Traders May Stick To The Sidelines Ahead Of Next Week’s Fed Meeting

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 higher over the past several sessions.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy meeting next week.

While the Fed is almost universally expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement for clues about the outlook for rates.

Recent economic data has led to concerns about the Fed leaving rates on hold for a prolonged period, but many economists still expect the central bank to resume cutting rates sometime in the first half of the year.

CME Group’s FedWatch Tool is currently indicating a 69.9 percent chance rates will be lower by at least a quarter point following the Fed’s June meeting.

Stocks moved mostly higher over the course of the trading day on Thursday, extending the strong upward move seen over the past several sessions. The S&P 500 closed higher for the seventh time in the past eight sessions, reaching a new record closing high.

The major averages reached new highs going into the close of trading. The Dow jumped 408.34 points or 0.9 percent to 44,565.07, the S&P 500 climbed 32.34 points or 0.5 percent to 6,118.71 and the Nasdaq rose 44.34 points or 0.2 percent at 20,051.68.

The markets continued to benefit from recent upward momentum, which has help stocks largely offset the sell-off seen earlier this month.

Optimism about a more pro-business administration under new President Donald Trump has helped offset concerns about the outlook for interest rates.

Potentially adding to the positive sentiment, Trump said during remarks at the World Economic Forum in Davos, Switzerland, that he will “demand that interest rates drop immediately.”

Trump also said he would ask Saudi Arabia and other members of OPEC to lower oil prices, contributing to a downturn by the price of crude oil.

Notably, Trump did not specifically comment on the level of tariffs he plans to impose on certain countries, which is one of the lingering areas of concern about his presidency.

In U.S. economic news, the Labor Department released a report showing initial jobless claims saw further upside in the week ended January 18th.

The Labor Department said initial jobless claims rose to 223,000, an increase of 6,000 from the previous week’s unrevised level of 217,000. Economists had expected jobless claims to inch up to 220,000.

With the increase, jobless claims continued to regain ground after hitting a nearly eleven-month low in the week ended January 4th.

Biotechnology stocks showed a strong move to the upside as the day progressed, driving the NYSE Arca Biotechnology Index up by 1.8 percent to its best closing level in almost four years.

Considerable strength also emerged among networking stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Networking Index. The index reached a new record closing high.

Healthcare, pharmaceutical and oil producer stocks also saw notable strength, while airline stocks came under pressure amid disappointing guidance from American Airlines (AAL).

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $74.96 a barrel after sliding $0.82 to $74.62 a barrel on Thursday. Meanwhile, after slipping $5.90 to $2,765 an ounce in the previous session, gold futures are climbing $24 to $2,789 an ounce.

On the currency front, the U.S. dollar is trading at 156.34 yen versus the 156.05 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0466 compared to yesterday’s $1.0484.

Asia

Asian stocks rose broadly on Friday after U.S. President Donald Trump said during an interview that his recent conversation with Chinese President Xi Jinping was friendly and that he would rather not impose tariffs on China, suggesting a potentially softer stance on tariffs against the country.

Gold hovered near record highs in Asian trading, as the dollar weakened on Trump’s call for immediate interest rate cuts by the U.S. Federal Reserve.

Oil struggled for direction after Trump said that lower oil prices could immediately end the war in Ukraine and he would ask Saudi Arabia and OPEC to bring down the cost of oil.

China’s Shanghai Composite Index climbed 0.7 percent to 3,252.63 after the China Securities Regulatory Commission said that mutual funds should increase holdings of onshore stocks by at least 10 percent annually for the next three years, while large state-owned insurers will need to invest 30 percent of their new policy premiums into share markets beginning this year.

Hong Kong’s Hang Seng Index surged 1.9 percent to 20,066.19, lifted by tech stocks like Tencent and Baidu.

Japanese markets surrendered early gains to end on a flat note as the Bank of Japan hiked the short-term rate target by 25 basis points as expected and new data showed core inflation rose last month at the fastest pace in 16 months.

The yen gained and bond yields rose as the central bank raised its interest rates to their highest since the 2008 global financial crisis, upwardly revised its inflation guidance and signaled more increases to come if GDP and price growth hit forecasts.

The Nikkei 225 Index and the broader Topix Index both finished marginally lower at 39,931.98 and 2,751.04, respectively.

Shares of Mitsubishi Motors plunged 6.9 percent after reports emerged that the company won’t be a part of Honda Motor Co. and Nissan Motor Co.’s plans to combine their companies under a holding company.

Seoul stocks rose notably, with the Kospi finishing up 0.9 percent at 2,536.80. Korea Zinc jumped 11.6 percent after its Chairman Choi Yun-beom retained control of the company during a shareholders’ meeting.

Australian markets eked out modest gains to close just shy of a record high ahead of a long weekend. The benchmark S&P/ASX 200 Index rose by 0.4 percent to 8,408.90, led by consumer discretionary stocks.

The broader All Ordinaries Index settled 0.4 percent higher at 8,660.40. Premier Investments surged 6.6 percent after its historic deal with Myer on Thursday.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.3 percent to 13,024.70.

Europe

European stocks opened on a firm note Friday after U.S. President Donald Trump called for lower interest rates and cheaper oil prices. He also hinted at a potential trade agreement with China.

The euro held steady after a survey showed Euro area consumer confidence grew for the first time in three months in January.

Focus also shifted to next week’s Fed and ECB meetings. No change is expected to U.S. interest rates, while the ECB is set to cut rates again by 25 basis points.

The pan European STOXX 600 Index is up 0.4 percent after gaining 0.4 percent in the previous session.

The French CAC 40 Index is up 0.7 percent and the German DAX Index is up by 0.1 percent, although the U.K.’s FTSE 100 Index has bucked the uptrend and dipped by 0.3 percent.

British luxury brand Burberry has soared after reporting a smaller-than-expected decline in its fiscal third quarter sales. Peers LVMH, Kering, Moncler and Swatch have also surged.

Assa Abloy AB has also moved to the upside after acquiring Uhlmann & Zacher GmbH, a German supplier of access control handles and knobs and corresponding software.

Meanwhile, Swedish telecom equipment maker Ericsson has plummeted after reporting a 6 percent decrease in 2024 revenue.

Italian lender Banca Monte dei Paschi di Siena has also slumped after it launched a €13.3 billion takeover offer for larger rival Mediobanca.

U.S. Economic News

The National Association of Realtors is scheduled to release its report on existing home sales in the month of December at 10 am ET.

Existing home sales are expected to climb to an annual rate of 4.19 million in December after surging to a rate of 4.15 million in November.

Also at 10 am ET, the University of Michigan is due to released its revised reading on consumer sentiment in the month of January.

The consumer sentiment index for January is expected to be unrevised from the preliminary reading of 73.2, which was down from 74.0 in December.