Looming Fed Meeting May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Friday, with stocks likely to extend the lackluster performance seen over the course of the previous session.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s highly anticipated monetary policy meeting next week.

The Fed is widely expected to leave monetary policy unchanged but could address the outlook for its asset purchase program.

The minutes of the Fed’s last meeting signaled the central bank was prepared to begin scaling back asset purchases by the end of the year.

With some recent disappointing economic data suggesting the Fed could push back its plans, traders are likely to pay close attention to the wording of the post-meeting statement.

Stocks may also see volatility as today represents a quadruple witching day, when stock options, single-stock futures, stock index futures and stock index options all expire on the same day.

Stocks fluctuated over the course of the trading session on Thursday before ending the day little changed. The major averages recovered from an early move to the downside but eventually finished the session on opposite sides of the unchanged line.

After tumbling by nearly 275 points in morning trading, the Dow closed down just 63.07 points or 0.2 percent at 34,751.32. The S&P 500 also dipped 6.95 points or 0.2 percent to 4,473.75, while the Nasdaq inched up 20.40 points or 0.1 percent to 15,181.92.

The lackluster close on Wall Street came following the release of a report from the Commerce Department showing an unexpected rebound in U.S. retail sales in the month of August.

The Commerce Department said retail sales climbed by 0.7 percent in August after plunging by a revised 1.8 percent in July.

The rebound surprised economists, who had expected retail sales to decrease by another 0.8 percent compared to the 1.1 percent slump originally reported for the previous month.

Excluding a continued nosedive in sales by motor vehicle and parts dealers, retail sales surged up by 1.8 percent in August after tumbling by a revised 1.0 percent in July.

Economists had expected ex-auto sales to edge down by 0.2 percent compared to the 0.4 percent drop originally reported for the previous month.

While the rebound in retail sales partly reflected a shift back to online spending amid the spread of the delta variant of the coronavirus, the resilience shown by consumers may encourage the Federal Reserve to follow through on plans to begin tapering its asset purchases later this year.

Recent signs of slowing economic momentum had generated optimism the Fed could delay tapering plans, allowing the central bank’s asset purchases to continue propping up stocks.

Meanwhile, a separate report from the Labor Department showed first-time claims for U.S. unemployment benefits rebounded by slightly more than expected in the week ended September 11th.

The report said initial jobless claims climbed to 332,000, an increase of 20,000 from the previous week’s revised level of 312,000.

Economists had expected initial jobless claims to rise to 328,000 from the 310,000 originally reported for the previous week.

The modest increase came after initial jobless claims fell to their lowest level since March of 2020 in the previous week.

Gold stocks turned in some of the market’s worst performances on the day, resulting in a 4.1 percent nosedive by the NYSE Arca Gold Bugs Index. The index ended the session at its lowest closing level in well over a year. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.

Substantial weakness was also visible among steel stocks, as reflected by the 2.9 percent slump by the NYSE Arca Steel Index.

Energy stocks also saw notable weakness on the day as the price of crude oil closed flat following Wednesday’s spike, while strength among airline stocks resulted in a 1.5 percent advance by the NYSE Arca Airline Index.

Commodity, Currency Markets

Crude oil futures are slipping $0.39 to $72.22 a barrel after coming in unchanged at $72.61 a barrel on Thursday. Meanwhile, after plunging $38.10 to $1,756.70 an ounce in the previous session, gold futures are inching up $3 to $1,759.70 an ounce.

On the currency front, the U.S. dollar is trading at 109.96 yen versus the 109.73 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1778 compared to yesterday’s $1.1767.

Asia

Asian stocks ended Friday’s session mostly higher despite concerns about slowing global growth and bets on early tapering by the U.S. Federal Reserve.

Chinese shares ended a choppy session modestly higher, with the benchmark Shanghai Composite Ondex rising 6.87 points, or 0.2 percent, to 3,613.97.

Hong Kong’s Hang Seng Index jumped 252.91 points, or 1 percent, to 24,920.76 after posting its lowest close in 10 months the day before.

China Evergrande Group shares fell a further 3.4 percent as the People’s Bank of China infused liquidity to ease nerves caused by the property giant’s debt crisis.

Japanese shares advanced, with the yen’s weakness and signs of falling new virus cases in the country offering some support. The Nikkei 225 Index climbed 176.71 points, or 0.6 percent, to 30,500.05, while the broader Topix ended 0.5 percent higher at 2,100.17.

Market heavyweight SoftBank Group advanced 1.8 percent, while semiconductor components manufacturer Lasertec climbed 2.2 percent and Tokyo Electron added 1.2 percent.

Nippon Steel slumped 6 percent after unveiling plans to sell 300 billion yen ($2.7 billion) worth of convertible bonds.

Australian markets ended notably lower as falling iron ore prices hurt miners. The benchmark S&P/ASX 200 Index fell 56.50 points, or 0.8 percent, to 7,403.70, while the broader All Ordinaries Index ended down 56.90 points, or 0.7 percent, at 7,702.90.

Mining heavyweights BHP and Rio Tinto tumbled 4-5 percent as iron ore prices continued to collapse on concerns over weaker demand. Smaller rival Fortescue Metals Group lost 11.5 percent and Mineral Resources gave up 8.5 percent.

IRESS shares slumped 10.7 percent as Swedish private equity group EQT walked away from a takeover bid for the financial data provider.

Seoul stocks eked out modest gains, supported by hopes of an economic recovery from the pandemic. The Kospi average inched up 10.42 points, or 0.3 percent, to 3,140.51 ahead of a three-day holiday.

Chip giants Samsung Electronics and SK Hynix rallied 1.5 percent and 2.9 percent, respectively, while Hyundai Heavy Industries closed 86 percent higher from its initial public offering price in its trading debut.

Europe

European stocks have risen on Friday and are on track for weekly gains, as travel and tourism stocks gain ground amid reports that Britain will consider easing COVID-19 rules for international travel.

The French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.2 percent, although the German DAX Index has bucked the uptrend and edged down by 0.1 percent.

Deutsche Lufthansa, InterContinental Hotels and British-Airways-owner IAG have surged amid hopes for an easing of restrictions for international travel.

Shares of Accsys Technologies have also soared after the British wood building products maker reported strong sales and revenue growth for the five months ended August 31st.

Commerzbank has also rallied. Handelsblatt reported that U.S. investor Cerberus was considering taking a 15.6 percent in the German lender after the federal election.

Biotest shares have also moved sharply higher as Grifols SA agreed to buy the healthcare company for about 1.6 billion euros ($1.9 billion).

Meanwhile, miners Anglo American, BHP fell and Rio Tinto have slumped as iron ore prices crash on concerns over weaker demand.

French carmaker Renault is also moving lower as group management and representative trade unions launched negotiations with a view to concluding a nationwide multi-year labor agreement for the period 2022-2024.

In economic news, U.K. retail sales declined for the fourth straight month in August, the Office for National Statistics reported.

Retail sales including auto fuel unexpectedly dropped by 0.9 percent month-on-month after declining 2.8 percent in July. Sales were forecast to climb 0.5 percent.

On a yearly basis, retail sales remained flat versus July’s 1.9 percent increase and the expected growth of 2.5 percent.

Elsewhere, Eurozone construction output grew for the first time in four months in July, data from Eurostat showed. Construction output rose 0.1 percent month-on-month in July after a 0.6 percent decrease in June.

On a year-on-year basis, output gained 3.3 percent in the month following 4.1 percent growth in the prior month.

U.S. Economic Reports

The University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of September at 10 am ET. Economists expect the consumer sentiment index to rise to 72.2 in September after plunging to 70.3 in August.

Stocks In Focus

Shares of Manchester United (MANU) are seeing significant pre-market weakness after the soccer team operator reported a wider fiscal fourth quarter loss and declined to provide guidance for the current fiscal year.

Video game maker Take-Two Interactive (TTWO) may also move to the downside after BMO Capital downgraded its rating on the company’s stock to Market Perform from Outperform.

On the other hand, shares of Invesco (IVZ) are likely to see initial strength after a report from the Wall Street Journal said the investment management firm is in talks to merge with State Street’s (STT) asset-management business.