Looming Fed Decision May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a mixed open on Friday, with the major averages likely to move in opposite directions after moving to the upside on Thursday.

The Nasdaq 100 futures are currently up by 0.2 percent, suggesting a modest extension of the significant rebound seen in the previous session.

Meanwhile, the Dow futures are down by 0.2 percent, pointing to a slight pullback by the blue chip index. The S&P 500 futures are little changed.

Overall trading may be somewhat subdued on the day, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Traders also continue to look ahead to the Federal Reserve’s highly anticipated monetary policy decision next Wednesday.

Key inflation reports are also likely to be in the spotlight next week, as the data could have a significant impact on the outlook for interest rates.

CME Group’s FedWatch Tool is currently indicating a 73.6 percent chance the Fed will leave rates unchanged next week but a 51.0 percent chance of another quarter point rate hike in July.

Stocks moved mostly higher during trading on Thursday, with the tech-heavy Nasdaq showing a significant rebound following the sharp pullback seen on Wednesday. With the upward move, the S&P 500 reached its best closing level in well over nine months.

The major averages ended the day just off their highs of the session. The Nasdaq jumped 133.63 points or 1.0 percent to 13,238.52, the S&P 500 climbed 26.41 points or 0.6 percent to 4,293.93 and the Dow rose 168.59 points or 0.5 percent to 33,833.61.

The strength on Wall Street partly reflected easing concerns about the outlook for interest rates following the release of a Labor Department report showing initial jobless claims increased by much more than expected last week.

The Labor Department said initial jobless claims climbed to 261,000 in the week ended June 3rd, an increase of 28,000 from the previous week’s revised level of 233,000.

Economists had expected jobless claims to inch up to 235,000 from the 232,000 originally reported for the previous week.

With the much bigger than expected advance, jobless claims reached their highest level since hitting 264,000 in the week ended October 30, 2021.

While economists noted jobless claims can be volatile around holidays like Memorial Day, the data added to optimism about the Federal Reserve pausing its interest rate hikes next week.

Retail stocks showed a strong move back to the upside after falling sharply on Wednesday, driving the Dow Jones U.S. Retail Index up by 1.4 percent.

Significant strength was also visible among pharmaceutical stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca Pharmaceutical Index.

Gold, semiconductor and software stocks also saw notable strength on the day, while most of the other major sectors showed more modest moves.

Commodity, Currency Markets

Crude oil futures are inching up $0.14 to $71.43 a barrel after slumping $1.24 to $71.29 a barrel on Thursday. Meanwhile, after jumping $20.20 to $1,978.60 an ounce in the previous session, gold futures are edging up $3.10 to $1,981.70 an ounce.

On the currency front, the U.S. dollar is trading at 139.11 yen versus the 138.92 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0774 compared to yesterday’s $1.0782.

Asia

Asian markets finished Friday’s trading on a positive note, buoyed by the rally on Wall Street a day earlier in cognizance of the weak jobs data. A surge in initial jobless claims in the U.S. has bolstered hopes that the Fed will pause its rate hikes.

China’s Shanghai Composite Index gained 17.82 points or 0.6 percent to finish trading at 3,231.41. The day’s trading ranged between 3,231.41 and 3,206.10. The Shenzhen Component Index added 71.05 points or 0.7 percent to close at 10,793.93.

The Japanese benchmark Nikkei 225 Index surged 623.90 points or 2.0 percent to end trading at 32,265.17. The day’s trading range was between 31,898.75 and 32,304.04.

Konami Corp. surged 5.8 percent. Marubeni Corp., Fast Retailing Co., Sojitz Corp. and Mitsui &Co. all rallied more than 4 percent.

Mitsui Engineering & Shipbuilding was the biggest laggard with a decline of 1.8 percent. NTN Corp. also slipped 1.6 percent. Sekisui House, Okuma Corp., and Mitsubishi Heavy Industries all declined more than half a percent.

The Hang Seng Index of the Hong Kong Stock Exchange added 90.77 points or 0.5 percent from the previous close to finish trading at 19,389.95. The day’s trading range was between a high of 19,463.61 and a low of 19,231.13.

The Korean Stock Exchange’s Kospi Index added 30.31 points or 1.2 percent to close trading at 2,641.16. The day’s trading range was between 2,618.45 and 2,644.70.

Australia’s S&P/ASX200 Index closed trading at 7,122.50 after gaining 22.80 points or 0.3 percent. The day’s trading range was between 7,099.70 and 7,131.20.

Nickel Industries surged 13.3 percent. Pharma business Imugene rebounded 7.5 percent. West African Resources rallied 5.3 percent. Champion Iron gained 4.5 percent and Sandfire Resources added 3.6 percent.

Johns Lyng Group dropped 4.1 percent. Healthcare business Healius, Lake Resources and Lovisa Holdings all declined more than 3 percent. NRW Holdings shed 2.5 percent.

Meanwhile, the NZX 50 Index of the New Zealand Stock Exchange shed 25.40 points or 0.2 percent to close at 11,690.34. Trading ranged between 11,663.14 and 11,742.10.

Software business Serko topped with a gain of more than 4 percent. Precinct Properties New Zealand and Restaurant Brands New Zealand both rallied more than 2 percent. Auckland International Airport and ANZ Group Holdings also added close to 2 percent.

EROAD, Mercury NZ, Synlait Milk and Skellerup Holdings all declined more than 2 percent. Healthcare business Pacific Edge also shed close to 2 percent.

Europe

European shares are seeing modest weakness during on Friday despite broadly higher movement in Asian markets and positive cues from Wall Street overnight.

Investors remain concerned over Chinese consumer inflation that contracted in May from the prior month. The National Bureau of Statistics reported that factory gate prices declined the most in more than seven years, leaving the door open for monetary policy easing to support the struggling economy.

Industrial production from Italy showed a 7.2 percent drop in April compared to the prior year and a 1.9 percent drop from the previous month.

The Netherlands’ industrial production was down for the fourth straight month in April and at the fastest pace in fourteen years, figures from the Central Bureau of Statistics showed on Friday.

While the U.K.’s FTSE 100 Index has slid by 0.5 percent, the French CAC 40 Index is down by 0.4 percent and the German DAX Index is down by 0.2 percent.

In corporate news, French software provider Dassault Systemes has slumped despite announcing that it targets a doubling of its earnings per share by 2028. The company also said that Pascal Daloz would become its new CEO from January 1 next year.

Shoe Zone plc shares have surged after the firm said it now expects adjusted profit before tax for fiscal 2023 to be not less than 10.5 million pounds. The business has exceeded expectations on strong early demand for summer products and lower container rates.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of Sonoma Pharmaceuticals (SNOA) are skyrocketing in pre-market trading after the company announced a new application for intraoperative pulse lavage irrigation treatment that can replace commonly used IV bags in a variety of surgical procedures.

Automakers General Motors (GM) and Tesla (TSLA) are also likely to see initial strength after GM announced a collaboration with Tesla to integrate the North American Charging Standard connector design into its electric vehicles beginning in 2025.

On the other hand, shares of Target (TGT) may move to the downside after Citi downgraded its rating on the retail giant’s stock to Neutral from Buy amid concerns its sales may have peaked.