Upbeat Earnings News May Lead To Extended Rally On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend the rally seen over the past several sessions.

Ongoing optimism about the Federal Reserve being close to ending its monetary policy tightening may contribute to continued strength on Wall Street following recent encouraging inflation data.

Early buying interest may also be generated in reaction to upbeat earnings news from financial giants JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC).

Shares of JPMorgan are surging by 3.0 percent in pre-market trading after the company reported second quarter earnings that came in well above analyst estimates.

Citigroup and Wells Fargo are also seeing significant pre-market strength after reporting better than expected quarterly results.

Outside the financial sector, Dow component UnitedHealth (UNH) is also likely to move to the upside after reporting second quarter results that beat expectations on both the top and bottom lines.

Stocks moved mostly higher during trading on Thursday, adding to the gains posted over the past few sessions. With the continued upward move, the Nasdaq and the S&P 500 once again reached their best closing levels in over a year.

The major averages gave back some ground going into the close but remained in positive territory. The Nasdaq surged 219.61 points or 1.6 percent to 14,138.57, the S&P 500 jumped 37.88 points or 0.9 percent to 4,510.04 and the narrower Dow inched up 47.71 points or 0.1 percent to 34,395.13.

The continued strength on Wall Street came following the release of a Labor Department report showing producer prices in the U.S. inched up by slightly less than expected in the month of June.

The Labor Department said its producer price index for final demand crept up by 0.1 percent in June after falling by a revised 0.4 percent in May.

Economists had expected producer prices to rise by 0.2 percent compared to the 0.3 percent dip originally reported for the previous month.

The report also said the annual rate of producer price growth slowed to just 0.1 percent in June from a revised 0.9 percent in May.

The pace of growth was expected to slow to 0.4 percent from the 1.1 percent originally reported for the previous month.

Following yesterday’s tamer-than-expected consumer price inflation data, the data further eased concerns about the outlook for interest rates.

“The disinflation narrative is in full effect with less-than-expected PPI numbers today following on the heels of lower-than-expected CPI numbers yesterday,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, “It does appear that inflation is coming down across the board and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”

Meanwhile, a separate Labor Department report unexpectedly showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 8th.

The Labor Department said initial jobless claims slipped to 237,000, a decrease of 12,000 from the previous week’s revised level of 249,000.

The dip surprised economists, who had expected jobless claims to inch up to 250,000 from the 248,000 originally reported for the previous week.

Computer hardware stocks saw substantial strength on the day, driving the NYSE Arca Computer Hardware Index up by 2.4 percent to its best closing level in over a year.

Semiconductor and software stocks also showed significant moves to the upside, contributing to the surge by the tech-heavy Nasdaq.

Steel, financial and housing stocks also saw considerable strength, while networking and airline stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slipping $0.19 to $76.70 a barrel after jumping $1.14 to $76.89 a barrel on Thursday. Meanwhile, after inching up $2.10 to $1,963.80 an ounce in the previous session, gold futures are edging up $1.80 to $1,965.60 an ounce.

On the currency front, the U.S. dollar is trading at 138.82 yen versus the 138.05 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1214 compared to yesterday’s $1.1226.

Asia

Asian stocks advanced on Friday, with optimism about receding inflation in the U.S. and China stimulus hopes aiding sentiment.

Traders also awaited the unofficial start of the second-quarter U.S. earnings season, with financial giants Citigroup, JPMorgan Chase and Wells Fargo due to release their quarterly results before the start of trading.

The dollar lingered near 15-month lows on rising bets that the U.S. monetary tightening cycle is nearing an end.

Gold was on track for its biggest weekly gain since April, while oil prices were set for a third weekly gain, drawing support from tighter supply amid issues in Libya and Nigeria and signs of easing U.S. inflation.

Chinese shares fluctuated before finishing marginally higher on optimism about stronger efforts to bolster the economy. Hong Kong’s Hang Seng Index edged up 0.3 percent to 19,413.78.

China’s central bank will use policy tools such as the reserve requirement ratio (RRR) and medium-term lending facility to weather the challenges facing the world’s second-largest economy, a senior bank official said today.

Japanese shares ended flat with a negative bias as the yen rallied for a seventh day on speculation that the Bank of Japan would tweak its policy, as inflation is stronger than expected.

The Nikkei 225 Index reversed course to end marginally lower at 32,391.26 amid apprehensions about the upcoming BOJ’s policy meeting starting July 27. The broader Topix slipped 0.2 percent to 2,239.10.

Uniqlo-parent Fast Retailing fell 2.1 percent despite reporting record third-quarter profits and raising its full-year forecast. Technology investor SoftBank Group lost 2 percent, while chip-related firm Advantest surged 5.7 percent.

Machinery maker Takisawa Machine Tool soared more than 25 percent after electric motor maker Nidec announced a takeover plan for the firm.

Seoul stocks rose for a fourth consecutive session on easing inflation concerns. The Kospi jumped 1.4 percent to 2,628.30, with Samsung Electronics and SK Hynix rallying 2-3 percent.

Australian stocks rose notably, and the Aussie dollar held gains against its counterpart after the government named Michele Bullock as the new central bank governor.

The benchmark S&P/ASX 200 Index gained 0.8 percent to close at 7,303.10, led by mining and technology stocks. The broader All Ordinaries Index finished 0.8 percent higher at 7,517.10.

Europe

European stocks are mixed on Friday but are on track to post their biggest weekly percentage gain in more than three months on easing worries about inflation and interest rates.

While the German DAX Index is down by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.3 percent and the French CAC 40 Index is up by 0.4 percent.

The euro touched a fresh 16-month peak against a weakening dollar while Eurozone government bond yields were little changed after a powerful two-day rally.

Finnish telecom gear maker Nokia has shown a substantial move to the downside after lowering its full-year outlook.

Ericsson has also slumped. The Swedish multinational company posted a second quarter net loss of 0.6 billion Swedish kronor compared to a profit of 4.7 billion kronor in the prior year, primarily due to restructuring charges.

Swedish property group SBB has also plummeted after posting a wider pre-tax loss in the second quarter.

Investment group Ashmore has also plunged after reporting a 3 percent drop in assets under management from the previous quarter.

ZOO Digital Group shares have also cratered after the cloud services provider for the entertainment industry announced that it expects lower first-quarter revenues than the previous year.

On the other hand, FLSmidth, a Danish engineering company, has risen after selling its Advanced Filtration Technologies business to Micronics, a provider of industrial filtration solutions.

McBride shares have soared in London after the consumer goods manufacturer confirmed that it will report a return to profitability for fiscal 2023.

U.S. Economic Reports

A report released by the Labor Department on Friday showed a modest decrease in U.S. import prices in the month of June.

The Labor Department said import prices dipped by 0.2 percent in June after falling by a revised 0.4 percent in May.

Economists had expected import prices to edge down by 0.1 percent compared to the 0.6 percent decrease originally reported for the previous month.

Meanwhile, the report said export prices slumped by 0.9 percent in June after tumbling by 1.9 percent in May. Export prices were expected to slip by 0.2 percent.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of July. The consumer sentiment index is expected to inch up to 65.5 in July from 64.4 in June.