.

Economists had expected housing starts to plunge by 4.8 percent to an annual rate of 1.359 million from the 1.427 million originally reported for the previous month.

The Commerce Department said building permits also dove by 1.6 percent to an annual rate of 1.330 million in December after plummeting by 10.6 percent to a revised rate of 1.351 million in December.

Building permits, an indicator of future housing demand, were expected to jump by 2.1 percent to an annual rate of 1.370 million from the 1.342 million originally reported for the previous month.

Semiconductor stocks saw substantial weakness on the day, resulting in a 2.8 percent nosedive by the Philadelphia Semiconductor Index.

Considerable weakness was also visible among housing stocks, as reflected by the 2.3 percent slump by the Philadelphia Housing Sector Index.

Retail stocks also showed a significant move to the downside, dragging the Dow Jones U.S. Retail Index down by 2.1 percent.

Computer hardware, networking and brokerage stocks also saw notable weakness, while gold and oil stocks bucked the downtrend amid increases in the prices of their associated commodities.

Commodity, Currency Markets

Crude oil futures are rising $0.40 to $80.73 a barrel after advancing $0.85 to $80.33 a barrel on Thursday. Meanwhile, after climbing $16.90 to $1,923.90 an ounce in the previous session, gold futures are inching up $6.10 to $1,930 an ounce.

On the currency front, the U.S. dollar is trading at 130.29 yen versus the 128.43 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0821 compared to yesterday's $1.0833.

Asia

Asian stocks ended broadly higher on Friday, Treasury yields fell and the dollar sank after a slew of Fed officials said there is a need for further rate increases at a slower pace. The dollar hung near its weakest level since May, helping gold prices trade near nine-month highs.

Oil prices were set to post a second straight week of gains after data showed Chinese November oil demand climbed to the highest level since February.

Chinese shares rose notably after a top official said the worst was over in the battle against Covid-19. Additionally, the People's Bank of China kept benchmark lending rates unchanged for a fifth month, widely in line with expectations.

The benchmark Shanghai Composite Index climbed 0.8 percent to 3,264.81 in thin trading ahead of the Lunar New Year holidays, when hundreds of millions of people are headed home.

Hong Kong's Hang Seng Index jumped 1.8 percent to 22,044.65 as official data showed the city's unemployment rate decreased for the eighth month in a row in December.

Japanese shares rose and the yen weakened, as data showed the country's core inflation rose to 4 percent in December last year on an annualized basis, marking the highest since December 1981 and matching expectations.

The Nikkei 225 Index rose 0.6 percent to 26,553.53, while the broader Topix closed 0.6 percent higher at 1,926.87.

Airlines topped the gainers list after Prime Minister Fumio Kishida announced plans to downgrade the Covid disease to the equivalent of seasonal influenza in the spring.

Seoul stocks rose for a second day running, with tech and steel stocks climbing on hopes for a demand recovery in China. The Kospi gained 0.6 percent to settle at 2,395.26. SK Hynix, POSCO Holdings and LG Energy Solution all jumped around 3 percent.

Australian markets ended modestly higher as higher commodity prices boosted mining and energy stocks. The benchmark S&P/ASX 200 Index inched up 0.2 percent to 7,452.20, while the broader All Ordinaries Index settled 0.2 percent higher at 7,666.30.

Whitehaven Coal shares soared 6.2 percent after the miner said it expected profit for the first half of fiscal 2023 to more than quadruple.

Europe

European stocks have moved mostly higher during trading on Friday after China said the worst was over in the battle against Covid-19.

Investors also expressed optimism about a demand recovery in the world's second-biggest economy on eve of upcoming Lunar New Year holiday.

The dollar edged lower in European trade after a slew of Fed officials said there is need for further rate increases at slower pace.

While the U.K.'s FTSE 100 Index has edged up by 0.2 percent, the German DAX Index and the French CAC 40 Index are up by 0.5 percent and 0.6 percent, respectively.

British corporate merchandize firm 4imprint has moved sharply higher after its full-year profit beat analysts' expectations.

Lender Standard Chartered has also moved to the upside after it was cleared to set up a wholly owned securities brokerage unit in China.

Meanwhile, Ericsson shares have plummeted in Sweden after the telecom giant reported weak profits in its fourth quarter, hurt by hefty charges.

In economic news, German producer price inflation eased for the third straight month in December to reach its lowest level in just over a year amid a moderation in energy prices, data from Destatis showed.

The producer price index climbed 21.6 percent year-over-year in December, which was slower than the 28.2 percent surge in October. Economists had forecast the price growth to ease to 20.8 percent.

Further, the latest inflation rate was the weakest since October 2021, when prices had risen 19.2 percent.

Separate data showed U.K. retail sales unexpectedly declined in December despite the festive season.

The retail sales volume logged a monthly fall of 1.0 percent after easing by a revised 0.5 percent a month ago, data published by the Office for National Statistics revealed Friday.

This was in contrast to economists' forecast for a 0.5 percent increase and marked the second consecutive contraction.

U.S. Economic Reports

Philadelphia Federal Reserve President Patrick Harker is due to speak on the economic outlook before the New Jersey Bankers Economic Leadership Forum at 9 am ET.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of December.

Existing home sales are expected to tumble by 3.4 percent to an annual rate of 3.95 million in December after plunging by 7.7 percent to an annual rate of 4.09 million in November.

Federal Reserve Board Governor Christopher Waller is due to speak on the economic outlook before a Council on Foreign Relations event at 1 pm ET.

Stocks In Focus

Shares of PagerDuty (PD) are showing a strong move to the upside in pre-market trading after Morgan Stanley upgraded its rating on the cloud computing company's stock to Overweight from Equal-Weight.

Wholesale retailer Costco (COST) may also see initial strength after reauthorizing a common stock repurchase program of up to $4 billion.

On the other hand, shares of Nordstrom (JWN) are moving sharply lower in pre-market trading after the retailer reported a 3.5 percent year-over-year decrease in holiday sales and slashed its full-year earnings forecast.

Drugmaker Eli Lilly (LLY) may also move to the downside after the FDA rejected accelerated approval of the company's experimental Alzheimer's drug.

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