Upbeat Retail Sales Data May Lead To Rebound On Wall Street

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

Early buying may be generated in reaction to a report from the Commerce Department showing an unexpected increase in retail sales in the month of June.

The Commerce Department said retail sales climbed by 0.6 percent in June after plunging by a revised 1.7 percent in May.

The rebound surprised economists, who had expected retail sales to fall by 0.4 percent compared to the 1.3 percent slump originally reported for the previous month.

Excluding a steep drop in sales by motor vehicle and parts dealers, retail sales jumped by an even stronger 1.3 percent in June following a revised 0.9 percent decrease in May.

Economists had been expecting ex-auto sales to increase by 0.4 percent compared to the 0.7 percent drop originally reported for the previous month.

The strong retail sales data my help ease concerns about a slowdown in the pace of the economic recovery due in part to supply constraints.

At the same, time, continued strength in the U.S. economy may lead the Federal Reserve to consider scaling back its asset purchases sooner than expected.

Following the lackluster performance seen on Wednesday, stocks moved mostly lower during trading on Thursday. The Nasdaq and the S&P 500 closed in negative territory, although the narrower Dow managed to close modestly higher.

While the Dow rose 53.79 points or 0.2 percent to 34,987.02, the tech-heavy Nasdaq slid 101.82 points or 0.7 percent to 14,543.13 and the S&P 500 fell 14.27 points or 0.3 percent to 4,360.03.

The uptick by the Dow was partly due to an advance by shares of UnitedHealth (UNH), which closed higher after the health insurer reported better than expected second quarter results. Honeywell (HON) and Home Depot (HD) also posted notable gains.

Meanwhile, the weakness in the broader markets partly reflected renewed concerns about the global economic outlook after a report from China’s National Bureau of Statistics showed Chinese GDP growth slowed by more than expected in the second quarter.

The report showed Chinese GDP grew 7.9 percent year-on-year in the second quarter, shy of expectations for a gain of 8.1 percent and down sharply from 18.3 percent in the three months prior.

Indications some central banks around the world are considering tightening monetary policy much sooner than the Federal Reserve may have added to worries about the global economy.

Traders were also digesting a slew of U.S. economic data, including a report from the Federal Reserve showing industrial production increased by less than expected in the month of June.

The Fed said industrial production rose by 0.4 percent in June after climbing by a downwardly revised 0.7 percent in May. Economists had expected industrial production to increase by 0.7 percent.

The weaker than expected growth was partly due to a 0.1 percent dip in manufacturing output, which came as an ongoing shortage of semiconductors contributed to a 6.6 percent nosedive in the production of motor vehicles and parts.

The Labor Department also released a report showing first-time claims for unemployment benefits decreased in line with economist estimates in the week ended July 10th.

The report said initial jobless claims fell to 360,000, a decrease of 26,000 from the previous week’s revised level of 386,000.

Economists had expected jobless claims to dip to 360,000 from the 373,000 originally reported for the previous week.

With the decrease, initial jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

A separate report released by the Labor Department showed U.S. import prices increased in line with economist estimates in the month of June.

Meanwhile, separate reports from the New York Federal Reserve and the Philadelphia Federal Reserve showed mixed readings on the pace of growth in manufacturing activity in the two regions.

Oil service stocks showed a substantial move to the downside on the day, dragging the Philadelphia Oil Service Index down by 3.6 percent to its lowest closing level in over two months. The sell-off by oil service stocks came amid a continued decrease by the price of crude oil.

Significant weakness was also visible among semiconductor stocks, as reflected by the 2.2 percent slump by the Philadelphia Semiconductor Index. The index pulled back further off the record intraday high set in early trading on Wednesday.

Oil producer, networking and computer hardware stocks also saw notable weakness on the day, while utilities stocks showed a strong move to the upside.

Commodity, Currency Markets

Crude oil futures are climbing $0.41 to $72.06 a barrel after tumbling $1.48 to $71.65 a barrel on Thursday. Meanwhile, after rising $4 to $1,829 an ounce in the previous session, gold futures are slipping $3.90 to $1,825.10 an ounce.

On the currency front, the U.S. dollar is trading at 110.30 yen versus the 109.83 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1800 compared to yesterday’s $1.1812.

Asia

Asian stocks turned in a mixed performance on Friday, as concerns about resurging new COVID-19 cases and rising tensions between China and the U.S. offset investor optimism over a combination of soothing comments on inflation from Fed Chair Jerome Powell and U.S. Treasury Secretary Yellen.

Chinese shares fell after reports the U.S. is due to issue an advisory cautioning its companies about the risks of doing business in Hong Kong. The benchmark Shanghai Composite Index dropped 25.29 points, or 0.7 percent, to 3,539.30, while Hong Kong’s Hang Seng Index finished marginally higher at 28,004.68.

Japanese shares ended lower for the third straight day as the Bank of Japan maintained its monetary stimulus unchanged but lowered its near-term growth outlook, citing the impact of the coronavirus pandemic.

The central bank also raised its fiscal 2021 inflation forecast as virus infections climb just days before the Olympic Games begin.

The Tokyo metropolitan government reported 1,308 new infections on Thursday, the highest figure since mid-January.

The Nikkei 225 Index slid 276.01 points, or 1 percent, to 28,003.08, while the broader Topix closed 0.4 percent lower at 1,932.19.

Market heavyweight SoftBank Group shed 0.7 percent, while Uniqlo operator Fast Retailing tumbled 2.6 percent. Tech stocks such as Advantest, Tokyo Electron and Screen Holdings ended down between 1.4 percent and 2.2 percent.

Meanwhile, Australian markets ended a choppy session slightly higher as the nation’s two biggest cities live under strict lockdown rules.

The benchmark S&P/ASX 200 Index edged up 12.20 points, or 0.2 percent, to 7,348.10, while the broader All Ordinaries Index ended up 14.10 points, or 0.19 percent, at 7,630.70.

Miners ended mixed, with Rio Tinto declining 0.4 percent after releasing its second quarter production results.

Buy now, pay later firm Afterpay dropped 1.3 percent, while Zip Co. shares rallied 2.8 percent. Energy stocks saw modest weakness as oil steadied after two days of losses.

Whitehaven Coal jumped 4.4 percent after it narrowly beat full-year coal production forecast. Drug maker CSL gained 0.9 percent as the Aussie dollar tracked for a weekly loss.

Seoul stocks ended lower amid worries about rising inflation in the U.S. and the spreading new coronavirus pandemic at home, with health authorities warning that new infections are likely to increase during the summer vacation season. The benchmark Kospi slipped 9.31 points, or 0.3 percent, to 3,276.91.

Market bellwether Samsung Electronics dropped 1 percent and No. 2 chipmaker SK Hynix lost 1.6 percent, while pharmaceutical firm Samsung Biologics jumped 2.9 percent.

Europe

European stocks are turning in a mixed performance on Friday as investors digest a slew of earnings as well as the latest U.S. retail sales data.

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

The British pound has pushed higher after a Bank of England policymaker said that the trends fueling price increaes may not be temporary.

Telecom equipment maker Ericsson has moved sharply lower after its second quarter core earnings came in below expectations.

Swiss luxury goods group Richemont has also fallen. The company said constant-currency sales more than doubled in the first quarter.

British luxury group Burberry has also slumped despite the company announcing that sales have returned to pre-pandemic levels.

German sportswear company Puma has also come under pressure despite posting strong sales and raising its full-year outlook.

Meanwhile, Swedish lender Swedbank has shown a strong move to the upside after reporting a better than expected profit for the second quarter.

Intercontinental Hotels, EasyJet and British-Airways owner IAG have also jumped after U.S. President Joe Biden said the United States is reviewing when it can lift the COVID-related travel ban for European citizens.

Automakers Volkswagen and Renault have also risen after industry data showed Europe’s passenger car registrations increased at a moderate pace in June.

In economic news, Eurozone inflation fell below 2 percent in June, as initially estimated, final data from Eurostat showed on Friday.

Inflation eased to 1.9 percent in June from 2 percent in the prior month. The annual rate came in line with the flash estimate released on June 30.

The inflation rate had exceeded the European Central Bank’s target of “below, but close to” 2 percent in May for the first time since 2018.

On a monthly basis, the harmonized index of consumer prices gained 0.3 percent in June.

Separately, Eurostat data revealed that the euro area trade surplus declined in May on weak foreign demand.

The trade surplus fell to a seasonally adjusted 9.4 billion euros in May from 13.4 billion euros in April. Exports dropped 1.5 percent on a monthly basis in May, while imports grew 0.7 percent.

On an unadjusted basis, the trade balance showed a surplus of 7.5 billion euros in May compared to the 8.9 billion euro surplus in the same period last year.

U.S. Economic Reports

Retail sales in the U.S. unexpectedly increased in the month of June, according to a report released by the Commerce Department on Friday.

The Commerce Department said retail sales climbed by 0.6 percent in June after plunging by a revised 1.7 percent in May.

The rebound surprised economists, who had expected retail sales to fall by 0.4 percent compared to the 1.3 percent slump originally reported for the previous month.

Excluding a steep drop in sales by motor vehicle and parts dealers, retail sales jumped by an even stronger 1.3 percent in June following a revised 0.9 percent decrease in May.

Economists had been expecting ex-auto sales to increase by 0.4 percent compared to the 0.7 percent drop originally reported for the previous month.

At 9 am ET, New York Federal Reserve President John Williams is scheduled to welcoming remarks before the virtual New York Fed Web Series on Culture: Culture in a Post-Pandemic Workplace.

The University of Michigan is due to release its preliminary reading on consumer sentiment in the month of July at 10 am ET. The consumer sentiment index is expected to inch up to 86.5 in July from 85.5 in June.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of May. Business inventories are expected to rise by 0.5 percent.

Stocks In Focus

Shares of Moderna (MRNA) are moving sharply higher in pre-market trading following news the drug maker will replace Alexion Pharmaceuticals (ALXN) in the S&P 500 prior to the start of trading on Wednesday, July 21. Alexion is being acquired by AstraZeneca (AZN).

Entertainment company Live Nation (LYV) is also likely to see initial strength after Goldman Sachs initiated coverage of the company’s stock with a Buy rating.

Aluminum producer Alcoa (AA) may also move to the upside after reporting second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Didi (DIDI) may come under pressure after Chinese regulators raided the ride-hailing service’s offices in an on-site cybersecurity investigation.

Outdoors equipment supplier American Outdoor Brands (AOUT) is also seeing significant pre-market weakness after reporting fiscal fourth quarter earnings that beat estimates but on weaker than expected sales.