Continued Stimulus Optimism May Generate Early Buying Interest

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks poised to extend the recovery from the sell-off seen early in the previous session.

Continued optimism about more fiscal stimulus may contribute to strength on Wall Street, as new Treasury Secretary Janet Yellen urged lawmakers to approve President Joe Biden’s $1.9 trillion relief package.

Yellen suggested during an interview with CNBC on Thursday that the Biden administration’s proposal could help the U.S. get back to full employment within a year.

The former Federal Reserve Chair also dismissed Republican complaints about the size of the proposed bill, arguing, “The price of doing too little is much higher than the price of doing something big.”

The comments from Yellen come after House Speaker Nancy Pelosi, D-Calif., said House Democrats aim to pass their version of the $1.9 trillion relief bill before the end of the month.

Democrats have been hoping to pass a new stimulus bill with Republican support but may be forced to use the process known as reconciliation to approve a relief package without GOP votes.

Traders have generally remained optimistic about more stimulus under Biden and the Democrat-controlled Congress, helping propel stocks to new record highs.

After moving sharply lower early in the session, stocks regained some ground over the course of the trading day on Thursday but still closed in negative territory. With the drop on the day, the Dow pulled back off Wednesday’s record closing high.

The major averages finished the day well off their lows but stuck in the red. The Dow fell 119.68 points or 0.4 percent to 31,493.34, the Nasdaq slid 100.14 points or 0.7 percent to 13,865.36 and the S&P 500 dropped 17.36 points or 0.4 percent to 3,913.97.

A negative reaction to earnings news from Walmart (WMT) contributed to the early sell-off on Wall Street, with the retail giant plunging by 6.5 percent.

The steep drop by Walmart came after the company reported weaker than expected fourth quarter earnings and warned of slowing sales growth in the coming year.

The weakness on Wall Street also came following the release of a Labor Department report showing initial jobless claims came in well above economist estimates in the week ended February 13th, with claims rising from a significantly upwardly revised level.

The report said initial jobless claims edged up to 861,000, an increase of 13,000 from the previous week’s revised level of 848,000.

Economists had expected jobless claims to dip to 765,000 from the 793,000 originally reported for the previous week.

Traders have recently viewed disappointing jobs data as positive for the markets amid expectations it will put further pressure on lawmakers to pass additional stimulus.

However, traders may now see the prospect of more stimulus as priced into the markets, inspiring them to use the data to cash in on the recent strength in the markets.

A separate report from the Commerce Department showed housing starts pulled back by much more than expected in the month of January.

The Labor Department also released a report showing a bigger than expected jump in import prices, which may have added to recent inflation concerns.

Energy stocks turned in some of the market’s worst performances on the day amid pullback by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 4.2 percent, the NYSE Arca Natural Gas Index tumbled by 3.5 percent and the NYSE Arca Oil Index slumped by 2.3 percent.

Considerable weakness was also visible among gold stocks, as reflected by the 1.6 percent drop by the NYSE Arca Gold Bugs Index. The weakness in the gold sector came despite a modest increase by the price of the precious metal.

Biotechnology stocks also showed a significant move to the downside, dragging the NYSE Arca Biotechnology Index down by 1.6 percent.

Telecom, steel and brokerage stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are tumbling $1.09 to $59.43 a barrel after sliding $0.62 to $60.52 a barrel on Thursday. Meanwhile, after inching up $2.20 to $1,775 an ounce in the previous session, gold futures are falling $7 to $1,768 an ounce.

On the currency front, the U.S. dollar is trading at 105.45 yen versus the 105.69 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2128 compared to yesterday’s $1.2092.

Asia

Asian stocks ended mixed on Friday as weak U.S. data released overnight as well as renewed concerns about rising inflation dented hopes of a swifter economic recovery from the Covid-19 pandemic.

Mainland Chinese markets recovered from an early slide to end higher. The benchmark Shanghai Composite Index climbed 20.81 points, or 0.6 percent, to 3,696.17, while Hong Kong’s Hang Seng Index closed 0.2 percent higher at 30,644.73.

Japanese shares fell for the third straight day, with a firmer yen and rising bond yields weighing on markets. Investors also digested official data showing that Japan’s consumer prices dropped at a slower pace in January, reflecting the end of the ‘Go To’ travel scheme by the government.

The Nikkei 225 Index dropped 218.17 points, or 0.7 percent, to 30,017.92, while the broader Topix closed 0.7 percent lower at 1,928.95.

Sharp Corp, plunged 7 percent and Inpex gave up 4.2 percent. Tech stocks bucked the weak trend, with Advantest climbing 3.3 percent and Tokyo Electron adding 1.5 percent.

Australian markets tumbled as investors reacted to mixed earnings results and news that Victoria has recorded three coronavirus cases after emerging from lockdown. There was also disappointment on the data front, with retail sales rising less than expected in January.

The benchmark S&P/ASX 200 Index lost 92.10 points, or 1.3 percent, to finish at 6,793.80, while the broader All Ordinaries Index ended down 91.50 points, or 1.3 percent, at 7,064.

Miners BHP, Fortescue Metals Group and Rio Tinto dropped 3-4 percent, while oil majors Woodside Petroleum, Oil Search and Santos tumbled 3-5 percent.

Lender ANZ rose slightly after reporting a sharp rise in quarterly profit, while the other three banks fell 1-2 percent. Gold miner Newcrest rose half a percent as gold prices snapped a four-session losing streak to close higher.

Shares of Inghams Group jumped 3.6 percent after the poultry producer said its first-half profit rose 34 percent.

Seoul stocks fluctuated before ending notably higher. The benchmark Kospi rose 20.96 points, or 0.7 percent, to 3,107.62 despite woes over a virus resurgence and rising U.S. Treasury yields.

South Korea’s daily new coronavirus cases fell back below 600, but health authorities warned that a resurgence in cases may occur, given a series of cluster infections at workplaces and hospitals.

South Korea’s producer prices increased 0.8 percent year-on-year in January following a 0.2 percent rise in December, central bank data showed earlier in the day.

Europe

European stocks have moved to the upside during trading on Friday, with earnings, macroeconomic data and rising bond yields in focus.

While the U.K.’s FTSE 100 Index has risen by 0.3 percent, the French CAC 40 Index and the German DAX Index are both up by 0.8 percent.

Daily Mail And General has moved significantly higher after announcing the sale of its education technology business.

NatWest Group has also moved to the upside in London after confirming that it will withdraw from the Republic of Ireland.

Segro has also advanced as it reported a 62 percent jump in 2020 pretax profit on the back of increased property valuations.

Danone SA shares have also climbed. The food company reported that its net income – group share for fiscal year 2020 rose to 1.96 billion euros from 1.93 billion euros in the prior year.

Luxury goods company Hermes has also moved sharply higher as revenue returned to growth in the second half of the year.

Insurance and asset management company Allianz SE has also advanced. After reporting a marginal drop in fourth-quarter net income, the company said it is in a good position to deliver on its 2021 ambition.

On the other hand, Swiss Re Group has moved to the downside as it posted a Group net loss of $878 million for fiscal year 2020.

Automaker Renault SA has also come under pressure after it posted a record annual loss of 8 billion euros ($9.68 billion).

Utility RWE AG has also fallen. The company said that the extreme weather conditions in Texas led to outages of RWE’s wind turbines and high electricity prices.

In economic news, the flash reading of the IHS Markit eurozone composite purchasing managers index rose to a two-month high of 48.1 in February from 47.8 in January. In the U.K. the flash composite PMI rose to 49.8 from 41.2 in January.

U.K. retail sales volume decreased 8.2 percent month-on-month in January, as tighter nationwide coronavirus restrictions affected demand, the Office for National Statistics said.

U.S. Economic Reports

The National Association of Realtors is due to release its report on existing home sales in the month of January at 10 am ET. Existing home sales are expected to slump by 1.5 percent.

At 11 am ET, Boston Federal Reserve President Eric Rosengren is scheduled to speak before a virtual Yale Economic Development Symposium

Stocks In Focus

Shares of Novavax (NVAX) are moving sharply higher in pre-market trading after the biotechnology company announced an agreement with global vaccine alliance Gavi to provide 1.1 billion doses of its Covid-19 vaccine candidate to an international vaccination effort.

Semiconductor equipment maker Applied Materials (AMAT) is also likely to see initial strength after reporting fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines and provided upbeat guidance.

Shares of Deere (DE) are also showing a strong move to the upside in pre-market trading after the heavy equipment maker reported better than expected fiscal first quarter results and raised its full-year earnings forecast.

On the other hand, shares of Dropbox (DBX) may come under pressure after the cloud storage company reported fourth quarter results that exceeded analyst estimates but provided disappointing guidance.

Travel website operator TripAdvisor (TRIP) is also likely to move to the downside after reporting a wider than expected fourth quarter loss.