Profit Taking May Lead To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground after ending the previous session mostly higher.

Profit taking may contribute to initial weakness on Wall Street after the upward move seen on Thursday lifted the S&P 500 to a new record closing high.

The tech-heavy Nasdaq also reached a record intraday high during yesterday’s trading but pulled back and ended the session only modestly higher.

A steep drop by shares of Twitter (TWTR) may weigh on the markets, with the social media giant plunging by 13.4 percent in pre-market trading.

The nosedive by Twitter comes after the company reported better than expected first quarter results but provided disappointing guidance.

On the other hand, shares of Amazon (AMZN) are likely to see initial strength after the online retail giant reported first quarter earnings that far exceeded analyst estimates.

Early negative sentiment may be partly offset by a report from the Commerce Department showing personal income skyrocketed in March amid the distribution of another round of stimulus checks.

Stocks showed wild fluctuations over the course of the trading session on Thursday but managed to end the day mostly higher. With the upward move on the day, the S&P 500 ended the session at a new record closing high.

The major averages all closed in positive territory, although the Nasdaq underperformed its counterparts. While the Nasdaq edged up 31.52 points or 0.2 percent to 14,082.55, the Dow climbed 239.98 points or 0.7 percent to 34,060.36 and the S&P 500 advanced 28.29 points or 0.7 percent to 4,211.47.

The higher close on Wall Street came following the release of upbeat earnings news from tech giants like Apple (AAPL) and Facebook (FB).

Shares of Apple jumped as much as 2.6 percent in early trading to reach a nearly three-month intraday high but pulled back near the unchanged line over the course of the session.

The initial advance by Apple came after the tech giant reported fiscal second quarter earnings that far exceeded analyst estimates and increased its stock buyback and dividend.

Social media giant Facebook climbed to a new record closing high after reporting much better than expected first quarter earnings.

Shares of Qualcomm (QCOM) also moved notably higher after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance.

In U.S. economic news, the Labor Department released a report showing first-time claims for U.S. unemployment benefits dropped to a new pandemic-era low in the week ended April 24th.

The report said initial jobless claims dipped to 553,000, a decrease of 13,000 from the previous week’s revised level of 566,000.

Economists had expected jobless claims to inch up to 549,000 from the 547,000 originally reported for the previous week.

Jobless claims fell for the third straight week, once again sliding to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Meanwhile, preliminary data released by the Commerce Department showed an acceleration in the pace of U.S. economic growth in the first three months of 2021.

The report said real gross domestic product surged up by 6.4 percent in the first quarter after jumping by 4.3 percent in the fourth quarter of 2020. Economists had expected GDP to increase by 6.5 percent.
Banking stocks showed a significant move to the upside on the day, driving the KBW Bank Index up by 2 percent to a new record closing high.

Substantial strength also emerged among networking stocks, as reflected by the 1.9 percent jump by the NYSE Arca Networking Index.

Housing stocks also turned in a strong performance, resulting in a 1.8 percent advance by the Philadelphia Housing Sector Index. The index reached its best closing level since a two-for-one split in early 2006.

The strength among housing stocks came after a report from the National Association of Realtors showed a rebound in pending home sales in the month of March.

On the other hand, gold stocks moved sharply lower on the day, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent. The sell-off by gold stocks came amid a decrease by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are tumbling $1.48 to $63.53 a barrel after jumping $1.15 to $65.01 a barrel on Thursday. Meanwhile, after falling $5.60 to $1,768.30 an ounce in the previous session, gold futures are inching up $1.60 to $1,769.90 an ounce.

On the currency front, the U.S. dollar is trading at 108.96 yen versus the 108.93 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2083 compared to yesterday’s $1.2121.

Asia

Asian stocks fell on Friday, as mixed regional data and fears of a fresh surge in coronavirus infection rates in the region, particularly in India and Japan, overshadowed signs that the U.S. economic recovery has picked up speed.

Chinese shares fell as regulators imposed wide-ranging restrictions on the financial divisions of 13 companies, including Tencent Holdings Ltd. and ByteDance Ltd., in an antitrust crackdown.

The benchmark Shanghai Composite Index ended down 28.04 points, or 0.8 percent, at 3,446.86, while Hong Kong’s Hang Seng Index plunged 578.38 points, or 2 percent, to 28,724.88.

In economic news, the manufacturing sector in China continued to expand in April, albeit at a pace, the National Bureau of Statistics, said with a manufacturing PMI score of 51.1. That missed expectations for a score of 51.7 and was down from 51.9 in March.

However, the Caixin manufacturing Purchasing Managers’ Index rose to a four-month high of 51.9 in April from an 11-month low of 50.6 in March.

Japanese shares fell as investors grew more worried about COVID-19 amid rising new infections in Tokyo and Osaka. Japan’s nationwide tally of new infections climbed to 5,918 on Thursday, the highest since the second state of emergency was completely lifted in late March.

The Nikkei 225 Index slid 241.34 points, or 0.8 percent, to 28,812.63, while the broader Topix closed 0.6 percent lower at 1,898.24.

Z Holdings shares plunged 7.2 percent after the internet company’s profit forecasts for the current fiscal year disappointed. Similarly, Sony plummeted 7.7 percent after it forecast profit to fall. Murata Manufacturing tumbled 3.6 percent after its forecasts came in below estimates.

In economic news, Japan’s industrial output posted a surprise increase in March and the jobless rate fell from the previous month, while Tokyo consumer prices fell unexpectedly in April, separate reports showed.

Australian markets fell sharply, dragged down by energy stocks. The benchmark S&P/ASX 200 Index dropped 56.50 points, or 0.8 percent, to 7,025.80 after hitting a 14-month high the previous day. The broader All Ordinaries index ended down 55.30 points, or 0.8 percent, at 7,290.70.

Beach Energy shares plummeted 24 percent after the oil and gas producer said it undertook an urgent review of its reserves across the Western Flank oil and gas fields in Australia.

Santos lost 1 percent after completing its stake sale in Bayu-Undan and Darwin LNG projects. Gold miners Evolution, Newcrest and Northern Star Resources gave up 2-3 percent after higher U.S. Treasury yields weighed on gold prices overnight.

In the healthcare sector, ResMed tumbled 4.2 percent after it slipped to a loss in the first quarter. Lender ANZ shed 0.7 percent after it warned of a profit hit in the first half from its exposure to Malaysia’s 1MBD scandal.

Mesoblast surged 6.8 percent after trial data showed the company’s remestemcel-L drug reduced mortality in COVID-19 patients under the age of 65.

In economic news, private sector credit in the country climbed 0.4 percent month-on-month in March after rising 0.2 percent in February, central bank data showed.

Seoul stocks ended lower for the fourth straight session as virus worries persisted and the latest economic readings proved to be a mixed bag. The lifting of a ban on stock short selling also raised uncertainties.

The benchmark Kospi fell 26.21 points, or 0.8 percent, to 3,147.86 as the government extended social distancing rules by three more weeks ahead of holidays next month. Naver, LG Chem, Hyundai Motor and Kakao fell 2-3 percent.

Industrial production in South Korea fell a seasonally adjusted 0.8 percent sequentially in March, Statistics Korea said. That was shy of expectations for an increase of 0.1 percent following the upwardly revised 4.4 percent jump in February.

Another report showed the value of retail sales in the country rose a seasonally adjusted 2.3 percent month-on-month in March. That beat expectations for a gain of 1.5 percent following the 0.8 percent contraction in February.

Europe

European stocks are turning in a mixed performance during trading on Friday as investors digest a slew of earnings reports and mixed GDP data from the region.

While the French CAC 40 Index is down by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.3 percent and the German DAX Index is up by 0.4 percent.

Tobacco company Swedish Match has moved to the downside despite reporting a significant increase in first-quarter net income.

Italian energy company ENI has also dropped. The company said that hydrocarbon production in the first quarter ticked lower to 1.70 million barrels of oil equivalent a day compared with 1.79 million boe/d the previous year.

Lender BNP Paribas has also fallen despite reporting better than expected profit, helped by lower provisions for pandemic-related bad loans and a rebound in equity trading.

Barclays has also shown a significant move to the downside despite reporting a quarterly profit that more than doubled.

Meanwhile,AstraZeneca has rallied in London. The pharmaceutical giant said it generated $275 million in revenue from its non-profit Covid-19 vaccine in the first quarter.

Hikma Pharma has also advanced after announcing the approval of KLOXXADO nasal spray 8mg by the FDA for the emergency treatment of known or suspected opioid overdose.

Smurfit Kappa has also surged. The provider of paper-based packaging solutions reported that its first quarter underlying revenue growth was 6 percent from last year.

Reinsurance giant Swiss Re has also jumped after reporting a strong first quarter, while French aerospace company Safran has risen after maintaining full-year forecasts.

In economic news, Eurozone GDP shrank by 0.6 percent in the first three months of this year as a slow vaccine rollout and ongoing lockdowns delayed the recovery, new figures from Eurostat showed.

The euro zone jobless rate fell to 8.1 percent in March, down from 8.2 percent in February and better than expectation of 8.3 percent.

U.K. house prices grew 2.1 percent month-on-month in April, the biggest monthly rise since February 2004, data published by the Nationwide Building Society showed. Economists had forecast an increase of 0.5 percent after posting a 0.3 percent drop in March.

On a yearly basis, house price inflation rose to 7.1 percent from 5.7 percent in March. The rate was expected to slow to 5 percent in April.

U.S. Economic Reports

Reflecting the distribution of another round of stimulus checks, the Commerce Department released a report on Friday showing U.S. personal income skyrocketed in the month of March.

The Commerce Department said personal income soared by 21.1 percent in March after plunging by a revised 7.0 percent in February.

Economists had expected personal income to spike by 20.3 percent compared to the 7.1 percent slump originally reported for the previous month.

The report also showed personal spending jumped by 4.2 percent in March following a 1.0 percent decrease in February. Personal spending was expected to surge up by 4.1 percent.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of April. The Chicago business barometer is expected to edge down to 65.0 in April from 66.3 in March, but a reading above 50 would still indicate growth.

Dallas Federal Reserve President Robert Kaplan is also due to participate in a moderated question-and-answer session before a virtual Montgomery Area Chamber of Commerce event at 9:45 am ET.

At 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of April.

The consumer sentiment index for April is currently expected to be upwardly revised to 87.5 from the preliminary reading of 86.5, which was up from 84.9 in March.

Stocks In Focus

Shares of Skyworks Solutions (SWKS) are moving sharply lower in pre-market trading after the chipmaker reported better than expected fiscal second quarter results but provided disappointing guidance.

Cleaning products maker Clorox (CLX) is also likely to see initial weakness after reporting fiscal third quarter results that beat estimates but cutting its full-year forecast.

On the other hand, shares of Western Digital (WDC) are likely to move to the upside after the disk drive maker reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Restaurant chain Texas Roadhouse (TXRH) may also see initial strength after reporting better than expected first quarter results.