Slowdown In Price Growth May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend the strong upward move seen over the two previous sessions.

The markets may continue to benefit from the upward momentum seen over the past two days, which has helped the major averages climb well off their recent lows.

Traders may continue to look to pick up stocks at relatively reduced levels amid optimism that the markets have found a bottom.

Buying interest may also be generated in reaction to a report from the Commerce Department showing a slowdown in the pace of core consumer price growth in the month of April.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth slowed to 4.9 percent in April from 5.2 percent in March.

The data may inspire confidence that the Fed will slow the pace of monetary policy tightening in the second half of the year.

The inflation reading was included in a report showing personal income in the U.S. increased by slightly less than expected in the month of April.

Stocks moved sharply higher during trading on Thursday, extending the strong upward move seen over the course of Wednesday’s session. The tech-heavy Nasdaq posted a particularly strong gain, continuing to recover after ending Tuesday’s trading at its lowest closing level since November 2020.

The major averages pulled back off their highs going into the close but continued to post strong gains. The Dow jumped 516.91 points or 1.6 percent to 32,637.19, the Nasdaq soared 305.91 points or 2.7 percent to 11,740.65 and the S&P 500 surged 79.11 points or 2 percent to 4,057.84.

The strength on Wall Street came as traders continued to pick up stocks at relatively reduced levels following recent weakness.

The major averages have recently fallen to their lowest levels in over a year, but traders seem to be expressing some optimism that the markets have finally found a bottom.

Adding to the positive sentiment, the Labor Department released a report showing first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended May 21st.

The report showed initial jobless claims dipped to 210,000, a decrease of 8,000 from the previous week’s unrevised level of 218,000. Economists had expected jobless claims to edge down to 215,000.

Meanwhile, a separate report from the Commerce Department showed economic activity in the U.S. slumped by slightly more than previously estimated in the first quarter of 2022.

The Commerce Department said real domestic product slid by 1.5 percent in the first quarter compared to the previously reported 1.4 percent drop. Economists had expected the decrease in GDP to be revised to 1.3 percent.

The slightly bigger than expected pullback came after GDP skyrocketed by 6.9 percent in the fourth quarter of 2021.

The National Association of Realtors also released a report showing pending home sales plummeted by much more than expected in the month of April.

NAR said its pending home sales plunged by 3.9 percent to 99.3 in April after tumbling by 1.6 percent to a revised 103.3 in March.

Economists had expected pending home sales to descend by 2.0 percent compared to the 1.2 percent slump originally reported for the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 5.2 percent.

Significant strength was also visible among retail stocks, as reflected by the 4.2 percent spike by the Dow Jones U.S. Retail Index. The index continued to rebound after ending Tuesday’s trading at a two-year closing low.

Dollar Tree (DLTR), Macy’s (M) and Dollar General (DG) all posted standout gains after reporting better than expected quarterly results.

Semiconductor stocks also saw considerable strength on the day, resulting in a 3.9 percent jump by the Philadelphia Semiconductor Index.

Housing, financial, steel and oil service stocks also showed notable moves to the upside amid broad based buying interest.

Commodity, Currency Markets

Crude oil futures are falling $0.83 to $113.26 a barrel after surging $3.76 to $111.25 a barrel on Thursday. Meanwhile, after inching up $1.30 to $1,847.60 an ounce in the previous session, gold futures are rising $2.90 to $1,850.50 an ounce.

On the currency front, the U.S. dollar is trading at 126.98 yen versus the 127.12 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0717 compared to yesterday’s $1.0725.

Asia

Asian stocks finished Friday’s session broadly higher after all three main U.S. indexes enjoyed a second day of gains overnight following strong earnings from retailers.

Investors also took comfort from the latest FOMC minutes suggesting that the Fed wants to slow the tightening cycle in the second half of the year following half-percentage-point rate hikes in June and July.

Oil prices slipped in Asian trading after surging to a two-month high in the previous session on signs of tight global supply. Gold prices were on course for a weekly gain as the dollar continued to weaken on easing of Fed hike fears.

China’s Shanghai Composite Index edged up 0.2 percent to 3,130.24 on hopes for improving Sino-U.S. ties and expectations of more economic stimulus measures.

The United States does not seek to sever China from the global economy but wants Beijing to adhere to international rules, U.S. Secretary of State Antony Blinken said on Thursday.

Hong Kong’s Hang Seng Index rallied 2.9 percent to 20,697.36, with Chinese tech stocks getting a boost after both Alibaba and Baidu reported sales growth that was higher than expected.

Japanese shares rose notably after data showed the Tokyo core consumer price index (CPI) grew an annual 1.9 percent in May 2022.

Bank of Japan Governor Haruhiko Kuroda told parliament that the country’s core consumer inflation would likely remain around the central bank’s 2 percent target for 12 months unless energy prices drop sharply.

The Nikkei 225 Index gained 0.7 percent to close at 26,781.68. SoftBank, Shiseido, Tokio Marine Holdings, Takashimaya, Sompo Holdings, J Front Retailing, Nippon Yusen KK and Nikon climbed 3-7 percent.

Seoul stocks advanced as a string of better-than-expected earnings results from retailers helped ease worries about a slowdown in U.S. consumption.

The Kospi jumped 1 percent to 2,638.05. Tech heavyweight Samsung Electronics rose 0.9 percent and peer SK Hynix added 2.9 percent.

Australian markets posted strong gains as higher commodity prices lifted mining and energy stocks. The benchmark S&P ASX 200 Index climbed 1.1 percent to 7,182.70, while the broader All Ordinaries index ended 1.0 percent higher at 7,413.10.

Automotive software firm Infomedia surged 6.5 percent after it received a A$657.6 million ($467.09 million) preliminary buyout offer from American tech-focused private equity firm Battery Ventures.

Europe

European stocks are moving higher for a third straight day on Friday, with strong earnings from U.S. retailers and expectations that the Federal Reserve may become less aggressive in tightening rates later in the year helping underpin sentiment.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is up by 0.7 percent and the French CAC 40 Index is up by 0.9 percent.

U.K. stocks have underperformed after the government announced a 25 percent windfall tax on oil and gas producers’ profits.

Chancellor of the Exchequer Rishi Sunak did not rule out applying a similar levy to power generators but said more work needs to be done on the idea.

Miners Anglo American, Antofagasta and Glencore have moved to the upside as copper and iron ore prices rise, boosted by a weaker dollar.

Workspace Group has advanced after saying it has received unsolicited indications of interest from a number of parties for the acquisition of the entire portfolio of light industrial assets formerly owned by McKay.

Saint-Gobain shares have also risen. The company has entered into agreements for the sale of its glass processing businesses Eckelt Glas and Glas Ziegler in Austria to the privately-owned German group AEQUITA, as well as the sale of its holding in the co-venture Glaskontor Erfurt – a glass processing business in Germany – to the CALEOGLAS Group.

U.S. Economic Reports

The Commerce Department released a report on Friday showing personal income in the U.S. increased by slightly less than expected in the month of April.

The report showed personal income rose by 0.4 percent in April after climbing by 0.5 percent in March. Economists had been expecting another 0.5 percent increase.

Meanwhile, the Commerce Department said personal spending advanced by 0.9 percent in April after surging by an upwardly revised 1.4 percent in March.

Personal spending was expected to increase by 0.7 percent compared to the 1.1 percent jump originally reported for the previous month.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth slowed to 4.9 percent in April from 5.2 percent in March.

At 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of May. The consumer sentiment index is expected to be unrevised from the preliminary reading of 59.1, which was down from 65.2 in April.

Stocks In Focus

Shares of Dell Technologies (DELL) are moving sharply higher in pre-market trading after the computer hardware maker reported fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines.

Cosmetics retailer Ulta Beauty (ULTA) is also likely to see initial strength after reporting better than expected fiscal first quarter results and providing upbeat guidance.

Meanwhile, shares of Gap (GPS) are seeing substantial pre-market weakness after the apparel retailer reported a wider than expected fiscal first quarter loss and slashed its full-year earnings forecast.

Discount retailer Big Lots (BIG) may also come under pressure after reporting an unexpected fiscal first quarter loss on weaker than expected sales.