Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend the upward trend seen over the past several sessions.

Optimism about the outlook for interest rates may contribute to continued strength on Wall Street ahead of the Federal Reserve’s monetary policy meeting next week.

The Fed is scheduled to announce its latest monetary policy decision next week and is almost universally expected to lower interest rates by at least 25 basis points.

Recent inflation has partly offset optimism the Fed will lower rates more aggressively, but the central bank is still expected to continue cutting rates over the next several months.

Potentially adding to the interest rate optimism, a report released by the Labor Department showed import prices in the U.S. decreased by slightly more than expected in the month of August.

The Labor Department said import prices fell by 0.3 percent in August after inching up by 0.1 percent n July. Economists had expected import prices to dip by 0.2 percent.

The report also showed a notable decline by export prices, which slid by 0.7 percent in August after climbing by a downwardly revised 0.5 percent in July.

Economists had expected export prices to edge down by 0.1 percent compared to the 0.7 percent increase originally reported for the previous month.

After turning in a lackluster performance early in the session, stocks moved notably higher over the course of the trading day on Thursday. The Nasdaq and the S&P 500 added to strong gains posted in Wednesday’s session, closing higher for the fourth straight day.

The major averages all finished the day firmly in positive territory. The Nasdaq jumped 174.15 points or 1.0 percent to 17,569.68, the S&P 500 advanced 41.63 points or 0.8 percent to 5,595.76 and the Dow climbed 235.06 points or 0.6 percent to 41,096.77.

The strength that emerged on Wall Street came as traders remain optimistic about the outlook for interest rates following this week’s inflation data.

While the data has seemingly reduced the likelihood the Federal Reserve will cut rates by 50 basis points next week, rates are still expected to be notably lower by the end of the year.

CME Group’s FedWatch Tool currently suggests rates will be lower by at least a full percentage point following the Fed’s December meeting.

Before the start of trading, the Labor Department said its producer price index for final demand crept up by 0.2 percent in August, while revised data showed prices were unchanged in July.

Economists had expected producer prices to inch up by 0.1 percent, matching the uptick originally reported for the previous month.

At the same time, the report said the annual rate of producer price growth slowed to 1.7 percent in August from a downwardly revised 2.1 percent in July.

The year-over-year increase by producer prices was expected to decelerate to 1.8 percent from the 2.2 percent originally reported for the previous month.

“Core CPI surprised yesterday, and PPI came in hotter than forecast today, but we don’t think we’re at the start of a renewed rise in inflation,” said Nationwide Financial Markets Economist Oren Klachkin

“Rather, we think they are evidence of a bumpy path to 2%,” he added. “A cooling economy and deflating labor market should dampen price pressures going forward.”

The Labor Department also released a separate report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended September 7th.

Gold stocks moved sharply higher along with the price of the precious metal, resulting in a 5.8 percent spike by the NYSE Arca Gold Bugs Index.

Substantial strength was also visible among networking stocks, as reflected by the 3.5 percent surge by the NYSE Arca Networking Index.

Shares of Netgear (NTGR) skyrocketed by 30.8 percent after the company raised its third quarter revenue guidance and said it has settled a patent dispute with TP-Link Systems.

Telecom, housing and steel stocks also saw significant strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.88 to $69.85 a barrel after jumping $1.66 to $68.97 a barrel on Thursday. Meanwhile, after surging $38.20 to $2,569.10 an ounce in the previous session, gold futures are rising $16.60 to $2,597.20 an ounce.

On the currency front, the U.S. dollar is trading at 140.88 yen versus the 141.82 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1081 compared to yesterday’s $1.1074.

Asia

Asian stocks fluctuated before ending mixed on Friday ahead of a widely expected interest rate cut by the U.S. Federal Reserve next week.

Markets expect a 25 basis point cut after separate data showed the U.S. core consumer price index and producer price index rose slightly more than expected from a month earlier in August.

Gold edged up in Asian trading to reach record levels, as the dollar weakened heading into next week’s FOMC meeting. Oil extended gains for a third day running as Hurricane Francine disrupted Gulf of Mexico production.

Chinese markets ended lower on growth concerns after FICC Investor CN Wire highlighted growing concerns about the economy. The benchmark Shanghai Composite Index dropped 0.5 percent to 2,704.09.

Hong Kong’s Hang Seng Index climbed 0.8 percent to 17,369.09, lifted by technology stocks on Fed rate cut speculation.

Japanese stocks fell as the yen’s rise to around 141 per dollar weighed on exporters. Gains in chip-related stocks helped limit overall loses to some extent.

The Nikkei 225 Index slid 0.7 percent to 36,581.76 ahead of a Bank of Japan policy meeting next week. The broader Topix Index settled 0.8 percent lower at 2,571.14.

Automakers Nissan, Honda Motor, Mitsubishi Motors and Toyota dropped 1-2 percent. Tech investor Softbank Group shed 0.8 percent and Fast Retailing, the owner of the Uniqlo brand, declined 1.4 percent. On the positive side, Advantest rose 1.3 percent and Tokyo Electron advanced 1.7 percent.

Seoul stocks ended a choppy session slightly higher ahead of a long holiday weekend. The Kospi inched up 0.1 percent to 2,575.41.

Hyundai Motor, Korea Gas Corp and Hyundai Steel climbed 2-3 percent, while market bellwether Samsung Electronics gave up 2.9 percent and No. 2 chipmaker SK Hynix tumbled 3.6 percent.

Australian markets eked out modest gains, with gold and mining stocks leading the uptick. Northern Star Resources jumped 3.7 percent and Fortescue Metals Group soared 5 percent.

The benchmark S&P/ASX 200 Index rose 0.3 percent to 8,099.90, while the broader All Ordinaries Index ended 0.4 percent higher at 8,323.50.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally higher at 12,832.55.

Europe

European stocks are broadly higher on Friday as bond yields ease amid bets of an interest rate cut at next week’s Federal Reserve meeting.

The U.S. central bank is almost certain to start its rate-cutting cycle next week, but analysts are looking for clues on the size of cuts over the next few months.

In economic news, Eurostat reported that Eurozone industrial production dropped 0.3 percent month-on-month in July, as expected.

French inflation eased more than estimated in August and reached the lowest since July 2021, revised data from the statistical office INSEE showed.

Consumer prices posted an annual increase of 1.8 percent in August following a 2.3 percent rise in July. The August rate was revised down from 1.9 percent.

Elsewhere, a Bank of England survey showed the British public’s expectations for inflation over the coming year dropped to its lowest in three years.

An interest rate cut from the Bank of England next week looks unlikely due to mixed signals regarding price pressures. That said, a 0.25 percentage point reduction is fully priced for November and investors are now looking for clues on its quantitative tightening program.

The pan European STOXX 600 Index has risen 0.6 percent after climbing 0.8 percent on Thursday. The German DAX Index is also up by 0.6 percent, while France’s CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.3 percent.

The euro edged higher a day after the European Central Bank cut the deposit interest rate by 25 basis points, as expected, but provided almost no clues to its future steps.

ECB official Joachim Nagel stated that inflation in the euro zone is going in the right direction and the inflation target is likely to be reached at the end of next year.

Commerzbank shares has moved notably higher. The head of Germany’s central bank said that authorities would take a “very close look” at UniCredit’s overtures to potentially buy the German bank.

Vodafone shares have also advanced. The company said it disagrees with the CMA’s provisional findings that its merger with Three UK raises competition concerns and could lead to price rises for customers.

Unilever ha also rsien after launching the second and final phase of its substantial €1.5 billion share buyback program.

Meanwhile, Worldline shares have plummeted in Paris after the payment group announced the departure of its CEO Gilles Grapinet and cut its 2024 revenue and core earnings guidance.

Drug maker AstraZeneca has also shown a notable move to the downside after a rating downgrade from Deutsche Bank.

U.S. Economic Reports

A report released by the Labor Department on Friday showed import prices in the U.S. decreased by slightly more than expected in the month of August.

The Labor Department said import prices fell by 0.3 percent in August after inching up by 0.1 percent n July. Economists had expected import prices to dip by 0.2 percent.

The report also showed a notable decline by export prices, which slid by 0.7 percent in August after climbing by a downwardly revised 0.5 percent in July.

Economists had expected export prices to edge down by 0.1 percent compared to the 0.7 percent increase originally reported for the previous month.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of September.

The University of Michigan’s consumer sentiment index is expected to inch up to 68.0 in September after rising to 67.9 in August.