Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move to the upside following the lackluster performance seen in recent sessions.

The upward momentum on Wall Street comes after a closely watched reading on inflation accelerated but failed to show the kind of jump that might encourage the Federal Reserve to scale back its asset purchases.

Stocks moved in opposite directions at the start of trading on Thursday and continued to experience choppy trading throughout the session. The Dow ended the day firmly positive, while the broader Nasdaq and S&P 500 closed near the unchanged line.

While the tech-heavy Nasdaq ended the day down 1.72 points or less than a tenth of a percent at 13,736.28, the Dow rose 141.59 points or 0.4 percent to 34,464.64 and the S&P 500 inched up 4.89 points or 0.1 percent to 4,200.88.

The lackluster performance on the day came as traders continued to look ahead to a highly anticipated reaching on inflation due out Friday.

The inflation reading is said to be preferred by the Federal Reserve and could have a significant impact on the outlook for monetary policy.

Traders were also digesting a report from the Labor Department showing weekly jobless claims once again fell to a new pandemic-era low.

The Labor Department said initial jobless claims slid to 406,000 in the week ended May 22nd, a decrease of 38,000 from the previous week’s unrevised level of 444,000. Economists had expected jobless claims to dip to 425,000.

Jobless claims decreased for the fourth consecutive week, once again falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The continued decrease in jobless claims paints a positive picture of the labor market but also raised concerns that the Fed will move closer to tapering its asset purchases in the near future.

A separate report from the Commerce Department showed an unexpected pullback in durable goods orders in April, although the decrease was largely due to a steep drop in orders for transportation equipment.

The report showed durable goods orders tumbled by 1.3 percent in April after jumping by an upwardly revised 1.3 percent in March.

The pullback surprised economists, who had expected durable goods orders to climb by 0.7 percent compared to the 0.8 percent increase that had been reported for the previous month.

Excluding a 6.7 percent slump in orders for transportation equipment, however, durable goods orders shot up by 1.0 percent in April after spiking by 3.2 percent in March. Economists had expected 0.8 percent growth.

The Commerce Department also released a report showing the pace of U.S. economic growth in the first quarter was unrevised from the advance estimate.

The report showed real gross domestic product spiked by 6.4 percent in the first quarter, unchanged from the estimate provided last month. Economists had expected a modest upward revision in the pace of GDP growth to 6.5 percent.

Meanwhile, a report released by the National Association of Realtors showed pending home sales in the U.S. unexpectedly tumbled to their lowest level in nearly a year in the month of April.

Despite the lackluster performance by the broader markets, steel stocks moved sharply higher following news of the first meeting between U.S. Trade Representative Katherine Tai and Chinese Vice Premier Liu He.

A statement from the Chinese Commerce Ministry described the virtual meeting as “candid, pragmatic and constructive” but did not reveal if the discussions included rolling back Trump-era tariffs.

Reflecting the strength in the steel sector, the NYSE Arca Steel Index surged up by 2.8 percent, climbing further off the nearly-one month closing low set on Tuesday.

Significant strength was also visible among oil service stocks, as reflected by the 1.7 percent gain posted by the Philadelphia Oil Service Index.

The strength in the oil service sector came amid a continued increase by the price of crude oil, with crude for July delivery climbing $0.64 to $66.85 a barrel.

Networking stocks also turned in a strong performance on the day, driving the NYSE Arca Networking Index up by 1.4 percent to its best closing level since reaching a record closing high in February.

Banking stocks also showed a strong move to the upside, while tobacco and gold stocks came under pressure over the course of the session.

Commodity, Currency Markets

Crude oil futures are ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬rising $0.56 to $67.41 a barrel after climbing $0.64 to $66.85 a barrel on Thursday. Meanwhile, after falling $5.30 to $1,898.50 an ounce in the previous session, gold futures are sliding $4.20 to $1,894.30 an ounce.

On the currency front, the U.S. dollar is trading at 110.70 yen versus the 110.44 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2144 compared to yesterday’s $1.2195.

Asia

Asian stocks ended Friday’s session on a mixed note as investors digested upbeat U.S. data and reacted to reports that the world’s largest economy will reveal a budget that would increase federal spending to $6 trillion in the coming fiscal year.

The dollar firmed up and Treasury yields ticked higher after U.S. Treasury Secretary Janet Yellen said above-normal inflation is likely to persist through the end of the year before fading.

Chinese shares fell slightly amid a strong yuan and lingering worries about policy tightening. Sino-U.S. relations remained on investors’ radar after the U.S. Senate advanced a sweeping package of legislation intended to boost the country’s ability to compete with Chinese technology.

Meanwhile, a statement from the Chinese Commerce Ministry described the virtual meeting between the U.S. and China’s top trade speakers as “candid, pragmatic and constructive” but did not reveal if the discussions included rolling back Trump-era tariffs.

China’s Shanghai Composite index dipped 8.07 points, or 0.22 percent, to 3,600.78 while Hong Kong’s Hang Seng index ended marginally higher at 29,124.41.

Japanese shares rallied amid hopes that a steady vaccination drive can help accelerate economic recovery. With infections not yet slowing to levels it can safely host the Olympics opening, the government is set to extend the COVID-19 state of emergency covering Tokyo and eight other prefectures for three weeks until June 20.

The Nikkei average jumped 600.40 points, or 2.10 percent, to 29,149.41, closing above the 29,000 level for the first time since May 10. The broader Topix index closed 1.91 percent higher at 1,947.44.

Market heavyweight SoftBank Group rallied 3.7 percent and Uniqlo operator Fast Retailing climbed 2.1 percent. Automaker Honda Motor jumped 3.6 percent, Nissan Motor added 3.1 percent and Toyota Motor advanced 1.7 percent as the dollar remained solid in the upper 109 yen range after rising overnight on optimism about the U.S. economic recovery.

Railway-related stocks rose, with Central Japan Railway gaining 2.5 percent and East Japan Railway adding 2 percent.

In economic news, the unemployment rate in Japan came in at a seasonally adjusted 2.8 percent in April – beating expectations for 2.7 percent and up from 2.6 percent in March.

Overall consumer prices in Tokyo were down 0.4 percent year-on-year in May – following the 0.6 percent decline in April. Core CPI was down an annual 0.2 percent – unchanged and in line with expectations.

Australian markets advanced, with miners leading the charge as iron ore prices rebounded from over six-week lows, aided by strong U.S. economic data released overnight.

The benchmark S&P/ASX 200 index climbed 84.60 points, or 1.19 percent, to 7,179.50 even as Victoria entered a seven-day lockdown over concerns about a highly infectious variant of COVID-19. The broader All Ordinaries index ended up 80 points, or 1.09 percent, at 7,424.

Mining heavyweights BHP and Rio Tinto jumped 2.9 percent and 2.6 percent, respectively. Woodside Petroleum, Oil Search and Santos gained around 2 percent after oil prices rose about 1 percent overnight.

Shareholder registry firm Link Administration soared 5 percent after private equity giant KKR & Co made an offer to buy its majority-owned online real estate platform PEXA.

Seoul stocks gained ground as improved U.S economic data raised hopes for a quick economic recovery from the pandemic. The benchmark Kospi edged up 23.22 points, or 0.73 percent, to settle at 3,188.73.

Top automaker Hyundai Motor jumped as much as 5.2 percent and leading chemical firm LG Chem added 3.6 percent.

Europe

European shares were at record highs on Friday after reports said U.S. President Joe Biden will seek $6trillion in federal spending plans for 2022. Biden is expected to unveil his first full budget later in the day.

Investors also wait for an update on the personal-consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, amid concerns that a higher-than-expected figure could force the U.S. Federal Reserve to tighten its monetary policy.

The pan-European STOXX 600 index rose 0.4 percent to 448.29 and was set for modest weekly gains.

The German DAX gained half a percent, France’s CAC 40 index rose 0.4 percent and the U.K.’s FTSE 100 was up 0.2 percent.

German industrial conglomerate Siemens rallied 3.5 percent to lead gains on hopes for economic recovery.

Banking giant HSBC rallied 2.2 percent in London and Standard Chartered advanced 1.7 percent.

TUI AG edged down slightly. The travel agency firm said that it has reached an agreement to dispose its 49 percent stake in RIU Hotels S.A. Joint Venture to Saranja S.L., an entity of the RIU-Group owned by Carmen and Luis Riu.

In economic releases, The European Commission’s economic sentiment index strongly to 114.5 in May, up from 110.5 in April, and above expectations for a score of 112.1.

France’s consumer price inflation accelerated to 1.4 percent in May from 1.2 percent in April, flash data from statistical office Insee revealed.

The rate came in line with economists’ expectations and a similar higher rate was last reported in February 2020.

The French economy contracted 0.1 percent in the first quarter of 2021, revised official data showed, marking a slip into recession as construction had fared worse than previously estimated.

U.S. Economic Reports

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of May.

The Chicago business barometer is expected to dip to 68.0 in May from 72.1 in April, with a reading above 50 indicating growth.

The University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of May at 10 am ET.

The consumer sentiment index for May is expected to be upwardly revised to 82.9 from the preliminary reading of 82.8, which was down from 88.3 in April.

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