Futures Pointing To Higher Open Following Inflation Data

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move back to the upside following the pullback seen in the previous session.

The futures remained firmly positive even after the Labor Department released a report showing U.S. consumer prices surged at the fastest annual rate of in nearly 40 years in November.

The report showed the annual rate of growth in consumer prices accelerated to 6.8 percent in November from 6.2 percent in October, reflecting the biggest jump since June of 1982.

Core consumer prices, which exclude food and energy prices, were up by 4.9 percent compared to the same month a year ago, showing the biggest annual increase since June of 1991.

The faster annual growth came as consumer prices climbed by 0.8 percent in November following a 0.9 percent advance in October. Economists had expected consumer prices to increase by 0.7 percent.

Core consumer prices rose by 0.5 percent in November after climbing by 0.6 percent in October. The increase in core prices matched economist estimates.

While the elevated rate of inflation may lead the Federal Reserve to accelerate the pace of tapering its asset purchases next week, the jump in prices should not come as a shock to investors.

Traders may instead focus on continued optimism about the economic outlook amid indications the Omicron variant of the coronavirus has milder symptoms and will not derail the global recovery.

Stocks moved mostly lower over the course of the trading session on Thursday, giving back ground after closing higher for three straight days. The Nasdaq showed a significant move to the downside, while the Dow ended the day nearly flat.

The Nasdaq tumbled 269.62 points or 1.7 percent to 15,517.37 and the S&P 500 slid 33.76 points or 0.7 percent to 4,667.45. Meanwhile, the Dow edged down by just 0.06 points or less than a tenth of a percent to 35,754.69.

The pullback on Wall Street came as traders cashed in on the recent strength in the markets, which saw stocks recover strongly from the post-Thanksgiving sell-off triggered by the detection of the Omicron variant of the coronavirus.

With concerns about the impact of the Omicron variant easing, traders are now looking ahead to the Federal Reserve’s monetary policy announcement next week.

Reports suggest the Fed could decide to double the pace of tapering its asset purchase program to $30 billion per month.

A report on consumer price inflation due to be released on Friday could impact the outlook for Fed policy, leading some traders to look for safe havens ahead of the data.

The Labor Department released a report this morning showing first-time claims pulled back by much more than expected in the week ended December 4.

The report said initial jobless claims slid to 184,000, a decrease of 43,000 from the previous week’s revised level of 227,000.

Economists had expected jobless claims to edge down to 215,000 from the 222,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims dropped to their lowest level since hitting 182,000 in September of 1969.

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.8 percent. The weakness among gold stocks came amid a decrease by the price of the precious metal.

Significant weakness also emerged among semiconductor stocks, as reflected by the 2.1 percent slump by the Philadelphia Semiconductor Index. The index pulled back further off Tuesday’s record closing high.

Biotechnology, computer hardware and tobacco stocks also gave back ground, while a rally by networking stocks drove the NYSE Arca Networking Index up by 2.1 percent to a new record closing high.

Ciena (CIEN) led the networking sector higher after reporting better than expected fiscal fourth quarter revenues and providing upbeat guidance.

Commodity, Currency Markets

Crude oil futures are jumping $1.21 to $72.15 a barrel after tumbling $1.42 to $70.94 a barrel on Thursday. Meanwhile, after falling $8.80 to $1,776.70 an ounce in the previous session, gold futures are rising $3.30 to $1,780 an ounce.

On the currency front, the U.S. dollar is trading at 113.55 yen versus the 113.49 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3231 compared to yesterday’s $1.1293.

Asia

Asian stocks ended mostly lower on Friday as investors avoided big bets ahead of U.S. consumer inflation data for November due this evening and the FOMC meeting next week.

At the meeting, the Federal Reserve could decide to double the pace of tapering its asset purchase program to $30 billion per month.

Evergrande’s default on U.S. dollar bonds as well as signs that several countries across the world are mulling stricter restrictions on movements to curb the spread of the Omicron variant of the coronavirus also dented sentiment.

Chinese shares ended lower amid uncertainty in the country’s property sector after Evergrande and Kaisa Group Holdings officially defaulted on their dollar debt. The developers were downgraded to “restricted default” by rating agency Fitch.

In another development, the People’s Bank of China has raised the reserve requirement ratio on banks’ foreign exchange deposits to 9 percent from 7 percent, effective December 15. This is the second time the central bank has raised the ratio this year.

The benchmark Shanghai Composite Index slipped 6.69 points, or 0.2 percent, to 3,666.35, while Hong Kong’s Hang Seng Index ended down 259.14 points, or 1.1 percent, at 23,995.72.

Japanese shares tumbled but posted their first weekly gain in three as Omicron worries ease. The Nikkei 225 fell 287.70 points, or 1 percent, to 28,437.77 but posted a 1.5 percent gain for the week. The broader Topix ended 0.8 percent lower at 1,975.48.

Tech stocks led losses, with Advantest, Tokyo Electron and Screen Holdings ending down between 1.3 percent and 1.8 percent. Medical equipment maker Terumo lost 2.3 percent and game maker Bandai Namco Holdings declined 2.9 percent.

Hitachi rose 2.2 percent on reports that the conglomerate is considering options to streamline its businesses, including the potential sale of its minority stake in a transportation unit.

Australian markets ended lower, dragged down by energy and technology stocks. Healthcare stocks also succumbed to selling pressure after three days of gains.

The benchmark S&P/ASX 200 Index dropped 31 points, or 0.4 percent, to 7,353.50 but recorded a weekly gain of 1.6 percent. The broader All Ordinaries Index ended down 21.50 points, or 0.3 percent, at 7,667.90.

Seoul stocks fell to snap a seven-day winning streak on concerns over Omicron’s economic impact. New coronavirus infections in South Korea stayed above 7,000 for the third consecutive day amid waning immunity and colder weather. The Kospi slid 19.34 points, or 0.6 percent, to close at 3,010.23.

Europe

European stocks have moved modestly higher on Friday as traders react to the U.S. inflation data amid lingering concerns around rising Covid-19 infections.

While the U.K.’s FTSE 100 Index has inched up by 0.1 percent, the French CAC 40 Index and the German DAX Index are both up by 0.2 percent.

United Internet shares have fallen. The German company said it expects EBITDA for 2022 to be on a par with 2021 and reach about 1.25 billion euros in 2022.

Saint-Gobain has also dropped in Paris. The building materials firm said it has sold its regional glass transformation business Glassolutions in Denmark to the German glass manufacturer Semcoglas Holding GmbH for an undisclosed amount.

Food delivery firms Deliveroo and Just Eat Takeaway have also dipped on worries that a European Commission ruling on gig economy drivers would hurt profits.

On the other hand, miner Anglo American has moved to the upside after it forecast a stronger performance in 2022.

Chemical giant Bayer has rallied after a California jury found that Bayer’s Roundup weedkiller was not the cause of a woman’s non-Hodgkin’s lymphoma.

Casino Group shares have also risen. The retailer has completed the definitive disposal of 3 percent of Mercialys equity through a total return swap of maturity March 2022.

Associated British Foods is slightly higher. The conglomerate said its performance since the fiscal 2021 year ended on September 18 across grocery, sugar, ingredients and agriculture has been in line with views.

Tobacco group Swedish Match has soared. The Wall Street Journal reported that U.S. Senate Democrats are dropping a proposal that would have imposed taxes on vaping.

In economic news, German consumer price inflation crossed 5 percent in November, largely driven by a low base effect and higher energy and food prices, the latest figures from the statistical office Destatis confirmed. The consumer price index rose 5.2 percent year-on-year following a 4.5 percent increase in October.

The U.K. economy expanded at a weaker pace in October. Gross domestic product grew only 0.1 percent from September, when the economy expanded 0.6 percent, official data showed. This was also much slower than the 0.4 percent expansion expected by economists.

U.S. Economic Reports

Reflecting broad based price growth, the Labor Department released a report on Friday showing U.S. consumer prices increased by slightly more than expected in the month of November.

The Labor Department said its consumer price index climbed by 0.8 percent in November following a 0.9 percent advance in October. Economists had expected consumer prices to increase by 0.7 percent.

Excluding food and energy prices, core consumer prices rose by 0.5 percent in November after climbing by 0.6 percent in October. The increase in core prices matched economist estimates.

The report also showed the annual rate of growth in consumer prices accelerated to 6.8 percent in November from 6.2 percent in October, reflecting the biggest jump since June of 1982.

Core consumer prices in November were up by 4.9 percent compared to the same month a year ago, showing the biggest annual increase since June of 1991.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of December. The consumer sentiment index is expected to edge down to 67.1 in December from 67.4 in November.

Stocks In Focus

Shares of Oracle (ORCL) are moving sharply higher in pre-market trading after the business software giant reported better than expected fiscal second quarter results and announced a $10 billion increase in its share repurchase program.

Chipmaker Broadcom (AVGO) is also likely to see initial strength after reporting fiscal fourth quarter results that exceeded expectations and providing upbeat guidance. Broadcom also announced a $10 billion share repurchase authorization.

Meanwhile, shares of Chewy (CHWY) are likely to come under pressure after the online pet products retailer reported a wider than expected fiscal third quarter loss.

Outdoor products maker American Outdoors Brands (AOUT) is also seeing significant pre-market weakness after reporting fiscal second quarter results that missed analyst estimates.