Economic Optimism May Lead To Continued Strength On Wall Street

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

Stocks are poised to extend the upward seen during trading on Thursday, which helped the major averages snap a three-day losing streak.

Optimism about the economic outlook may contribute to continued strength on Wall Street after yesterday’s jobless claims data.

The Labor Department report showed initial jobless claims once again dropped to their lowest level in well over a year.

The data further reinforced the view that the disappointing monthly employment report for April was an anomaly and not a sign of an economic downturn.

U.S. stocks snapped a three-day losing streak and closed higher on Thursday, buoyed by data showing a drop in jobless claims last week. Technology stocks posted strong gains, contributing significantly to the market’s strong close.

Bitcoin’s rebound after a terrible setback in the previous session aided sentiment. A few encouraging earnings announcements helped as well.

The major averages all closed notably higher. The Dow came off day’s high of 34,233.40, but still closed with a fairly decent gain of 188.11 points or 0.6 percent at 34,084.15. The S&P 500 ended up by 43.44 points or 1.1 percent at 4,159.12, while the Nasdaq settled at 13,535.74, gaining 236 points or 1.8 percent.

Data released by the Labor Department showed unemployment claims in the U.S. fell to 444,000 last week (the lowest since the week ended March 14, when it had dropped to 256,000), down from a revised 478,000 claims in the previous week. Economists had expected unemployment claims to drop to around 450,000 in the week ending May 15th.

The Labor Department’s data also showed that the number of continuing claims unexpectedly rose by 111,000 last week to 3.75 million, hitting a seven-week high.

The four-week moving average of US jobless claims, which removes week-to-week volatility, dropped to a fourteen-month low of 504,750 in the week, down from a revised 535,250 in the previous week.

The Philadelphia Fed Manufacturing Index fell to 31.5 in May from 50.2 in April which was the strongest reading in nearly 50 years. Figures also came below forecasts of 43. The index of business conditions fell sharply to 52.7 in April, from 66.6.

Apple, Home Depot, Boeing, Salesforce.Com, Amgen, Microsoft, Walt Disney, Intel and Procter & Gamble gained 1 to 2.1 percent. Tesla shares gained more than 4%.

Shares of Kohl’s Corporation (KSS) tumbled more than 10 percent despite the company reporting a strong surge in sales in the first quarter. The company reported a first-quarter net income of $14 million or $0.09 per share, compared to a net loss of $541 million or $3.52 per share in the prior-year quarter.

The company also raised its earnings guidance for the full-year 2021 to $3.80 to $4.20 per share, up from a previous guidance of $2.45 to $2.95 per share. share last year.

Commodity, Currency Markets

Crude oil futures are jumping $1.11 to $63.05 a barrel after tumbling $1.41 to $61.94 a barrel on Thursday. Meanwhile, after inching up $0.40 to $1,881.90 an ounce in the previous session, gold futures are rising $3.80 to $1,885.70 an ounce.

On the currency front, the U.S. dollar is trading at 108.71 yen versus the 108.78 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2198 compared to yesterday’s $1.2228.

Asia

Asian stocks ended mixed on Friday, despite a rebound on Wall Street overnight after data showed the U.S. economic recovery is underway.

While bargain hunting offered some support, inflation worries and COVID concerns kept the underlying mood cautious.

Chinese markets ended lower, as financials and consumer staple stocks came under selling pressure, offsetting gains in the commodities sector. The benchmark Shanghai Composite Index fell 20.39 points, or 0.6 percent, to 3,486.56, while Hong Kong’s Hang Seng Index finished marginally higher at 28,458.44.

Japanese shares ended higher despite lingering concerns over slow economic recovery from the pandemic due to stagnated vaccine rollouts. The Nikkei 225 Index climbed 219.58 points, or 0.8 percent, to 28,317.83, while the broader Topix closed 0.5 percent higher at 1,904.69.

Japan’s factory activity expanded at a slower pace in May while inflation fell in April, surveys showed earlier today just as the country approved two more coronavirus vaccines.

More than 40 percent of Japan’s population will be under the state of emergency starting this weekend as the country pushes on with Olympic test events.

Market heavyweight Fast Retailing rallied 1.1 percent and medical equipment maker Olympus gained over 2 percent, while chip making equipment maker Tokyo Electron dropped 1.3 percent.

Takeda Pharmaceutical, which is in deal with Moderna Inc., to begin the vaccine distribution in the country rose 1.4 percent.

Inpex, Japan’s biggest oil and gas explorer, tumbled 3.9 percent and peer Japan Petroleum Exploration gave up 3.2 percent.

Australian markets fluctuated before ending slightly higher after a survey showed retailers enjoyed stronger-than-expected sales in April. A measure of Australian manufacturing activity also expanded at a faster pace in May.

The benchmark S&P/ASX 200 Index edged up 10.70 points, or 0.2 percent, to 7,030.30 while the broader All Ordinaries index ended up 12.70 points, or 0.2 percent, at 7,265.30.

Tech stocks ended mixed, with Xero climbing 4.2 percent and Wisetech Global adding 1 percent, while Appen slumped 5.1 percent.

Miners BHP, Rio Tinto and Fortescue Metals dropped 1-2 percent, tracking weak iron ore prices after Beijing vowed to stabilize commodities prices. Mineral Resources lost 4.2 percent.

Energy stocks such as Woodside Petroleum, Oil Search Santos gave up 3-5 percent after crude oil prices tumbled overnight.

Kogan.com plummeted 14.3 percent after the online retailer issued an earnings downgrade due to issues with excess inventory and problems with its shipping costs. EML Payments surged 15.8 percent to extend gains for the second day.

Seoul stocks closed lower as investors locked in some profits amid uncertainties over inflation and China’s crackdown on crypto trading. The benchmark Kospi dipped 5.86 points, or 0.2 percent, to 3,156.42 despite early data suggesting that exports are set to surge in May. LG Chem fell 1 percent and POSCO lost 1.4 percent.

Europe

European stocks are broadly higher on Friday, as regional PMI data and U.K. retail sales figures supported the view that the economic recovery will be fast and full.

While the U.K.’s FTSE 100 Index is just above the unchanged line, the German DAX Index is up by 0.4 percent and the French CAC 40 Index is up by 0.6 percent.

Swiss luxury goods maker Richemont has moved sharply higher after saying it planned to double its dividend.

CTS Eventim shares have also surged. The concert promoter and ticketing company said ticket sales in Germany have begun to pick up for major and mid-sized artists and events.

BMW has also risen. The automaker said it expects an antitrust fine from the European Union will be much smaller than anticipated two years ago.

Electra Private Equity has also jumped after the private equity firm unveiled plans to list TGI Fridays and Hotter Shoes.

Meanwhile, Lufthansa has slumped after the Thiele family, the second-largest shareholder, sold more than half its stake in the German airline group.

In economic news, the euro area private sector activity grew the most in more than three years in May as economies continued to open up from virus restrictions, flash survey data from IHS Markit showed.

The composite output index rose to 56.9 from 53.8 in the previous month. The score was expected to climb moderately to 55.1.

U.K. retail sales expanded 9.2 percent month-on-month in April, faster than the 5.1 percent increase in March and the economists’ forecast of +4.5 percent as non-essential stores reopened, official data showed. This was the biggest increase since June 2020, when sales were up 13.9 percent.

On a yearly basis, retail sales volume grew sharply by 42.4 percent, after rising 7.2 percent in March.

Earlier in the day, survey results from the market research group GfK showed that confidence among consumers bounced back to its pre-lockdown level in May. The consumer sentiment index rose six points to -9 in May.

Separately, IHS Markit said that U.K. private sector is growing at its fastest pace in at least two decades this month.

U.S. Economic Reports

Dallas Federal Reserve President Robert Kaplan is due to moderate a “Technology-Enabled Disruption: A Conversation” discussion before a virtual Technology-Enabled Disruption Conference: Implications for Business, Labor Markets and Monetary Policy.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of April. Existing home sales are expected to jump by 2.0 percent.

San Francisco Federal Reserve President Mary Daly is due to participate in a “Wage Dynamics” panel discussion before a virtual National Bureau of Economic Research Spring ’21 Wage Dynamics in the 21st Century Conference at 1:30 pm ET.

At 4:55 pm ET, Kaplan is scheduled to give concluding remarks before the virtual Technology-Enabled Disruption Conference organized by the Federal Reserve Banks of Atlanta, Dallas and Richmond.