U.S. Stocks May Lack Direction Following Recent Strength

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 moving sharply higher over the past few sessions.

Traders may take a breather following the recent surge on Wall Street, which has lifted the major averages to new record highs.

The rally largely reflected a positive reaction to President Donald Trump’s decisive victory in the U.S. presidential election.

Trump’s return to the White House is expected to be positive for corporations and the U.S. economy, although there are some concerns about the effect planned tariff increases will have on inflation.

While some traders may look to cash in on the recent strength in the markets, others may be concerned about missing out on further upside.

After moving sharply higher on Tuesday and Wednesday, stocks showed another strong move to the upside during trading on Thursday. With the continued advance, the Nasdaq and the S&P 500 reached new record closing highs.

The tech-heavy Nasdaq led the charge, surging by 285.99 points or 1.5 percent to 19,269.46, while the S&P 500 climbed 44.06 points or 0.7 percent to 5,973.10.

The narrower Dow, on the other hand, spent the day lingering near the unchanged line before closing down just 0.59 points at 43,729.34.

The continued strength on Wall Street partly reflected ongoing optimism about the impact of former President Donald Trump’s return to the White House.

The markets also benefited from Trump’s victory over Vice President Kamala Harris being decisive, avoiding the uncertainty that would be created by a prolonged vote counting process and potential legal challenges.

Stocks saw continued strength as the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point.

After aggressively slashing interest rates by half a percentage point in September, the Fed said it has decided to lower the target range for the federal funds rate by 25 basis points to 4.50 to 4.75 percent.

The central bank said its decision to continue lowering rates comes as labor market conditions have generally eased, while inflation continues to make progress towards its 2 percent objective.

However, the Fed said the risks to achieving its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run are roughly in balance.

“The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the Fed said.

In considering future adjustments to rates, the central bank said it will continue to carefully assess incoming data, the evolving outlook, and the balance of risks.

Fed Chair Jerome Powell stressed during his post-meeting press conference that rates are not on “any preset course” and said the central bank will make future decisions “meeting by meeting.”

Powell also said the Fed is “well positioned” to deal with the risks to both sides of its dual mandate, noting the it can cut rates more slowly or more quickly depending on the economic developments.

Semiconductor stocks extended the surge seen over the two previous sessions, driving the Philadelphia Semiconductor Index up by 2.3 percent.

Considerable strength was also visible among software stocks, as reflected by the 1.9 jump by the Dow Jones U.S. Software Index.

Gold stocks also saw significant strength amid a sharp increase by the price of the precious metal, moving notably higher along with retail and commercial real estate stocks.

On the other hand, banking stocks pulled back sharply after Wednesday’s spike, dragging the KBW Bank Index down by 2.7 percent. Telecom, oil service and brokerage stocks also gave back ground.

Commodity, Currency Markets

Crude oil futures are tumbling $1.22 to $71.14 a barrel after climbing $0.67 to $72.36 a barrel on Thursday. Meanwhile, after surging $29.50 to $2,705.80 an ounce in the previous session, gold futures are slipping $4.90 to $2,700.90 an ounce.

On the currency front, the U.S. dollar is trading at 152.69 yen versus the 152.94 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0759 compared to yesterday’s $1.0805.

Asia

Asian stocks ended mixed on Friday after the Bank of England and the U.S. Federal Reserve cut interest rates by a quarter point.

Focus shifted to stimulus announcements from China later in the day, as the meeting in the Standing Committee of the National People’s Congress ends.

The dollar sagged in Asian trading after Fed Chair Jerome Powell said the central bank will evaluate data to adjust the “pace and destination” of rates.

Gold prices were notably lower after rising more than 1 percent on Thursday. Oil prices dipped but were on track for a weekly gain.

Chinese and Hong Kong markets ended lower as investors awaited details of a much-anticipated economic stimulus package to rev up the slowing Chinese economy.

China’s Shanghai Composite Index ended down 0.5 percent at 3,452.30 after a choppy session. Hong Kong’s Hang Seng Index fell 1.1 percent to 20,728.19, giving up early gains.

Japanese markets eked out modest gains as tech stocks followed their U.S. peers higher. The upside was capped by weak household spending data and a relatively stronger yen.

The Nikkei 225 Index rose 0.3 percent to 39,500.37, while the broader Topix Index finished marginally lower at 2,742.15.

AI-focused startup investor SoftBank Group gained 1.6 percent and Tokyo Electron added 0.9 percent.

Nissan Motor shares slumped more than 6 percent as the automaker announced plans to cut 9,000 jobs and 20 percent of its global manufacturing capacity after net income plummeted in the first half.

Seoul stocks ended slightly lower on lingering concerns regarding a second presidential term for Donald Trump. The Kospi edged down 0.1 percent to 2,561.15.

Australian markets climbed to over a two-week high, with mining and gold stocks leading the surge. The benchmark S&P/ASX 200 Index jumped 0.8 percent to 8,295.10, while the broader All Ordinaries Index closed up 0.8 percent at 8,552.60.

Lender ANZ rose 1.3 percent despite posting a 9 percent drop in annual profit.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index surged 1.5 percent to 12,770.33.

Europe

European stocks have drifted lower on Friday as China’s top legislative body – the National People’s Congress (NPC) – approved the State Council’s proposal to increase the local government debt limit by $838 billion after a week-long session.

There was some disappointment as the hotly anticipated stimulus was not as broad or immediate as initially presumed.

The French CAC 40 Index has slid by 0.9 percent, the German DAX Index is down by 0.8 percent and the U.K.’s FTSE 100 Index is down by 0.6 percent.

Eurozone bond yields have dipped after a busy week of central bank meetings and amid the collapse of the German government.

Germany’s opposition leader Friedrich Merz has accused Chancellor Olaf Scholz of seeking to delay an early election until March purely for political advantage.

Merz rejected Scholz’s approach and reiterated his demand for a January vote, arguing Europe’s biggest economy urgently needs additional measures to restore meaningful growth.

In corporate news, Vistry Group shares have plummeted. The British homebuilder announced today that it has revised down its expectations for annual adjusted profit before tax because of issues in its South Division, adjustments in other regions, and reduced expectations for completions.

Cartier owner Richemont has also tumbled after posting a 20 percent drop in net profit for the first half of the year. French rivals LVMH, Kering and Hermes were down 2-3 percent.

On the other hand, German telecom service provider Freenet has moved sharply higher after raising its full-year outlook.

AstraZeneca has also rallied. It was said the Phase III WAYPOINT study of AstraZeneca and Amgen’s Tezspire in patients with chronic rhinosinusitis with nasal polyps met its both co-primary endpoints.

British Airways-owner IAG has also shown a significant move to the upside after reporting a bigger-than-expected quarterly profit.

U.S. Economic News

The University of Michigan is due to release its preliminary report on consumer sentiment in the month of November at 10 am ET. The consumer sentiment index is expected to inch up to 71.0 in November creeping up to 70.5 in October.

At 11 am ET, Federal Reserve Board Governor Michelle Bowman is scheduled to participate in a conversation on banking topics before the University of Mississippi School of Business’ Banking & Finance Symposium.

St. Louis Federal Reserve President Alberto Musalem is due to give welcome remarks before the 22nd Annual St. Louis Fed Professors Conference at 2:30 pm ET.