Lingering Rate Uncertainty May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Friday, with stocks likely to show a lack of direction after ending the previous session mostly higher.

Traders may take a step back to assess the near-term outlook for the markets after yesterday’s gains lifted the Nasdaq and S&P 500 to new record closing highs.

While yesterday’s in-line inflation data added to optimism about the Federal Reserve eventually cutting interest rates, the timing of the first rate cut remains uncertain.

A rate cut later this month has largely been ruled out, but CME Group’s FedWatch Tool is currently indicating a 21.7 percent chance of a quarter point rate cut in May and a 67.6 percent chance of a rate cut by June.

Traders may also be reluctant to make significant moves ahead of key economic events next week, including congressional testimony by Fed Chair Jerome Powell and the monthly jobs report.

Stocks fluctuated over the course of the trading session on Thursday but largely maintained a positive bias before ending the day mostly higher. The major averages all moved to the upside, with the Nasdaq and S&P 500 reaching new record closing highs.

The Nasdaq and S&P 500 reached new highs for the session in late-day trading before giving back some ground going into the close.

The tech-heavy Nasdaq jumped 144.18 points or 0.9 percent to 16,091.92 and the S&P 500 climbed 26.51 points or 0.5 percent to 5,06.27.

Meanwhile, the narrower Dow spent most of the day bouncing back and forth across the unchanged line before closing up 47.37 points or 0.1 percent at 38,996.39.

The strength on Wall Street came following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December.

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

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations.

The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates.

“The report was largely in line with economist estimates, which was seen a relief for investors who were concerned about the potential for hotter than expected inflation to start the year,” said Sam Millette, Director of Fixed Income for Commonwealth Financial Network.

The inflation readings are said to be favored by the Federal Reserve, and the data generated some optimism about the outlook for interest rates.

In other U.S. economic news, the Labor Department released a report showing a bigger than expected increase in weekly jobless claims, while a report from the National Association of Realtors unexpectedly showed a sharp pullback by pending home sales in January.

Computer hardware stocks saw substantial strength the day, resulting in a 3.3 percent spike by the NYSE Arca Computer Hardware Index.

Pure Storage (PSTG) led the sector higher, with the data storage company soaring by 25.0 percent after reporting better than expected fourth quarter results and providing upbeat guidance.

Significant strength was also visible among semiconductor stocks, with the Philadelphia Semiconductor Index surging by 2.7 percent to a record closing high.

Gold stocks also turned in a strong performance amid an increase by the price of the precious metal, driving the NYSE Arca Gold Bugs Index up by 2.6 percent.

Housing, software and commercial real estate also saw strength on the day, while networking stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are surging $1.55 to $79.81 a barrel after falling $0.28 to $78.26 a barrel on Thursday. Meanwhile, after climbing $12 to $2,054.70 an ounce in the previous session, gold futures are rising $4.80 to $2,059.50 an ounce.

On the currency front, the U.S. dollar is trading at 150.57 yen versus the 149.98 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0809 compared to yesterday’s $1.0805.

Asia

Asian shares moved mostly higher during trading on Friday after the release of key U.S. and Chinese economic data.

A key U.S. inflation metric closely watched by the Federal Reserve increased at the slowest rate in nearly three years, fueling hopes for a Fed rate cut in June.

China reported mixed data, increasing pressure on policymakers to unveil more stimulus.

An official survey showed Chinese factory activity shrank for the fifth straight month in February. The Caixin survey contrasted with the official data, as both production and new orders grew faster in February.

Non-manufacturing activity expanded at a faster pace in the month, but the home sales slump dragged on despite increased support from regulators to salvage the beleaguered property market.

China’s Shanghai Composite Index rose 0.4 percent to 3,027.02 after a choppy session ahead of the annual gathering of the National People’s Congress next week, during which Beijing will announce the annual GDP growth target. Hong Kong’s Hang Seng Index climbed 0.5 percent to 16,589.44.

Japanese markets hit a record high as tech-related stocks surged on expectations for a U.S. rate cut in June. The Nikkei 225 Index rallied 1.9 percent to a new closing high of 39,910.82, while the broader Topix Index settled 1.3 percent higher at 2,709.42.

Advantest, Screen Holdings and Tokyo Electron climbed 3-4 percent, while AI-focused startup investor SoftBank Group added 1.3 percent.

Operating conditions in Japan’s manufacturing sector continued to deteriorate in February, while the unemployment rate remained steady at 2.4 percent in January, separate reports showed earlier today.

South Korean financial markets were closed for a public holiday.

Australian markets rose notably, led by mining, technology and energy stocks. The benchmark S&P/ASX 200 Index rose 0.6 percent to 7,745.60, hitting a record high for the second straight session. The broader All Ordinaries Index closed 0.6 percent higher at 8,007.10.

Graphite producer Syrah Resources soared 13.1 percent after inking an offtake deal with South Korea’s Posco Future M.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished marginally higher at 11,744.39.

Europe

European stocks have advanced on Friday as investors react favorably to in-line U.S. inflation data and comments from Fed officials signaling the possibility of rate cuts in June.

Closer to home, flash estimates showed earlier in the day that Eurozone manufacturing activity slowed slightly in February amid weak demand.

While the French CAC 40 Index has inched up by 0.1 percent, the German DAX Index and the U.K.’s FTSE 100 Index are up by 0.5 percent and 0.6 percent, respectively.

German aerospace and defense company Rheinmetall AG has moved to the upside as it received a further contract to supply Skynex air defense systems to a European customer.

Germany’s Sixt SE has also gained. The car rental leader outlined optimistic revenue and earnings guidance for the full year after a challenging first quarter.

Daimler Truck has soared. The truck maker raised its dividend and announced a share buyback program after 2023 profit topped forecasts.

ITV has also surged. The media firm has sold its entire 50 percent interest in digital subscription streaming service BritBox International to BBC Studios, ITV’s joint venture partner, for 255 million pounds in cash.

Aerospace major Airbus SE has edged up slightly in Paris. The company announced 155 commitments, including 40 firm orders, for its various multi-mission helicopters at the Heli-Expo 2024 trade show.

On the other hand, Aegon has moved sharply lower. The Dutch insurer posted a net loss of 199 million euros for the full-year 2023.

Vallourec SA shares have also slumped despite the provider of tubular solutions announcing a profit for its fourth quarter that increased from the same period last year.

Property portal Rightmove has also shown a significant move to the downside after it forecast 7-9 percent revenue growth in 2024.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of February at 10 am ET.

The ISM’s manufacturing PMI is expected to inch up to 49.5 in February from 49.1 in January, but a reading below 50 would still indicate contraction.

Also at 10 am ET, the University of Michigan is due to release its revised reading on consumer sentiment in the month of February.

The consumer sentiment index for February is expected to be unrevised from the preliminary reading of 79.6, which was up from 79.0 in January.

The Commerce Department is also scheduled to release its report on construction spending in the month of January at 10 am ET. Construction spending is expected to rise by 0.2 percent.

At 10:15 am ET, Federal Reserve Board Governor Christopher Waller and Dallas Federal Reserve President Lorie Logan are due to participate in a panel responding to a paper entitled, “Quantitative Tightening Around the Globe: What Have We Learned?” before the 2024 U.S. Monetary Policy Forum.

Atlanta Federal Reserve President Raphael Bostic is scheduled to speak on the economic outlook and real estate trends before the University of Florida’s Kelley A. Bergstrom Real Estate Center 2024 Trends and Strategies Conference at 12:15 pm ET.

At 1:30 pm ET, San Francisco Federal Reserve President Mary Daly is due to participate in a panel on “AI and the Labor Market” before the 2024 U.S. Monetary Policy Forum.

Federal Reserve Board Governor Adriana Kugler is scheduled to speak on “Pursuing the Dual Mandate” before the 2024 Stanford Institute for Economic Policy Research Economic Summit at 3:30 pm ET.

Stocks In Focus

Shares of Dell (DELL) are skyrocketing in pre-market trading after the computer maker reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Software company Autodesk (ADSK) is also likely to see initial strength after reporting better than expected fourth quarter results.

Meanwhile, shares of New York Community Bancorp (NYCB) are seeing substantial pre-market weakness after the regional bank revealed issues with its internal controls and announced Executive Chairman Alessandro DiNello is replacing Thomas R. Cangemi as President and Chief Executive Officer.

Information technology company Hewlett Packard Enterprise (HPE) may also come under pressure after reporting mixed fiscal first quarter results and providing disappointing guidance.