Futures Pointing To Roughly Flat Open On Wall Street

The major U.S. index futures are currently pointing to a roughly flat higher open on Friday, with stocks likely to show a lack of direction following the substantial downturn seen over the course of the previous session.

Traders may take a step back following the recent volatility in the markets, which saw stocks surge on Wednesday before pulling back sharply on Thursday.

Early trading may be impacted by reaction to a Labor Department report showing producer prices in the U.S. increased by slightly more than expected in the month of June.

The Labor Department said its producer price index for final demand rose by 0.2 percent in June following a revised unchanged reading in May.

Economists had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

The report also said the annual rate of producer price growth accelerated to 2.6 percent in June from an upwardly revised 2.4 percent in May.

The annual rate of producer price growth was expected to creep up to 2.3 percent from the 2.2 percent originally reported for the previous month.

Traders are also reacting to earnings news from several big-name financial companies, with Wells Fargo (WFC) moving sharply lower in pre-market trading after reporting weaker than expected net interest income for the second quarter.

Shares of JPMorgan Chase (JPM) are also seeing modest pre-market weakness even though the financial giant reported second quarter revenues that exceeded analyst estimates.

On the other hand, shares of Citigroup (C) are likely to see initial strength after the company reported second quarter results that beat expectations on both the top and bottom lines.

Stocks showed a substantial downturn over the course of the trading session on Thursday, with the Nasdaq and the S&P 500 pulling back sharply after reaching new record intraday highs in early trading.

The tech-heavy Nasdaq posted a particularly steep loss on the day, plunging 364.04 points or 2.0 percent to 18,283.41, while the S&P 500 slumped 49.37 points or 0.9 percent to 5,584.54.

The narrower Dow, on the other hand, spent most of the day lingering near the unchanged line before closing up 32.39 points or 0.1 percent at 39,753.85.

While optimism about the outlook for interest rates contributed to early strength on Wall Street, buying interest waned shortly after the start of trading.

Traders may have seen the increased confidence in a September rate cut as already priced into the markets following Wednesday’s rally.

The subsequent sell-off came as traders took the opportunity to cash in on the recent strength in the markets, with some of the biggest tech winners of the year like AI darling Nvidia (NVDA) leading the pullback.

Nonetheless, the Federal Reserve is still seen as likely to lower rates in September after a report from the Labor Department showing showed prices in the U.S. unexpectedly edged slightly lower in the month of June.

The Labor Department said its consumer price index slipped by 0.1 percent in June after coming in unchanged in May. Economists had expected consumer prices to inch up by 0.1 percent.

The unexpected dip by consumer prices came as another steep drop by gasoline prices more than offset a continued increase in shelter costs.

Excluding food and energy prices, core consumer prices crept up by 0.1 percent in June after rising by 0.2 percent in May. Core prices were expected to increase by another 0.2 percent.

The report also said the annual rate of consumer price growth slowed to 3.0 percent in June from 3.3 percent in May. Economists had expected the pace of price growth to decelerate to 3.1 percent.

The annual rate of core consumer price growth also slowed to 3.3 percent in June from 3.4 percent in May. The pace of growth was expected to remain unchanged.

“This is the kind of CPI report the Fed wants to see [to] feel more confident that inflation is headed back toward their target,” said Bill Adams, Chief Economist for Comerica Bank. “The Fed targets 2% inflation by the personal consumption expenditures price index, which usually runs a little cooler than the CPI.”

He added, “The CPI report won’t be enough to convince the Fed to cut interest rates at their decision this month, but a rate cut at the following decision in September is quite likely.”

Semiconductor stocks moved sharply lower over the course of the session, giving back ground following recent strength in the sector.

The Philadelphia Semiconductor Index plunged by 3.5 percent, pulling back off the record closing high set on Wednesday.

Software and computer hardware stocks also showed notable moves to the downside, contributing to the steep drop by the tech-heavy Nasdaq.

On the other hand, housing stocks saw substantial strength amid optimism about lower interest rates, resulting in a 5.7 percent spike by the Philadelphia Housing Sector Index.

Considerable strength also emerged among gold stocks, as reflected by the 2.8 percent surge by the NYSE Arca Gold Bugs Index. The strength in the sector came amid a sharp increase by the price of the precious metal

Interest rate-sensitive commercial real estate, telecom and utilities stocks also saw significant strength, while oil service, transportation and networking stocks also showed strong moves to the upside.

Commodity, Currency Markets

Crude oil futures are climbing $0.73 to $83.35 a barrel after rising $0.52 to $82.62 a barrel on Wednesday. Meanwhile, after surging $42.20 to $2,421.90 an ounce in the previous session, gold futures are slumping $18.40 to $2,403.50 an ounce.

On the currency front, the U.S. dollar is trading at 158.99 yen versus the 158.84 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0879 compared to yesterday’s $1.0868.

Asia

Asian stocks ended mixed on Friday as investors reacted to surprisingly soft U.S. inflation data, mixed Chinese trade figures and comments from several Federal Reserve officials on the interest rate trajectory.

The dollar edged up slightly as the latest inflation data fueled bets for a September rate cut and a Pew Research Centre poll showed former President Trump leading President Biden by 4 points among registered voters.

Gold edged lower but was headed for a third straight week of gains. Oil extended gains amid signs of easing inflationary pressures in the United States, the world’s biggest oil consumer.

China’s Shanghai Composite Index ended a choppy session marginally higher after the release of mixed trade data.

Chinese exports rose 8.6 percent year-on-year by value in June, while imports dropped 2.3 percent, customs data revealed.

Hong Kong’s Hang Seng Index surged 2.6 percent to 18,293.38 after China unveiled fresh curbs on short selling.

Ahead of next week’s Third Plenum meeting, there was speculation that Chinese policymakers may announce a tax revamp to plug gaps in local government funding.

Japanese stocks tumbled as the yen held gains on speculation that authorities may have again intervene in forex markets to prop up the ailing currency.

The Nikkei 225 Index plunged 2.5 percent to 41,190.68, while the broader Topix Index settled 1.2 percent lower at 2,894.56.

Chip-making equipment giant Tokyo Electron plummeted 6.2 percent and smaller peer Disco lost 8.8 percent after the Philadelphia Semiconductor Index fell more than 3 percent overnight.

Seoul stocks fell sharply, with the Kospi closing down 1.2 percent at 2,857.

Australian markets rose notably to hit record highs as banks surged on speculation that a Fed rate cut would impact the Reserve Bank of Australia’s stance on interest rates. The big four banks rose 1-2 percent.

The benchmark S&P/ASX 200 Index hit a record high of 7,969.10 before closing at 7,959.30, up 0.9 percent from its previous close. The broader All Ordinaries Index climbed 0.9 percent to 8,206.10.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.6 percent to 12,134.97 despite weak manufacturing data.

Europe

European stocks have moved higher for a third straight session on Friday as surprisingly soft U.S. inflation data bolstered hopes for two Federal Reserve rate cuts this year.

While the French CAC 40 Index has advanced by 0.7 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.2 percent.

Swedish telecom company LM Ericsson has soared after EBITA, a key earnings metric, beat analysts’ expectations in the second quarter.

Similarly, Lifco AB has also shown a substantial move to the upside after posting better-than-expected quarterly earnings.

Aker Solutions ASA has also moved sharply higher after its second-quarter profit beat expectations.

Drug maker AstraZeneca has risen after outlining its “bold ambition” to deliver $80 billion in revenue by 2030 during its recent Investor Day.

Meanwhile, specialist fund manager Ashmore Group has slumped after an update that its assets under management decreased by $2.4 billion over the quarter ended June 30, 2024.

U.S. Economic Reports

Following yesterday’s tamer-than-expected consumer price inflation data, the Labor Department released a report on Friday showing producer prices in the U.S. increased by slightly more than expected in the month of June.

The Labor Department said its producer price index for final demand rose by 0.2 percent in June following a revised unchanged reading in May.

Economists had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

The report also said the annual rate of producer price growth accelerated to 2.6 percent in June from an upwardly revised 2.4 percent in May.

The annual rate of producer price growth was expected to creep up to 2.3 percent from the 2.2 percent originally reported for the previous month.

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 68.5 in July after falling to 68.2 in June.