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Financial Stocks May Lead The Way Higher On Wall Street

The major U.S. index futures are pointing to a higher opening on Friday, with stocks likely to add to the gains posted in the previous session.

Continued strength in the financial sector may push the markets higher after most of the nation's largest banks passed the Federal Reserve's annual stress test.

Financial giants such as Wells Fargo (WFC), Citigroup (C), and JPMorgan Chase (JPM) have subsequently announced billions of dollars in stock buybacks and raised their quarterly dividends.

Strength in the overseas markets may also generate early buying interest on Wall Street despite lingering trade concerns.

After seeing modest weakness early in the session, stocks showed a notable move to the upside over the course of the trading day on Thursday. The rebound on the day came on the heels of the pullback seen on Wednesday.

The major averages pulled back off their highs going into the close by still ended the day in positive territory. The Dow rose 98.46 points or 0.4 percent to 24,216.05, the Nasdaq advanced 58.60 points or 0.8 percent to 7,503.68 and the S&P 500 climbed 16.68 points or 0.6 percent to 2,716.31.

The strength that emerged on Wall Street may partly have reflected bargain hunting, with the Dow bouncing off its lowest intraday level in almost two months.

Financial stocks helped to lead the way back to the upside, regaining ground after trending lower over the past several sessions.

The weakness seen earlier in the day partly reflected lingering concerns about the global economic impact of the ongoing trade dispute between the U.S. and other major economies.

During a rally in North Dakota on Wednesday, President Donald Trump claimed the European Union was set up to take advantage of the U.S.

Trump accused the EU of exporting products to the U.S. while refusing to import American products, which he argued is "not free trade, that's stupid trade."

Negative sentiment was also generated in reaction to a Commerce Department report showing weaker than previously estimated U.S. economic growth in the first quarter.

The report said real gross domestic product increased by 2.0 percent in the first quarter compared to the previous estimate of 2.2 percent growth. Economists had expected the pace of GDP growth to be unrevised.

The weaker than previously estimated growth reflected downward revisions to private inventory investment, consumer spending, and exports.

A separate report from the Labor Department showed a bigger than expected increase in initial jobless claims in the week ended June 23rd.

The report said initial jobless claims rose to 227,000, an increase of 9,000 from the previous week's unrevised level of 218,000. Economists had expected jobless claims to inch up to 220,000.

Telecom stocks showed a strong move to the upside on the day, driving the NYSE Arca Telecom Index up by 1.3 percent.

The advance by the telecom index came after it ended Wednesday's trading at its lowest closing level in well over a month.

Notable strength also emerged among tobacco stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Tobacco Index.

Semiconductor, pharmaceutical, and chemical stock also saw some strength, while most of the other major sectors showed more modest moves.

Commodity, Currency Markets

Crude oil futures are edging down $0.01 to $73.44 a barrel after climbing $0.69 to $73.45 a barrel on Thursday. Meanwhile, after falling $5.10 to $1,251 an ounce in the previous session, gold futures are rising $1.70 to $1,252.70 an ounce.

On the currency front, the U.S. dollar is trading at 110.65 yen compared to the 110.49 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1659 compared to yesterday's $1.1569.

Asia

Asian stocks reversed early losses to end mostly higher on Friday after China eased restrictions on foreign investment in sectors including banking, automotive, heavy industry and agriculture amid scrutiny from its top trading partners.

The United States and the European Union have been complaining that Beijing limits foreign firms' ability to enter the world's second-largest economy.

China's Shanghai Composite Index rallied 61.41 points or 2.2 percent to finish at 2,848.43, the largest single-day gain since August 2016, as authorities eased foreign investment curbs.

Speculation was also rife that the People's Bank of China will lower the reserve ratios for some banks next week. Hong Kong's Hang Seng Index jumped 457.79 points or 1.6 percent to 28,955.

Japanese shares rebounded from early losses to finish modestly higher as the yen fell out of favor and EU leaders reached a deal on migration after more than 12 hours of negotiations.

The Nikkei 225 Index edged up 34.12 points or 0.2 percent to 22,304.51, while the broader Topix Index closed 0.2 percent higher at 1,730.89.

Air-conditioner maker Fujitsu General jumped 3.7 percent after the rainy season ended in Kanto-Koshin region 22 days earlier than average.

Sharp Corp soared 15.2 percent after the company cancelled plans to raise as much as 200 billion yen in a public share sale, citing a volatile market due to U.S.-China trade tensions.

In economic news, Japan's unemployment rate decreased to the lowest level in nearly twenty-six years in May, a government report showed. The seasonally adjusted jobless rate dropped to 2.2 percent from 2.5 percent in April.

Industrial production dropped a seasonally adjusted 0.2 percent month-over-month in May, reversing a 0.5 percent increase in April, another report showed. It was the first decline in four months.

Meanwhile, Australian shares fell modestly, dragged down by healthcare and energy stocks. The benchmark S&P/ASX 200 Index dropped 20.80 points or 0.3 percent to 6,194.60, while the broader All Ordinaries Index ended down 16.10 points or 0.3 percent at 6,289.70.

Healthcare stocks extended recent losses, with CSL and Sonic Healthcare ending down 1.1 percent and 1.6 percent, respectively. Energy stocks fell modestly on profit taking as oil prices dipped on concerns about trade frictions between the U.S. and other major economies.

Banks also closed mostly lower, with ANZ falling as much as 1.5 percent. Investment bank Macquarie Group lost 2.4 percent after hitting a record high in the previous session. Fortescue Metals Group shed 2.2 percent after Atlas Iron's board unanimously backed Gina Rinehart's A$390 million takeover bid for the company.

On the other hand, BHP Billiton rose 0.3 percent after it agreed to pay $158 million in remediation and compensation to the Brazilian non-profit foundation it set up in response to the 2015 Samarco mine dam collapse.

Europe

European stocks have rallied on Friday after China eased restrictions on foreign investment in several sectors and EU leaders struck a deal on immigration, helping investors shrug off trade tensions.

EU leaders have reached an agreement on migration, averting a political crisis in Germany, where Chancellor Angela Merkel's coalition government was under strain over migrant policy.

While the U.K.'s FTSE 100 Index has climbed by 0.7 percent, the French CAC 40 Index and the German DAX Index are both up by 1.2 percent.

Swiss pharmaceutical company Novartis has rallied after announcing a share buyback and unveiling plans to spin off its eye-care business Alcon.

French drug giant Sanofi has also climbed after it received a positive CHMP opinion for the treatment of a rare blood disorder called acquired thrombotic thrombocytopenic purpura.

BAE Systems has jumped in London. The Australian Commonwealth Government has selected the British defense company as the preferred tenderer to deliver its nine ship Future Frigate program for the Royal Australian Navy.

Meanwhile, British outsourcing and support services provider Serco Group has slumped after the company cut its revenue guidance for 2018.

In economic news, German retail sales decreased for the first time in seven months in May, while the country's jobless rate held steady at 5.2 percent in June, separate reports showed.

French consumer price inflation rose to 2.1 percent in June from 2 percent in May, matching expectations, provisional estimates from the statistical office Insee revealed.

Flash data from Eurostat showed that Eurozone inflation rose to 2 percent in June, in line with estimates and up from 1.9 percent in May on food and energy prices. The European Central Bank targets "below, but close to 2 percent" inflation.

In the U.K., the Office for National Statistics upwardly revised its first quarter GDP growth figures to 0.2 percent from 0.1 percent previously.

There was more good news for the economy as growth in the U.K.'s dominant services sector gained momentum in April and the housing market also ticked upwards in May despite some slowdown in unsecured consumer lending.

U.S. Economic Reports

A report released by the Commerce Department showed personal income in the U.S. increased in line with economist estimates in the month of May, although the report also showed weaker than expected growth in personal spending.

The report said personal income climbed by 0.4 percent in May after edging up by a downwardly revised 0.2 percent in April.

Economists had expected income to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending rose by 0.2 percent in May after climbing by a downwardly revised 0.5 percent in April.

Personal spending had been expected to increase by 0.4 percent compared to the 0.6 percent growth originally reported for the previous month.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of June. The Chicago business barometer is expected to drop to 60.0 in June from 62.7 in May, although a reading above 50 still indicates growth.

The University of Michigan is due to release its revised reading on consumer sentiment in the month of June at 10 am ET. The consumer sentiment index is expected to be downwardly revised to 99.2 from the preliminary reading of 99.3.

Stocks In Focus

Shares of Nike (NKE) are moving sharply higher in pre-market trading after the athletic footwear and apparel giant reported better than expected fiscal fourth quarter results and announced a $15 billion stock buyback.

Homebuilder KB Home (KBH) is also likely to see early strength after reporting fiscal second quarter results that exceeded analyst estimates.

On the other hand, shares of Constellation Brands (STZ) may come under pressure after the spirits producer reported fiscal first quarter earnings that missed expectations.

Supply chain services provider Synnex (SNX) may also move to the downside after announcing an agreement to acquire IT management company Convergys (CVG) for $2.4 billion.

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