Upbeat Earnings News May Contribute 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 move to the upside after ending yesterday’s extremely volatile session mostly lower.

A positive reaction to the latest batch of earnings may contribute to early strength on Wall Street, with apparel retailer Gap (GPS) moving notably higher in pre-market trading after unexpectedly returning to profitability in the third quarter on sales that exceeded analyst estimates.

Semiconductor equipment maker Applied Materials (AMAT) is also likely to move to the upside after reporting fiscal fourth quarter results that beat analyst estimates on both the top and bottom lines and providing upbeat guidance.

Shares of Ross Stores (ROST) and Palo Alto Networks (PANE) are also moving sharply higher in pre-market trading after reporting better than expected quarterly results.

Overall trading activity may be somewhat subdued, however, as some traders may stick to the sidelines following the recent volatility on Wall Street.

Stocks went on another wild ride over the course of the trading day on Thursday, extending the volatility seen in recent sessions. After recovering from an early sell-off, the major averages pulled back once again to end the day in negative territory.

The major averages moved back to the upside going into the close but finished the session in the red. While the Dow edged down 7.51 points or less than a tenth of a percent to 33,546.32, the Nasdaq fell 38.70 points or 0.4 percent to 11,144.96 and the S&P 500 dipped 12.23 points or 0.3 percent to 3,946.56.

The volatility on the day came as traders assessed the impact of recent developments on the likelihood of Chine easing Covid restrictions and the outlook for interest rates.

A recent jump in Covid cases in China has seemingly dashed hopes that the country will soon begin easing restrictions, leading to renewed concerns about global demand.

Hawkish comments from Federal Reserve officials also dented recent optimism about the outlook for interest rates.

In remarks at an event hosted by Greater Louisville Inc., St. Louis Fed President James Bullard suggested the central bank’s aggressive interest rate hikes have had “only limited effects on observed inflation.”

Bullard said the Fed will need to continue increasing interest rates to reach a level that could be considered “sufficiently restrictive.”

Selling pressure waned over the course of the session, however, as the Fed is still expected to slow the pace of its rate hikes as early as next month.

Gold stock showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.0 percent. The weakness among gold stocks came amid a decrease by the price of the precious metal.

Considerable weakness was also visible among utilities stocks, as reflected by the 1.9 percent drop by the Dow Jones Utility Average.

Housing stocks also saw notable weakness following the release of a Commerce Department showing a notable decrease in housing starts in the month of October.

Banking, retail and transportation stocks also moved to the downside on the day, while rebounds by computer hardware and semiconductor stocks contributed to the recovery attempt by the broader markets.

Commodity, Currency Markets

Crude oil futures are slumping $1.69 to $79.95 a barrel after plunging $3.95 to $81.64 a barrel on Thursday. Meanwhile, after falling $12.80 to $1,763 an ounce in the previous session, gold futures are inching up $2.70 to $1,765.70 an ounce.

On the currency front, the U.S. dollar is trading at 139.84 yen versus the 140.20 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0379 compared to yesterday’s $1.0362.

Asia

Asian stocks ended mixed on Friday amid worries about the U.S. Federal Reserve’s tightening cycle and a flare-up in COVID-19 cases in China despite strict measures to fight new outbreaks.

The dollar was headed for its best week in a month as hawkish remarks from several Federal Reserve officials suggested the Federal Reserve would continue to hike interest rates for an extended period.

St. Louis Fed President James Bullard said on Thursday that interest rates need to be increased further to between 5 percent and 7 percent to cool inflation. That would require more sharp increases in the Fed’s benchmark rate, which stands at 3.75 percent to 4 percent.

Oil edged up in Asian trading but was on track for a weekly loss of around 8 percent on concerns about potential lockdowns in top consumer China.

China’s Shanghai Composite Index dropped 0.6 percent to 3,097.24 amid worsening of the COVID situation in many cities. Hong Kong’s Hang Seng Index dipped 0.3 percent to 17,992.54.

Japanese shares closed a tad lower after data showed inflation in the country hit its fastest clip in 40 years in October. The Nikkei 225 Index slipped 0.1 percent to 27,899.77 and lost about 1.3 percent for the week, marking its first weekly loss in four.

The broader Topix finished marginally higher at 1,967.03. Growth shares were hit hard as long-term Treasury yields bounced from six-week lows.

Market heavyweight SoftBank Group tumbled 3.9 percent, while automakers Honda Motor, Nissan and Mitsubishi Motors climbed 1-3 percent as the yen stabilized around 140 per dollar.

Seoul stocks ended little changed, with the Kospi average ending 1.58 points higher at 2,444.48 amid Fed rate hike woes.

Australian markets eked out modest gains, with rate-sensitive financial stocks outperforming. The benchmark S&P ASX 200 Index rose 0.2 percent to 7,151.80, while the broader All Ordinaries Index ended 0.2 percent higher at 7,354.70.

OZ Minerals rallied 4 percent after receiving an improved offer from BHP Group.

Europe

European stocks have moved mostly higher on Friday after two straight days of declines on concerns about the impact of China’s “zero-COVID” strategy and indications that the U.S. Federal Reserve will keep raising rates to fight inflation.

Closer to home, the European Central Bank will keep raising rates as withdrawing accommodation may not be enough to curb inflation, ECB President Christine Lagarde said in a speech at a conference.

While the French CAC 40 Index has jumped by 1.3 percent, the German DAX Index is up by 1.2 percent and the U.K.’s FTSE 100 Index is up by 0.9 percent.

Regional banks are mostly higher as the European Central Bank begins the biggest withdrawal of cash from the euro zone’s banking system in its history.

British insurance giant Legal & General has also rallied after backing its full-year operating profit forecast.

Bodycote has also moved to the upside. After reporting strong revenue growth in the third quarter, the heat treatment and thermal processing services specialist said it expects its full-year performance to meet market expectations.

In economic news, U.K. retail sales volumes advanced 0.6 percent on a monthly basis in October, faster than the expected growth of 0.3 percent, data from the Office for National Statistic showed.

The monthly growth reversed the revised 1.5 percent decrease in September, which was affected by the bank holiday for the State Funeral.

Year-on-year, the decline in retail sales slowed to 6.1 percent from 6.8 percent in September.

Separately, survey results from market research group Gfk revealed that U.K. consumer confidence improved in November for the second straight month.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on existing home sales in the month of October at 10 am ET. Existing home sales are expected to edge down by 0.1 percent in October after slumping by 1.5 percent in September.

Also at 10 am ET, the Conference Board is due to release its report on leading economic indicators in the month of October. The leading economic index is expected to fall by 0.4 percent in October, matching the drop seen in September.

Stocks In Focus

Shares of Foot Locker (FL) are moving sharply higher in pre-market trading after the athletic footwear and apparel retailer reported better than expected third quarter results and raised its full-year guidance.

Cybersecurity company Palo Alto Networks (PANW) is also likely to see initial strength after reporting fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Farfetch (FTCH) are likely to come under pressure after the online luxury fashion retail platform reported a wider than expected third quarter loss.