Futures Pointing To Roughly Flat Open After Israel Retaliates Against Iran

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 trending lower over the past several sessions.

The futures had been pointing to a lower open earlier in the morning after Israel launched strikes against Iran, in what appeared to be limited retaliatory action for last week’s drone and missile barrage by Tehran.

However, negative sentiment has waned after Iranian state media downplayed the attacks, saying explosions heard in Isfahan were a result of the activation of Iran’s air defense systems.

The semi-official news agency Tasnim also reported the nuclear facilities in Iran’s central Isfahan province are completely safe.

Nonetheless, a steep drop by shares of Netflix (NFLX) may still weigh on the markets, as the streaming giant is plunging by 6.8 percent in pre-market trading.

Netflix is under pressure after reporting better than expected first quarter results but providing disappointing revenue guidance.

Consumer products giant Procter & Gamble (PG) is also seeing pre-market weakness after reporting first quarter earnings that beat analyst estimates but weaker than expected sales.

On the other hand, shares of American Express (AXP) are edging higher in pre-market trading after the financial services giant reported first quarter results that exceeded expectations.

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

After once again failing to sustain an early upward move, stocks came under pressure over the course of the trading session on Thursday. The major averages pulled back well off their highs of the session, with the Nasdaq and the S&P 500 ending the day in negative territory.

Reflecting weakness in the tech sector, the Nasdaq slid 81.87 points or 0.5 percent to 15,601.50, while the S&P 500 dipped 11.09 points or 0.2 percent to 5,011.12. The narrower Dow bucked the downtrend, inching up 22.07 points or 0.1 percent to 37,775.38

With the downturn on the day, the Nasdaq and the S&P 500 extended their losing streaks to five days, falling to their lowest closing levels in almost two months.

The early strength on Wall Street partly reflected bargain hunting, as traders looked to pick up stocks at relatively reduced levels following recent weakness.

However, as with other recent rebound attempts, buying interest waned over the course of the session amid ongoing concerns about the outlook for interest rates.

Potentially adding to the interest rate worries, the Philadelphia Federal Reserve released a report showing a considerable acceleration in the pace of growth in regional manufacturing activity in the month of April.

The Philly Fed said its diffusion index for current general activity jumped to 15.5 in April from 3.2 in March, with a positive reading indicating growth. Economists had expected the index to edge down to 1.5.

Notably, the report also said the prices paid index surged to 23.0 in April from 3.7 in May, reaching its highest reading since December 2023.

Quincy Krosby, Chief Global Strategist for LPL Financial, said the spike by the prices paid index supports “the Fed’s concerns regarding inflationary pressures stalling in its downward trajectory.”

The Labor Department also released a report showing first-time claims for U.S. unemployment benefits remained flat in the week ended April 13th.

The report said initial jobless claims came in at 212,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to rise to 215,000 from the 211,000 originally reported for the previous week.

“Jobless claims remain well below levels that would signal a major slowdown in job growth,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, “A strong labor market gives the Federal Reserve the room to put off rate cuts until inflation gets back on a sustainable path to 2%.”

Meanwhile, the National Association of Realtors released a report showing a sharp pullback by existing home sales in the U.S. in the month March.

NAR said existing home sales plunged by 4.3 percent to an annual rate of 4.19 million in March after surging by 9.5 percent to a rate of 4.38 million in February. Economists had expected existing home sales to slump to a rate of 4.20 million.

Semiconductor stocks came under pressure over the course of the session, dragging the Philadelphia Semiconductor Index down by 1.7 percent to its lowest closing level in almost two months.

U.S.-listed shares of Taiwan Semiconductor Manufacturing (TSM) have tumbled by 4.9 percent even though the chipmaker reported better than expected first quarter results.

Considerable weakness also emerged among biotechnology stocks, with the NYSE Arca Biotechnology Index falling by 1.6 percent to its lowest closing level in well over four months.

Software, computer hardware and oil producer stocks also moved to the downside on the day, while significant strength remained visible among airline stocks.

Alaska Air (ALK) soared by 4.0 percent after reporting a narrower than expected first quarter loss on revenues that exceeded analyst estimates.

Commodity, Currency Markets

Crude oil futures are falling $0.56 to $82.17 a barrel after inching up $0.04 to $82.73 a barrel on Thursday. Meanwhile, after climbing $9.60 to $2,398 an ounce in the previous session, gold futures are edging down $3 to $2,395 an ounce.

On the currency front, the U.S. dollar is trading at 154.51 yen versus the 154.64 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0668 compared to yesterday’s $1.0643.

Asia

Asian stocks sank on Friday, while the dollar surged, oil prices climbed and gold held near a record high below $2,400 per ounce after Israel launched strikes against Iran, in what appeared to be limited retaliatory action for last week’s drone and missile barrage by Tehran.

Brent crude futures leapt more than 4 percent to more than $90 a barrel as the latest move by Israel threatened to push the region deeper into conflict.

However, oil gave up most initial gains and last held little changed after Iranian state media downplayed the attacks, saying the explosions heard in Isfahan were a result of the activation of Iran’s air defense systems.

Also, the nuclear facilities in Iran’s central Isfahan province are completely safe, the semi-official news agency Tasnim reported.

The International Atomic Energy Agency (IAEA) also confirmed that there has been no damage to Iranian nuclear sites.

Meanwhile, fresh hawkish comments from Federal Reserve officials also spurred risk aversion and sent investors flocking to buy safe-haven assets.

China’s Shanghai Composite Index slipped 0.3 percent to 3,065.26, outpacing its Asian peers on hopes of more government stimulus. Hong Kong’s Hang Seng Index dropped 1.0 percent to 16,224.14.

Japanese markets slumped as heightened geopolitical tensions and growing uncertainty over the outlook for U.S. interest rates spooked investors.

The Nikkei 225 Index plunged 2.7 percent to 37,068.35 in its sharpest daily fall since September 2022, while the broader Topix Index settled 1.9 percent lower at 2,626.32.

Semiconductor companies, including Advantest, Tokyo Electron and Screen Holding,s plummeted 4-9 percent after Taiwan Semiconductor Manufacturing Co. scaled back its outlook for chip-market expansion.

Data released earlier in the day showed Japanese inflation slowed to 2.6 percent in March, largely in line with expectations.

Seoul stocks fell sharply, with the Kospi ending down 1.6 percent at 2,591.86 after comments from Fed officials cast more doubt on the timing of rate cuts this year.

Australian stocks declined to reach a two-month low amidst geopolitical tensions. The benchmark S&P ASX 200 Index fell 1.0 percent to 7,567.30, with tech and property stocks leading losses. The broader All Ordinaries Index closed down 1.0 percent at 7,817.40.

Northern Star Resources rose 1.3 percent and Santos climbed 1.8 percent as gold and oil prices surged as a result of escalating conflict between Israel and Iran.

Europe

European stocks have fallen on Friday as tensions soared in the Middle East in the aftermath of Israel’s retaliatory strikes against Iran.

Hawkish comments from Federal Reserve officials have also led investors to scale back their expectations for the Federal Reserve to cut interest rates this year.

Most market participants believe that the U.S. central bank will wait until September to cut its key interest rate.

In economic news, German producer prices continued to decline in March, though at the slowest pace in nine months, data published by Destatis showed.

Producer prices registered an annual decrease of 2.9 percent after declining 4.1 percent in January. Prices have been falling since July 2023.

Elsewhere, U.K. retail sales came in unchanged on a month-on-month basis in March, defying expectations for a gain.

Retail sales including automotive fuel grew 0.1 percent from the previous month, according to preliminary data from the Office for National Statistics. Economists were looking for a 0.3 percent gain for March.

This was the weakest outcome since December, when sales shrunk 3.5 percent.

While the French CAC 40 Index has edged down by 0.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 0.5 percent.

Schneider Electric SA, a digital automation and energy management firm, has moved notably lower. The company confirmed it has been engaged in preliminary talks on a potential deal with Bentley Systems Inc. (BSY), an American software company.

Man Group shares have also slumped. The British investment management firm reported $1.6 billion of outflows from its funds during the first three months of the year.

On the other hand, gambling group 888 Holdings has shown a strong move to the upside after backing its full-year targets.

Sodexo SA, a food services and facilities management firm, has also risen as it posted a net loss for the first half, mainly due to a higher loss from discontinued operations. The company said it expects 2024 organic revenue growth at the top of its 6-8 percent range.

U.S. Economic Reports

Chicago Federal Reserve Bank President Austan Goolsbee is scheduled to participate in a moderated question-and-answer session before the Society for Advancing Business Editing and Writing Annual Conference at 10:30 am ET.

Stocks In Focus

Shares of Paramount Global (PARA) are moving sharply higher in pre-market trading following reports Sony Pictures Entertainment and Apollo Global Management have been discussing a joint bid to acquire the media company.

Homebuilder KB Home (KBH) is also likely to see initial strength after announcing a $1.0 billion stock repurchase plan and raising its quarterly dividend to $0.25 per share.

Meanwhile, shares of Sunnova Energy (NOVA) may come under pressure after Wells Fargo downgraded its rating on the solar energy company’s stock to Equal Weight from Overweight.

Beauty store chain Ulta Beauty (ULTA) may also move to the downside after Jefferies downgraded its rating on the company’s stock to Hold from Buy.