U.S. Stocks May Lack Direction Following Yesterday’s Sell-Off

Following the sharp pullback seen in the previous session, stocks may show a lack of direction in early trading on Friday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures up by just 5 points.

Uncertainty about the outlook for interest rates may lead to choppy trading on Wall Street following comments from several Federal Reserve officials.

In an interview with Bloomberg News on Thursday, St. Louis Fed President James Bullard indicated he supports raising interest rates by a full percentage point by the start of July, including a possible 50-basis point hike.

“I was already more hawkish but I have pulled up dramatically what I think the committee should do,” said Bullard, who is a voting member on the Federal Open Market Committee this year.

Bullard’s comments came after a report from the Labor Department showed consumer prices spiked by the highest annual rate in 40 years in January.

However, other Fed officials have subsequently pushed back against the idea of raising rates by 50 basis points at the next Fed meeting in mid-March.

Atlanta Fed President Raphael Bostic told CNBC he still favors a 25-basis point increase in March, while Richmond Fed President Tom Barkin said he would “have to be convinced” of the need for a 50-basis-point rate hike.

San Francisco Fed President Mary Daly also said a 50-basis-point hike is “not my preference,” according to CNBC’s Steve Liesman.

Shortly after the start of trading, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of February. The consumer sentiment index is expected to inch up to 67.5 in February from 67.2 in January.

Stocks recovered from a sell-off at the start of trading on Thursday only to pullback sharply over the course of the session. With the steep drop on the day, the major averages largely offset the strong upward move seen on Tuesday and Wednesday.

The major averages climbed off their worst levels going into the close but still ended the day sharply lower. The Dow tumbled 526.47 points or 1.5 percent to 35,241.59, the Nasdaq dove 304.73 points or 2.1 percent to 14,185.64 and the S&P 500 plunged 83.10 points or 1.8 percent to 4,504.08.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday, with the Japanese markets closed for a holiday. China’s Shanghai Composite Index fell by 0.7 percent, while Hong Kong’s Hang Seng Index edged down by 0.1 percent.

The major European markets have also moved to the downside on the day. While the French CAC 40 Index has slid by 0.8 percent, the U.K.’s FTSE 100 Index is down by 0.6 percent and the German DAX Index is down by 0.3 percent.

In commodities trading, crude oil futures are jumping $1.25 to $91.13 a barrel after rising $0.22 to $89.88 a barrel on Thursday. Meanwhile, after inching up $0.80 to $1,837.40 an ounce an ounce in the previous session, gold futures are falling $8.20 to $1,829.20 an ounce.

On the currency front, the U.S. dollar is trading at 115.91 yen versus the 116.01 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1394 compared to yesterday’s $1.1428.

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