Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground after ending yesterday’s choppy trading session mostly higher.

Profit taking may contribute to initial weakness on Wall Street after the Nasdaq and the S&P 500 ended the previous session at new record closing highs.

Encouraging inflation data has contributed to recent strength, although traders remain wary about the outlook for interest rates after the Federal Reserve forecast just one rate cut this year.

Potentially helping to alleviate the concerns, the Labor Department released a report this morning showing unexpected decrease by U.S. import and export prices in the month of May.

The Labor Department said import prices fell by 0.4 percent in May following a 0.9 percent advance in April. Economists had expected import prices to inch up by 0.1 percent.

Prices for fuel imports led the way lower, tumbling by 2.0 percent, although prices for non-fuel imports also dipped by 0.3 percent.

Meanwhile, the report said export prices slid by 0.6 percent in May after climbing by an upwardly revised 0.6 percent in April.

Economists had expected export prices to come in unchanged compared to the 0.5 percent increase originally reported for the previous month.

Stocks turned in a relatively lackluster performance during trading on Thursday, as traders took a breather following the rally seen in Wednesday’s session. Despite the choppy trading, the Nasdaq and the S&P 500 once again reached new record closing highs.

The Nasdaq climbed 59.12 points or 0.3 percent to 17,667.56 and the S&P 500 rose 12.71 points or 0.2 percent to 5,433.74. The Dow once again bucked the uptrend, however, with the blue chip index slipping 65.11 points or 0.2 percent to 38,647.10.

The choppy trading on Wall Street came despite the release of U.S. economic data that seemed likely to add to optimism about the outlook for interest rates.

While the data may have generated some hopes Federal Reserve officials were being conservative when they forecast just one rate cut this year, traders may have been reluctant to continuing buying stocks following yesterday’s surge.

Following yesterday’s tamer-than-expected consumer price inflation data, the Labor Department released a report unexpectedly showing a modest decrease by producer prices in the month of May.

The report said the producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Economists had expected producer prices to inch up by 0.1 percent.

The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April.

Economists had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month.

The Labor Department also released a separate report showing an unexpected increase by first-time claims for U.S. unemployment benefits in the week ended June 8th.

The report said initial jobless claims climbed to 242,000, an increase of 13,000 from the previous week’s unrevised level of 229,000. Economists had expected jobless claims to edge down to 225,000.

With the unexpected increase, jobless claims reached their highest level since hitting 248,000 in the week ended August 12, 2023.

“The latest data in hand nudge the door a little wider open for the Fed to begin making an interest rate cut later this year,” said Bill Adams, Chief Economist for Comerica Bank. “Comerica forecasts for the Fed to make its first cut of this cycle in September, followed by a second cut in December.”

Semiconductor and computer hardware stocks showed strong moves to the upside on the day, contributing to the modest gain posted by the tech-heavy Nasdaq.

Reflecting the strength in the sectors, the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index climbing by 1.5 percent and 1.4 percent, respectively.

Within the semiconductor sector, shares of Broadcom (AVGO) soared by 12.3 percent after the chipmaker reported better than expected fiscal second quarter results and announced a 10-for-1 stock split.

Meanwhile, gold stocks pulled back sharply along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent.

Oil service stocks also saw considerable weakness despite a modest increase by the price of crude oil, with the Philadelphia Oil Service Index tumbling by 2.1 percent.

Commodity, Currency Markets

Crude oil futures are rising $0.32 to $78.94 a barrel after inching up $0.12 to $78.62 a barrel on Thursday. Meanwhile, after plunging $36.80 to $2,318 an ounce in the previous session, gold futures are jumping $25.10 to $2,343.10 an ounce.

On the currency front, the U.S. dollar is trading at 157.25 yen versus the 157.03 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0687 compared to yesterday’s $1.0737.

Asia

Asian stocks ended mixed on Friday after Beijing slammed EU tariffs on Chinese electric vehicles as protectionist behavior and indicated it would take countermeasures in an escalating trade dispute. Signs of slowing inflation in the United States helped to limit regional losses to some extent.

The Japanese yen and bond yields fell as the Bank of Japan flagged a cut in debt purchases without laying out any figures or timeline.

Gold edged up slightly in Asian trading, while oil prices eased but headed for their best week in more than two months.

China’s Shanghai Composite Index reversed early losses to end 0.1 percent higher at 3,032.63, while Hong Kong’s Hang Seng Index dropped 0.9 percent to 17,941.78 on tariff jitters.

Japanese markets reversed early losses to end higher after the Bank of Japan said it would scale down its huge bond-buying program and announce a detailed plan for the reduction “during the next one to two years or so” at the next policy meeting in July.

The Nikkei 225 Index rose 0.2 percent to 38,814.56 amid relief over the central bank making no near-term changes to its bond buying program. The broader Topix Index settled 0.5 percent higher at 2,746.61 despite a decline in banking stocks.

Seoul stocks ended higher for the fourth day running due to sustained strength in technology stocks. Tech heavyweight Samsung Electronics rose 1.3 percent while battery maker LG Energy Solution lost 3.9 percent.

The Kospi inched up 0.1 percent to 2,758.42 as the government extended a market-wide ban on short-selling of stocks through the first quarter of 2025.

Australian markets ended lower as investors braced for the Reserve Bank of Australia’s policy meeting due next week.

The benchmark S&P/ASX 200 Index dipped 0.3 percent to 7,724.30 as miners declined due to pressure on iron ore prices from China’s weakening property market. The broader All Ordinaries Index ended down 0.4 percent at 7,974.80.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index finished marginally lower at 11,864.89.

Europe

European stocks have moved mostly lower on Friday, extending losses from the previous session as election campaigns in the U.K. and France continue.

Political uncertainty in France has weighed on the marketsafter the country’s finance chief warned that a new left-wing coalition coming to power in France would lead to the country’s exit from the European Union.

Elsewhere, Nigel Farage’s Reform UK has surpassed Prime Minister Rishi Sunak’s Conservatives in a YouGov poll.

The poll for the Times newspaper puts Reform UK at 19 percent, up from 17 percent previously, and the Conservative Party unchanged at 18 percent in voting intention.

While the U.K.’s FTSE 100 Index is marginally lower, the German DAX Index is down by 1.1 percent and the French CAC 40 Index is down by 2.1 percent.

Regional banks suffered heavy losses, with French lenders BNP Paribas, Credit Agricole and Societe Generale plummeting as the risk premium on French bonds hit a four-year high on concerns about the political situation in the country.

France’s finance minister has warned that the country could plunge into a debt crisis similar to one sparked in the U.K. two years ago if far-right leader Marine Le Pen were to win legislative elections slated for the end of the month.

Ratings agency S&P Global, which recently downgraded the country, said policies advocated by the party could have implications for the credit rating.

French retail company Casino Group has also slumped after an announcement that it has entered into exclusive negotiations with Auchan Retail France and Rocca regarding a sale of its Corsican subsidiary Codim 2.

Meanwhile, Crest Nicholson shares have soared in London. The embattled homebuilder has rebuffed a second all-share takeover approach from its larger rival Bellway.

Tesco has also rallied after reporting a “robust” surge in grocery purchases by U.K. shoppers in the most recent quarter.

In economic news, French consumer price inflation accelerated in May on higher energy and food prices, final data from the statistical office INSEE showed.

The consumer price index climbed 2.3 percent on a yearly basis in May, faster than the 2.2 percent increase seen in April. The rate for May was revised up from 2.2 percent.

The slight increase in inflation resulted from higher prices of energy and food. Energy prices grew at a faster pace of 5.7 percent due to base effect.

Britons’ short-term inflation expectations softened in May, the quarterly Inflation Attitudes Survey conducted by Ipsos on behalf of the Bank of England showed.

The one-year ahead inflation expectations fell to 2.6 percent from 2.8 percent in February. Respondents assessed the current inflation at 5.5 percent compared to 6.1 percent in the previous survey period.

U.S. Economic Reports

A report released by the Labor Department on Friday showed unexpected decreases by U.S. import and export prices in the month of May.

The Labor Department said import prices fell by 0.4 percent in May following a 0.9 percent advance in April. Economists had expected import prices to inch up by 0.1 percent.

Prices for fuel imports led the way lower, tumbling by 2.0 percent, although prices for non-fuel imports also dipped by 0.3 percent.

Meanwhile, the report said export prices slid by 0.6 percent in May after climbing by an upwardly revised 0.6 percent in April.

Economists had expected export prices to come in unchanged compared to the 0.5 percent increase originally reported for the previous month.

At 10 am ET, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of June. The consumer sentiment index is expected to climb to 72.0 in June after plunging to 69.1 in May.

Chicago Federal Reserve President Austan Goolsbee is due to participate in a fireside chat before the Iowa Farm Bureau Economic Summit at 2 pm ET.

At 7 pm ET, Federal Reserve Board Governor Lisa Cook is scheduled to speak at an event celebrating 50 Years of the American Economic Association Summer Program.

Stocks In Focus

Shares of Adobe (ADBE) are moving sharply higher in pre-market trading after the software company reported better than expected fiscal second quarter results and raised its full-year guidance.

Toymaker Hasbro (HAS) may also move to the upside after Bank of America upgraded its rating on the company’s stock to Buy from Neutral.

On the other hand, shares of RH (RH) are seeing substantial pre-market weakness after the high-end retailer reported a wider than expected fiscal first quarter loss.