Traders May Look To Start New Month On Upbeat Note

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to regain ground following the steep drop seen in the previous session.

Traders may look to pick up stocks at relatively reduced levels following the sell-off seen on the final day of a disappointing September.

The Dow ended Thursday’s trading at its lowest closing level in three months, while the Nasdaq and the S&P 500 fell to two-month closing lows.

Trading activity may be somewhat subdued, however, as traders may be reluctant to go bargain hunting amid lingering concerns about inflation and the Federal Reserve scaling back its asset purchases.

Next week’s monthly jobs report may be on traders’ minds, as Fed officials have indicated the outlook for monetary policy will depend primarily on the strength of the labor market.

Following the mixed performance seen on Wednesday, stocks moved sharply lower over the course of the trading session on Thursday.

The Dow plunged 546.80 points or 1.6 percent to 33,843.92 and the S&P 500 slumped 51.92 points or 1.2 percent to 4,307.54, while the Nasdaq spent the day bouncing back and forth across the unchanged line before closing down 63.86 points or 0.4 percent at 14,448.58.

The weakness that emerged on Wall Street came on the final day of what was already a particularly disappointing month for stocks.

For the month of September, the Dow dove by 4.3 percent, while the Nasdaq and the S&P 500 plummeted by 5.3 percent and 4.8 percent, respectively. The S&P 500 saw its worst month since the early days of the coronavirus pandemic.

Concerns about the outlook for inflation continued to weigh on the markets along with indications the Federal Reserve plans to begin scaling back its asset purchases in the near future.

Traders largely shrugged off news that lawmakers in Washington avoided a government shutdown, with the Senate and the House both passing a stopgap spending bill.

The legislation, which funds the government through December 3rd, also includes spending on hurricane relief and Afghan refugee resettlement.

While a government shutdown was avoided, the U.S. still faces a potential default amid an impasse over raising the debt ceiling.

Treasury Secretary Janet Yellen has warned of “catastrophic economic consequences” if the debt ceiling is not raised by October 18th.

Yellen and Federal Reserve Chair Jerome Powell also testified before the House Financial Services Committee today.

Powell’s prepared remarks mirrored those he delivered before the Senate Banking Committee on Tuesday, with the Fed chief warning of upside risks to inflation.

On the economic front, a report from the Labor Department showed initial jobless claims unexpectedly increased for the third straight week in the week ended September 25th.

The report said initial jobless claims edged up to 362,000, an increase of 11,000 from the previous week’s unrevised level of 351,000. The uptick surprised economists, who had expected jobless claims to dip to 335,000.

With the unexpected increase, jobless claims climbed further off the pandemic-era low of 312,000 set in the week ended September 4th.

Housing stocks moved sharply lower over the course of the session, dragging the Philadelphia Housing Sector Index down by 2.6 percent to a nearly six-month closing low.

Substantial weakness was also visible among airline stocks, as reflected by the 2.3 percent nosedive by the NYSE Arca Airline Index.

Tobacco stocks also saw considerable weakness on the day, with the NYSE Arca Tobacco Index tumbling by 2 percent.

Altria (MO) and Philip Morris (PM) posted steep losses after the International Trade Commission ruled the tobacco producers must halt imports and sales of their IQOS heated tobacco device in a patent case brought by rival R.J. Reynolds.

Financial, chemical, commercial real estate and retail stocks also showed notable moves to the downside, while gold stocks bucked the downtrend amid a spike by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are falling $0.68 to $74.35 a barrel after rising $0.20 to $75.03 a barrel on Thursday. Meanwhile, after surging $34.10 to $1,757 an ounce in the previous session, gold futures are slipping $3.60 to $1,753.40 an ounce.

On the currency front, the U.S. dollar is trading at 111.03 yen versus the 111.29 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1604 compared to yesterday’s $1.1580.

Asia

Asian stocks fell broadly on Friday amid concerns the Federal Reserve might hurry to taper its stimulus to reign in the pace of inflation.

Sentiment was also dented by concerns around energy price increases impacting production in China and fears that disruptions to global supply chains will continue into next year. Chinese and Hong Kong markets were closed for holidays.

Japanese shares hit a one-month low, with news of various supply constraints worldwide and worries that the U.S. infrastructure bill may not pass Congress weighing on investors’ mood.

The Nikkei 225 Index plunged 681.59 points, or 2.3 percent, to 28,771.07, while the broader Topix closed 2.2 percent lower at 1,986.31. Both marked their biggest drop in three months to reach their lowest levels since early September.

Nitori Holdings plunged 6 percent and Sumitomo Chemical tumbled 5.3 percent after disappointing earnings updates. Silicon wafer manufacturer Sumco lost 4.4 percent after it unveiled plans to raise 128 billion yen ($1.14 billion) from new shares to expand production.

Toshiba Corp. rallied 3.1 percent after Elliott Investment Management said it has become a “significant investor” in the company.

In economic news, business confidence among major Japanese manufacturers improved for a fifth straight quarter in three months to September, the Bank of Japan said.

The manufacturing sector in the country expanded at a slower rate in September, while the unemployment rate remained flat at 2.8 percent in August, separate reports showed.

Australian markets fell sharply, with banks and miners leading losses after Wall Street posted its worst monthly retreat in September since the start of the pandemic.

The benchmark S&P/ASX 200 Index tumbled 146.70 points, or 2 percent, to 7,185.50, while the broader All Ordinaries Index ended down 143.10 points, or 1.9 percent, at 7,486.60.

Commonwealth Bank of Australia shares slumped 4.1 percent, while the other three big banks fell over 2 percent each. Miners BHP, Fortescue Metals Group and Rio Tinto lost 2-3 percent. Virgin Money UK plummeted 7.4 percent after its digital strategy update.

Whitehaven Coal led the gainers to end up more than 4 percent. Gold miners posted broad-based gains after gold prices rallied to a one-week high above the key $1,750 an ounce level in the previous session.

Seoul stocks tumbled on concerns about power shortages in China and the extended virus curbs at home. Amid fears of a slowing economic recovery, investors ignored positive manufacturing and trade balance data.

The Kospi slumped 49.64 points, or 1.6 percent, to 3,019.18. Samsung Electronics, Naver, SK Hynix and Hyundai Motor declined 1-3 percent.

Europe

European stocks are seeing modest weakness after hitting two-month lows on Friday amid fears of a slowing economic recovery.

Eurozone manufacturing growth weakened in September, as producers report a growing toll from supply chain headwinds, IHS Markit noted.

The corresponding PMI dropped to 58.6 in September from 61.4 in August, posting the largest drop since April 2020.

The U.K.’s manufacturing sector also saw growth slow last month on the back of surging material and staff shortages, while German retail sales rebounded at a slower than expected pace in August.

Inflation worries persist, with Eurozone inflation accelerating for the third straight month in September.

Inflation advanced to 3.4 percent in September from 3.0 percent in August, flash data from Eurostat showed. The rate was also above economists’ forecast of 3.3 percent.

While the U.K.’s FTSE 100 Index has dipped by 0.4 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is just below the unchanged line.

Dutch bank ING Group has moved to the downside even after announcing a share buyback program with a total value of 1.74 billion euros.

Crédit Agricole S.A. shares have also fallen in Paris. The French lender confirmed that it is in talks with Holmarcom regarding a possible sale of its stake in Moroccan subsidiary Crédit du Maroc.

Telecom major Orange SA has also dropped. The company announced an investment of 230 million euros to strengthen the development of Orange Bank.

British electronics retailer AO World has also shown a substantial move to the downside after warning of lower profits.

On the other hand, German automaker Daimler has edged higher in volatile trade as shareholders vote on spinning off the sprawling truck division from the Mercedes-Benz luxury-car operations.

Leoni AG has also advanced. The company said it would reach a binding agreement to sell the Business Group Leoni Industrial Solutions to BizLink Holding Inc.

Ocado Group shares have also risen. The online grocer said it has successfully priced an offering of 500 million pounds ($673.7 million) of senior notes.

U.S. Economic Reports

After reporting a sharp increase in U.S. personal income in the previous month, the Commerce Department released a report on Friday showing personal income edged up by slightly less than expected in the month of August.

The Commerce Department said personal spending crept up by 0.2 percent in August after jumping by 1.1 percent in July. Economists had expected income to rise by 0.3 percent.

Meanwhile, the report said personal spending climbed by 0.8 percent in August following a revised 0.1 percent dip in July. Spending was expected to increase by 0.6 percent compared to the 0.3 percent uptick originally reported for the previous month.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of September.

The ISM’s manufacturing PMI is expected to edge down to 59.6 in September from 59.9 in August, with a reading above 50 indicating growth in the sector.

The Commerce Department is also due to release its report on construction spending in the month of August at 10 am ET. Construction spending is expected to rise by 0.3 percent.

Also at 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of September. The consumer sentiment index is expected to be unrevised at 71.0.

Philadelphia Federal Reserve President Patrick Harker is due to speak virtually at the New Castle County Chamber of Commerce’s 10th annual Economic Development Luncheon at 11 am ET.

At 1 pm ET, Cleveland Federal Reserve President Loretta Mester is scheduled to participate in a discussion before a virtual Shadow Open Market Committee meeting on “Inflation, Employment, and the Federal Reserve.”

Stocks In Focus

Shares of Merck (MRK) are seeing significant pre-market strength after the drug giant said it plans seek emergency use authorization for an oral antiviral treatment for Covid-19 following “compelling” trial results.

China-based electric vehicle maker Nio (NIO) may also move to the upside after reporting it delivered a record 10,628 vehicles globally in September, reflecting 125.7 percent year-over-year growth.

Shares of Lordstown Motors (RIDE) are also likely to see initial strength after the electric truck maker announced an agreement to sell its Ohio plant to Taiwan’s Foxconn for $230 million.