Interest Rate, Economic Worries May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to move back to the downside following yesterday’s tech-led rebound.

Overseas weakness may carry over onto Wall Street amid ongoing concerns about the outlook for interest rates and the global economy.

Rate hikes in England and other countries along with the Federal Reserve’s forecast for additional rate increases have reignited worries tighter monetary policy will tip the global economy into recession.

Trading activity may be somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

The economic calendar picks back up next week with the release of reports on durable goods orders, consumer confidence, new home sales and pending home sales.

The Commerce Department is also due to release its report on personal income and spending in the month of May, which includes a reading on inflation said to be preferred by the Fed.

The consumer price inflation data could significantly impact opinions regarding whether the Fed will follow through on its forecast rate hikes.

Stocks turned in a lackluster performance for much of the trading session on Thursday but managed to end the day mostly higher. Technology stocks helped lead the advance, resulting in a surge by the tech-heavy Nasdaq.

The Nasdaq saw further upside going into the close, jumping 128.41 points or 1.0 percent to 13,630.61. The S&P 500 also climbed 16.20 points or 0.4 percent to 4,381.89, while the narrower Dow edged down 4.81 points or less than a tenth of a percent to 33,946.71.

The higher close on the day came as some traders looked to pick up stocks at somewhat reduced levels, with the Nasdaq and the S&P 500 both snapping three-day losing streaks.

Buying interest may also have been generated in reaction to a Labor Department report showing initial jobless claims held at their highest level since October 2021 last week.

The report said initial jobless claims came in at 264,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to edge down to 260,000 from the 262,000 originally reported for the previous week.

Reflecting the upward revision to the previous week, jobless claims held at their highest level since hitting 269,000 in the week ended October 23, 2021.

With the Federal Reserve repeatedly warning about the impact of labor market tightness, the data may have added to optimism the central bank will not follow through on plans to continue raising interest rates.

Lingering concerns about rates limited the upside, however, as the Bank of England raised rates more aggressively, hiking rates by a bigger-than-expected 50 basis points.

Retail stocks showed a substantial move to the upside on the day, driving the Dow Jones U.S. Retail Index up by 1.8 percent to a ten-month closing high.

Within the sector, shares of Overstock.com (OSTK) soared by 17.3 percent after the internet retailer won an auction to buy Bed Bath & Beyond’s intellectual property and digital assets.

Significant strength also emerged among software stocks, as reflected by the 1.3 percent gain posted by the Dow Jones U.S. Software Index.

On the other hand, interest rate concerns weighed on banking stocks, dragging the KBW Bank Index down by 2.3 percent.

Energy stocks also saw considerable weakness amid a sharp pullback by the price of crude oil, moving notably lower along with brokerage and commercial real estate stocks.

Commodity, Currency Markets

Crude oil futures are tumbling $1.12 to $68.39 a barrel after plummeting $3.02 to $69.51 a barrel on Thursday. Meanwhile, after plunging $21.20 to $1,923.70 an ounce in the previous session, gold futures are climbing $9.90 to $1,933.60 an ounce.

On the currency front, the U.S. dollar is trading at 143.02 yen versus the 143.11 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0891 compared to yesterday’s $1.0956.

Asia

Asian stocks drifted lower on Friday as a spate of rate hikes from policymakers in England, Norway and Switzerland pushed up global bond yields and revived fears of an imminent recession.

The dollar continued to benefit from risk aversion on concerns that higher interest rates could slow economic growth. Both oil and gold headed for weekly losses on fears of further rate hikes.

Mainland Chinese markets were closed for a public holiday. Hong Kong’s Hang Seng Index plummeted 1.7 percent to close at 18,889.97 in catch-up trade as trading resumed after a holiday on Thursday.

Japanese stocks fell sharply as the latest inflation data stoked speculation the Bank of Japan could tweak its yield control policy as soon as in July.

Japan’s core inflation rate in May eased slightly to 3.2 percent year-on-year from 3.4 percent in April but still above the central bank’s target, data showed.

The Nikkei 225 Index slumped 1.5 percent to 32,781.54, while the broader Topix Index ended 1.4 percent lower at 2,264.73.

Uniqlo clothing chain parent Fast Retailing and technology investor Softbank Group both fell around 2.4 percent.

Marubeni lost 3.4 percent and Itochu plunged 4 percent on profit taking after recent strong gains on news of Warren Buffett’s Berkshire Hathaway Inc. raising its stakes in Japan’s five leading trading houses.

Seoul stocks turned lower after the country failed to win developed market status on the global stock indices provided by Morgan Stanley. The Kospi ended 0.9 percent lower at 2,570.10, with chemical and auto stocks leading losses.

Australian markets fell for a third straight session on fears of major economies falling into recession. Investors were also spooked by data revealing a slowdown in Australian manufacturing and services activities.

The benchmark S&P/ASX 200 Index ended down 1.3 percent at 7,099.20, with energy and financial stocks pacing the declines. The broader All Ordinaries Index settled 1.3 percent lower at 7,285.60.

Europe

European stocks have moved mostly lower during trading on Friday as investors react to mixed economic data from the region.

Eurozone bond yields dropped after preliminary data revealed business activity growth in Europe slowed in June. The region’s flash composite Purchasing Managers’ Index dropped to 50.3 in June from 52.8 in the previous month.

Elsewhere, U.K. retail sales logged unexpected growth in May, as bank holidays and warm weather boosted demand for outdoor-related goods and summer clothing, official data showed.

Retail sales grew at a pace of 0.3 percent in May from April, the Office for National Statistics reported. This was in contrast to the expected fall of 0.2 percent. Nonetheless, the pace of growth slowed from April’s 0.5 percent increase.

On a yearly basis, retail sales declined at a slower pace of 2.1 percent after a 3.4 percent drop in April. The decrease was also slower than economists’ forecast of a 2.6 percent slump.

Separately, British consumer confidence rose for the fifth consecutive month in June to hit a 17-month high, a closely watched survey revealed. Market research group GfK said its consumer sentiment index rose to -24 in June from -27 in May.

While the German DAX Index has slumped by 1.0 percent, the U.K.’s FTSE 100 Index is down by 0.5 percent and the French CAC 40 Index is down by 0.4 percent.

Siemens Energy shares have plummeted. The German company, which supplies equipment and services to the power sector, withdrew its profit guidance for fiscal year 2023 due to Siemens Gamesa citing a substantial increase in failure rates of wind turbine components.

Italian oil major Eni S.p.A. has also fallen after agreeing to acquire private equity-backed Neptune Energy for $4.9 billion in the largest cash deal in the European oil and gas sector in almost a decade.

Industrial engineering and steel production company Thyssenkrupp has also slumped on reports that its Nucera hydrogen unit is seeking to raise as much as €566 million ($615 million) in an initial public offering.

On the other hand, GSK has moved sharply higher in London after settling a Zantac suit in the U.S. to avoid a protracted legal fight.

Capgemini SE shares have edged higher in Paris. The IT services and consulting company has signed a share purchase agreement to acquire BTC Corp., a Japanese cloud and digital services provider for an undisclosed amount.

U.S. Economic Reports

Cleveland Federal Reserve President Loretta Mester is due to give closing remarks before the Policy Summit 2023: Communities Thriving in a Changing Economy conference at 1:40 pm ET.

Stocks In Focus

Shares of Virgin Galactic (SPCE) are moving sharply lower in pre-market trading after the space tourism company announced plans to sell up to $400 million worth of shares of its common stock to fund development of its spaceship fleet.

Athletic apparel company Under Armour (UAA) may also move to the downside after Wells Fargo downgraded its rating on the company’s stock to Equal Weight from Overweight.

Meanwhile, shares of CarMax (KMX) are seeing significant pre-market strength after the used car retailer reported fiscal first quarter results that exceeded analyst estimates.