Futures Pointing To Further Downside On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to see further downside after coming under pressure late in the previous session.

Concerns about the outlook for interest rates may continue to weigh on Wall Street following Federal Reserve Chair Powell’s remarks on Thursday suggesting the central bank doesn’t need to hurry to lower rates.

Citing the strength of the U.S. economy, Powell said the Fed can take a careful approach to future monetary policy decisions.

The futures remained firmly negative territory following the release of the latest batch of U.S. economic data, including a Commerce Department showing retail sales increased by slightly more than expected in October.

The Commerce Department said retail sales rose by 0.4 percent in October after growing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Excluding a surge in sales by motor vehicle and parts dealers, retail sales inched up by 0.1 percent in October after jumping by 1.0 percent in September. Ex-auto sales were expected to rise by 0.3 percent.

The Labor Department also released a report showing an unexpected increase by import prices in the U.S. in the month of October, which may added to recent worries about stick inflation.

The report said import prices rose by 0.3 percent in October after falling by 0.4 percent in September. Economists had expected import prices to edge down by 0.1 percent.

Meanwhile, the Labor Department said export prices climbed by 0.8 percent in October following a revised 0.6 percent decrease in September.

Export prices were expected to slip to 0.1 percent compared to the 0.7 percent decline originally reported for the previous month.

After showing a lack of direction for much of the session, stocks came under pressure in the latter part of the trading day on Thursday. The major averages slid more firmly into negative territory after spending most of the day bouncing back and forth across the unchanged line.

The major averages ended the day just off their lows of the session. The Dow slid 207.33 points or 0.5 percent to 43,750.86, the Nasdaq fell 123.07 points or 0.6 percent to 19,107.65 and the S&P 500 declined 36.21 points or 0.6 percent to 5,949.17.

The weakness that emerged on Wall Street late in the session came after Powell said the central bank does not “need to be in a hurry to lower rates” due to the strength of the economy.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said during an event in Dallas, Texas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

Powell’s comments on the outlook for rates came as he described the U.S. economy’s performance as “remarkably good,” noting the labor market remains in solid condition but is no longer a source of significant inflationary pressures.

He also said the Fed is attentive to risks to both its employment and inflation goals, noting cutting rates too quickly could hinder progress on inflation but cutting rates too slowly could unduly weaken economic activity and employment.

“We are moving policy over time to a more neutral setting. But the path for getting there is not preset,” Powell said. “Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve.”

Powell’s remarks came as the latest batch of U.S. economy data released earlier in the day generated some uncertainty about the outlook for interest rates.

The Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits unexpectedly edged lower in the week ended November 9th.

The report said initial jobless claims slipped to 217,000, a decrease of 4,000 from the previous week’s unrevised level of 221,000. Economists had expected jobless claims to inch up to 223,000.

The unexpected decline pulled jobless claims down to their lowest level since hitting 216,000 in the week ended May 18th.

After yesterday’s consumer price inflation data matched expectations, the Labor Department also released a separate report showing producer prices in the U.S. also increased in line with economist estimates in the month of October.

The Labor Department said its producer price index for final demand rose by 0.2 percent in October following a revised 0.1 percent uptick in September.

Meanwhile, the report said the annual rate of growth by producer prices accelerated to 2.4 percent in October from an upwardly revised 1.9 percent in September.

The annual rate of producer price growth was expected to accelerate to 2.3 percent from the 1.8 percent originally reported for the previous month.

The slightly faster than expected annual price growth combined with the jobless claims data showing continued strength in the labor market has added to recent uncertainty about the outlook for interest rates.

While the Fed is still widely expected to lower interest rates by a quarter point next month, there is some concern sticky inflation will lead the central bank to slow the pace of its rate cuts in early 2025.

Biotechnology stocks moved sharply lower over the course of the session, dragging the NYSE Arca Biotechnology Index down by 2.8 percent.

Significant weakness also emerged among healthcare and pharmaceutical stocks, with the Dow Jones U.S. Health Care Index and the NYSE Arca Pharmaceutical Index falling by 1.6 percent and 1.5 percent, respectively.

Networking, steel and commercial real estate stocks also showed notable moves to the downside, while considerable strength remained visible among airline stocks.

Reflecting the strength in the airline sector, the NYSE Arca Airline Index jumped by 1.8 percent after plummeting by 7.3 percent on Wednesday.

Commodity, Currency Markets

Crude oil futures are sliding $0.39 to $68.31 a barrel after rising $0.27 to $68.70 a barrel on Thursday. Meanwhile, after falling $13.60 to $2,572.90 an ounce in the previous session, gold futures are edging down $1 to $2,571.90 an ounce.

On the currency front, the U.S. dollar is trading at 155.33 yen versus the 156.27 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0565 compared to yesterday’s $1.0530.

Asia

Asian stocks turned in a mixed performance on Friday, as Federal Reserve Chair Jerome Powell’s remarks poured cold water on rate cut optimism and mixed economic data highlighted China’s uneven economic recovery.

Gold hovered near $2,560 per ounce in Asian trading, as the dollar consolidated weekly gains ahead of the release of U.S. retail sales data due later in the day. Oil prices were set for a weekly loss on concerns over slowing demand in China, the world’s biggest crude importer.

China’s Shanghai Composite Index tumbled 1.5 percent 3,330.73 on concerns around slowing economic growth. Hong Kong’s Hang Seng Index finished marginally lower at 19,426.34 after a choppy session.

Data showed earlier today that Chinese industrial output expanded at a slower-than-anticipated 5.3 percent in October, while retail sales jumped an annual 4.8 percent to surpass expectations, boosted by a week-long holiday and the annual Singles’ Day shopping festival.

Property investment fell 10.3 percent year-on-year in January-October and fixed asset investment growth in the first ten months of 2024 came in below expectations, keeping alive calls for Beijing to unveil more stimulus.

Japanese markets eked out modest gains, as a weakening yen boosted export-related shares. The U.S. dollar hit around a four-month high in the upper 156-yen zone, as weak Q3 GDP data dampened expectations for more rate hikes by the Bank of Japan.

The Nikkei 225 Index rose 0.3 percent to 38,642.91, snapping a three-day losing streak. The broader Topix Index settled 0.4 percent higher at 2,711.64. Automaker Honda Motor rallied 2.2 percent, Toyota added 1.4 percent and Nissan surged 4.5 percent.

Seoul stocks ended little changed, with the Kospi finishing marginally lower at 2,416.86 after a choppy session.

Car battery maker LG Energy Solution plunged 12.1 percent and Samsung SDI lost 6.8 percent after reports U.S. President-elect Donald Trump’s transition team plans to scrap the US$7,500 tax credit for EV purchases as part of broader tax legislation.

Australian markets rose notably but ended the week marginally lower due to disappointment over China’s $1.40 trillion stimulus package unveiled over the last weekend.

The benchmark S&P/ASX 200 Index climbed 0.7 percent to 8,285.20, with banks leading the way higher. The broader All Ordinaries Index gained 0.7 percent to close at 8,539.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50Iindex finished marginally lower at 12,684.88, as a survey showed manufacturing activity in the country contracted for a record 20th consecutive month.

Europe

European stocks have declined on Friday as Federal Reserve Chair Jerome Powell signaled a cautious approach to rate cuts and mixed Chinese data stoked concerns about slowing demand in the country.

Powell said the U.S. central bank does not need to rush to lower interest rates and can approach decisions carefully, given persistent inflationary pressures.

Data showed earlier today that Chinese industrial output expanded at a slower-than-anticipated 5.3 percent in October, while retail sales jumped an annual 4.8 percent to surpass expectations, boosted by a week-long holiday and the annual Singles’ Day shopping festival.

Property investment fell 10.3 percent year-on-year in January-October and fixed asset investment growth in the first ten months of 2024 came in below expectations, keeping alive calls for Beijing to unveil more stimulus.

Closer to home, Destatis reported that German wholesale prices continued to decline in October, although at a slower pace.

German wholesale prices decreased 0.8 percent year-on-year in October, slower than the 1.1 percent drop in September. Wholesale prices have been falling since May 2023, and the latest drop was the weakest in three months.

The British pound lingered near a four-month low after data showed Britain’s economy contracted unexpectedly in September and growth slowed to a crawl over the third quarter.

GDP grew 0.1 percent sequentially, following growth of 0.5 percent in the second quarter. That was also weaker than the forecast of 0.2 percent. In September, GDP edged down 0.1 percent, in contrast to the 0.2 percent expansion in August.

The pan-European STOXX 600 Index has fallen by 0.6 percent and is on track for its fourth straight weekly drop.

The French CAC 40 Index is down by 0.4 percent, the German DAX Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.1 percent.

Vaccine makers have come under selling pressure, with GSK and Sanofi slumping after U.S. President-elect Donald Trump tapped anti-vaccine activist and conspiracy theorist Robert F. Kennedy as his secretary of health.

Danish biotech Bavarian Nordic has also moved sharply lower after announcing its interim results for the first nine months of 2024.

Chipmaker ASML has also tumbled after U.S. firm Applied Materials reported fiscal fourth-quarter earnings that missed analysts’ expectations.

On the other hand, Dutch insurer Aegon has shown a strong move to the upside after launching a share buyback worth 150 million euros.

Generali Group shares have also jumped. The Italian insurer beat estimates with nine-month profits, despite a 930 million euro ($980.22 million) hit from natural disasters.

Evotec SE shares have also spiked after Halozyme Therapeutics put forth a non-binding proposal to acquire the German drug developer for about 2 billion euros ($2.10 billion).

U.S. Economic News

Partly reflecting a jump in sales by motor vehicle and parts dealers, the Commerce Department released a report on Friday showing retail sales in the U.S. increased by slightly more than expected in the month of October.

The Commerce Department said retail sales rose by 0.4 percent in October after growing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Excluding the surge in sales by motor vehicle and parts dealers, retail sales inched up by 0.1 percent in October after jumping by 1.0 percent in September. Ex-auto sales were expected to rise by 0.3 percent.

The Labor Department also released a report on Friday showing an unexpected increase by import prices in the U.S. in the month of October.

The report said import prices rose by 0.3 percent in October after falling by 0.4 percent in September. Economists had expected import prices to edge down by 0.1 percent.

Meanwhile, the Labor Department said export prices climbed by 0.8 percent in October following a revised 0.6 percent decrease in September.

Export prices were expected to slip to 0.1 percent compared to the 0.7 percent decline originally reported for the previous month.

A separate report released by the Federal Reserve Bank of New York on Friday showed regional manufacturing activity has seen a substantial turnaround in the month of November.

The New York Fed said its general business conditions index skyrocketed to a positive 31.2 in November from a negative 11.9 in October, with a positive reading indicating growth. Economists had expected the index to jump to a negative 0.7.

With the much bigger than expected increase, the general business conditions index reached its highest level since December 2021.

Looking ahead, the New York Fed said firms remained optimistic that conditions would continue to improve in the months ahead.

At 9 am ET, Boston Federal Reserve President Susan Collins is due to give opening remarks before the Federal Reserve Bank of Boston 68th economic conference, “The Future of Finance: Implications of Innovation.”

The Federal Reserve is scheduled to release its report on industrial production in the month of October at 9:15 am ET. Industrial production is expected to dip by 0.3 percent in October, matching the decrease seen in September.

At 10 am ET, the Commerce Department is due to release its report on business inventories in the month of September. Business inventories are expected to rise by 0.2 percent in September after climbing by 0.3 percent in August.

The Federal Reserve Bank of New York is scheduled to release the text of opening remarks by President John Williams before a closed event, “New York Fed Alumni: Celebrating 100 Years of Making Our Mission Possible,” at 1:15 pm ET.