Bargain Hunting May Lead 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 regain ground after trending lower over the past few sessions.

Traders may look to pick up stocks at somewhat reduced levels after the Dow and the S&P 500 closed lower for the fourth straight session on Thursday.

The Dow ended Thursday’s trading at its lowest closing level in a month, and the major averages are all currently lower for the week.

Buying interest may be somewhat subdued, however, as traders continue to express concerns about the economic impact of the delta variant.

Traders may also be wary of making significant moves ahead of the Federal Reserve’s next monetary policy meeting later this month.

The Fed may provide an update on the plans for its asset purchase program, although recent signs of slowing economic momentum may lead the central bank to push back tapering.

In U.S. economic news, the Labor Department released a report showing producer prices increased by slightly more than expected in the month of August.

After failing to sustain an early move to the upside, stocks moved mostly lower over the course of the trading session on Thursday. The major averages pulled back well off their early highs and into negative territory.

The major averages all finished the day in the red, with the Dow and the S&P 500 closing lower for the fourth straight session. The Dow fell 151.69 points or 0.4 percent to 34,879.38, the Nasdaq dipped 38.38 points or 0.3 percent to 15,248.25 and the S&P 500 slid 20.79 points or 0.5 percent to 4,493.28.

The early strength on Wall Street came after the Labor Department released a report showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended September 4th.

The report said initial jobless claims fell to 310,000, a decrease of 35,000 from the previous week’s revised level of 345,000. Economists had expected jobless claims to edge down to 335,000 from the 340,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims once again dropped to their lowest level since hitting 256,000 in the week ended March 14, 2020.

“While the August jobs report showed employers may have hit the pause button on hiring amid renewed concerns about the pandemic, the claims data suggest a reluctance to lay off workers amid a record number of job openings,” said Nancy Vanden Houten, Lead Economist at Capital Economics.

Last Friday, the Labor Department released a separate report showing U.S. job growth fell well short of economic estimates in the month of August.

Traders were also reacting to the European Central Bank’s latest monetary policy decision, as the bank announced it would slow the pace of asset purchases under its pandemic emergency purchase program.

Buying interest waned over the course of the session, however, with traders expressing continued concerns about the impact of the rapid spread of the delta variant of the coronavirus.

Uncertainty about the outlook for monetary policy also weighed on the markets ahead of the next Federal Reserve meeting later this month.

Pharmaceutical stocks moved sharply lower over the course of the session, dragging the NYSE Arca Pharmaceutical Index down by 2 percent to its lowest closing level in well over a month.

Significant weakness also emerged among commercial real estate stocks, as reflected by the 2 percent slump by the Dow Jones U.S. Real Estate Index.

On the other hand, airline stocks held on to the bulk of their early gains, with the NYSE Arca Airline Index soaring by 2.6 percent.

The rally by airline stocks came even though several major carriers lowered their forecasts due to the recent surge in Covid-19 cases.

Commodity, Currency Markets

Crude oil futures are jumping $1.24 to $69.38 a barrel after tumbling $1.16 to $68.14 a barrel on Thursday. Meanwhile, after rising $6.50 to $1,800 an ounce in the previous session, gold futures are slipping $3.20 to $1,796.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.89 yen versus the 109.72 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1830 compared to yesterday’s $1.1825.

Asia

Asian stocks mostly trod in positive territory on Friday, as easing concerns about U.S.-China tensions and clarifications that Chinese regulatory crackdown on gaming companies were not as harsh as originally reported, lifted sentiment in the region. Hang Seng’s Hang Seng Index led the region’s rally with a gain of 1.9 percent.

China’s Shanghai Composite Index managed to gain 0.3 percent over previous close to end trading at 3,703.11, as sentiment was supported by news of a conversation between the presidents of the U.S. and China.

Japan’s Nikkei 225 Index rallied 373.65 points or 1.3 percent to end trading at 30,381.84, just about a percent away from the 52-week high of 30,714.52.

Shinsei Bank gained more than 20 percent as rival lender SBI Holdings’ launched an unsolicited bid for the company and announced plans to increase its stake to 48 percent through a tender offer. Marine transportation business Kawasaki Kisen Kaisha gained more than 5 percent.

Pharmaceutical company Eisai Co. slumped more than 8 percent after Biogen, with whom it is jointly developing Alzhiemer drug Aduhelm, admitted to unexpected delays in the launch of the drug.

The Korean Stock Exchange’s Kospi Index gained 11.06 points or 0.4 percent to close at 3125.76. The day’s trading range was between 3,103.38 and 3,131.54. Ilsung Construction Co. was the lead gainer with a rally of close to 30 percent.

Hong Kong’s Hang Seng Index jumped 489 points or 1.9 percent to finish trading at 26,205.91. The day’s high was at 26,205.91 and the low was at 25,870.71.

Australia’s S&P ASX200 Index rose 37.10 points or 0.5 percent to close at 7,406.60, around 3 percent below its 52-week high of 7,632.80. Sentiment was lifted following the easing of coronavirus-related restrictions.

Nickel Mines surged 8.5 percent as positive investor sentiment in the electric vehicle (EV) battery market spilled over to nickel, a key component in lithium-ion batteries used in generating power for electric vehicles.

Mining stocks Alumina Ltd., South32 Ltd. and Mineral Resources Ltd. also rallied more than 5 percent as aluminum prices hit multi-year highs.

Medical device maker Polynovo Ltd. declined more than 5 percent following news of the resignation of its chief operating officer. Legal business services provider Omni Bridgeway slipped following an unfavorable legal decision in the Brisbane floods class action suit.

Europe

Despite some disappointing data from the region, European stocks mostly higher on Friday on hopes the economic recovery is on track after the latest data from the U.S. showed jobless claims in the world’s largest economy saw a bigger than expected drop last week.

Investors continue to digest the European Central Bank’s monetary policy announcement, and are tracking updates about the spread of the delta variant of coronavirus in several countries.

While the French CAC 40 Index has risen by 0.3 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.4 percent.

In the UK market, Antofagasta is climbing more than 3.5%. Experian, Evraz, Lloyds Banking Group, Burberry Group, RightMove, Glencore, Rio Tinto, Anglo American Plc and Weir Group are gaining 1.5 to 2.3%.

IAG is declining more than 3%. Barratt Developments is down by about 1.6% and Coca-Cola HBC is lower by 1%.

In France, LVMH is surging up 2.2%. Hermes International is gaining 1.7%, while STMicroElectronics and Kering both are up 1.5%. Schneider Electric is moving up 1.1%.

Unibail Rodamco is declining 2.7%, Air France-KLM is lower by 1.7%, Atos is down 1.4%, Vinci is drifting down 1.1% and Dassault Systemes is down 1%.

Shares of petroleum firm Rubis is down sharply as problems in the Caribbean region weighed on the company’s earnings.

In Germany, Infineon Technologies is rallying 2.3%, Adidas is gaining 2%, Siemens is climbing 1.8%, Daimler is up 1.7% and Deutsche Bank is rising 1.5%.

Fresenius Medical Care is lower by about 4.4% and Deutsche Telekom is down 2.1%.

In economic news, French industrial production and manufacturing grew at slower rates in July, preliminary data from the statistical office INSEE showed.

Industrial production grew 0.3% in July after rising 0.6% in June. Economists had forecast a 0.4% gain. Manufacturing output rose 0.6% after a 1% increase in June.

German consumer price inflation accelerated to the highest level since late 1993, rising marginally to 3.9% in August, final data from Destatis showed. Inflation rose 3.8% in July.

The U.K. economy logged weak growth in July as the output remained flat in services and contracted further in construction on supply shortages, data from the Office for National Statistics showed on Friday.

Gross domestic product expanded 0.1% in July from June, when the economy grew 1%. This was also slower than the 0.6% growth economists had forecast.

Although the economy expanded for the sixth consecutive month, output remained 2.1% below its pre-coronavirus pandemic level.

The European Central Bank on Wednesday left its key interest rate, the main refinancing rate, unchanged at zero, the deposit rate at -0.50% and the marginal lending rate at 0.25%, in line with economists’ expectations.

The ECB said it would slow the pace of its emergency asset purchases, which were launched last year to support the economy amid the Covid-19 crisis, as policymakers worry higher inflation may last longer.

U.S. Economic Reports

Producer prices in the U.S. increased by slightly more than expected in the month of August, according to a report released by the Labor Department on Friday.

The Labor Department said its producer price index for final demand climbed by 0.7 percent in August after jumping by 1.0 percent for two straight months. Economists had expected producer prices to increase by 0.6 percent.

Excluding prices for food, energy and trade services, core producer prices rose by 0.3 percent in August following a 0.9 percent advance in July. Core prices were expected to rise by 0.4 percent.

At 9 am ET, Cleveland Federal Reserve President Loretta Mester is scheduled to speak before a virtual Bank of Finland-CEPR “New Avenues for Monetary Policy” Conference.

The Commerce Department is due to release its report on wholesale inventories in the month of July at 10 am ET. Economists expected inventories to increase by 0.6 percent.

Stocks In Focus

Shares of Affirm Holdings (AFRM) are moving sharply higher in pre-market trading after the buy-now, pay-later company reported better than expected fiscal fourth quarter revenues and provided upbeat guidance.

Restaurant chain Dave & Buster’s (PLAY) is also likely to see initial strength after reporting fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of American Outdoor Brands (AOUT) may come under pressure after the maker of outdoor recreational products reported fiscal first quarter earnings that beat estimates but forecast full-year earnings toward the low end of expectations.

Specialty apparel retailer Zumiez (ZUMZ) is also seeing pre-market weakness after reporting better than expected fiscal second quarter earnings but weaker than expected revenues.