### U.S. Markets: A Mixed Opening Expected
The major U.S. index futures indicate a relatively flat opening on Friday, suggesting stocks may display indecisiveness following the slight retreat witnessed in the previous session.
Traders appear hesitant to make bold moves as they digest recent market strength that saw major indexes reach new record intraday highs. For instance, the Dow Jones Industrial Average surpassed the 40,000 mark for the first time ever on Thursday before retracting slightly to close lower.
Recent economic data has stirred optimism about a potential interest rate cut in the months ahead. However, comments from Federal Reserve officials have somewhat tempered this enthusiasm.
After a flurry of U.S. economic data releases over the past two days, today's economic calendar is quieter, although The Conference Board’s report on leading economic indicators for April may still attract some attention. The leading economic index is projected to dip by 0.3% in April, mirroring the decrease seen in March.
On Thursday, stocks initially moved higher but fluctuated throughout the day, finally ending modestly lower. This downward adjustment partly offset the strong gains observed in the preceding two sessions.
The Dow soared above 40,000 during the morning session but eventually declined by 38.62 points or 0.1%, ending at 39,869.38. The S&P 500 dipped 11.05 points or 0.2% to 5,297.10, and the Nasdaq fell 44.07 points or 0.3% to 16,698.32.
Early strength in U.S. markets reflected an extension of Wednesday's rally, spurred by optimism regarding interest rates following softer-than-expected consumer price inflation data. A key Labor Department report showed consumer prices rose less than anticipated in April, bolstering expectations that the Federal Reserve may lower interest rates in the coming months.
According to CME Group's FedWatch tool, there is an 85.5% probability that rates will be a quarter point lower by September.
However, buying interest waned as traders paused to reassess the near-term market outlook after major indexes reached new record highs.
On the employment front, the Labor Department reported a decline in initial jobless claims for the week ended May 11th. Initial claims fell to 222,000, a drop of 10,000 from the previous week’s revised level of 232,000. Economists had predicted claims would fall to 220,000 from the initially reported 231,000 for the prior week. This pullback came after jobless claims had risen to their highest level since late August 2023.
Meanwhile, a separate Labor Department report indicated a sharp rise in U.S. import prices in April, which exceeded expectations. Import prices surged by 0.9% in April following an upwardly revised 0.6% increase in March. Economists had anticipated a 0.3% rise compared to the originally reported 0.4% increase for the previous month. The annual growth rate of import prices also accelerated to 1.1% in April from 0.4% in March, marking the largest year-over-year increase since December 2022.
"The surge in April import prices won't instill the Fed with greater confidence that inflation is decelerating, but officials will assuredly place more weight on yesterday's CPI report, which was a small step in the right direction and solidifies our baseline forecast for a rate cut in September," said Matthew Martin, U.S. Economist at Oxford Economics.
Another report from the Federal Reserve revealed that U.S. industrial production remained flat in April. Gains in utilities output were offset by declines in mining and manufacturing output. Industrial production was unchanged in April following a downwardly revised 0.1% increase in March. Economists had expected a 0.1% rise compared to the previously reported 0.4% increase for March.
Most major sectors saw modest movements on Thursday, but housing stocks plunged significantly, dragging the Philadelphia Housing Sector Index down by 2.8%. This decline followed a Commerce Department report showing a rebound in housing starts in April, coupled with a continued decline in building permits.
Airline stocks also experienced a notable dip, with the NYSE Arca Airline Index falling by 1.4%.**Market Overview: Hardware, Tobacco, and Commodities**
Computer hardware stocks retreated after Wednesday's gains, while tobacco stocks notably advanced, leading the NYSE Arca Tobacco Index to rise by 1.3 percent.
**Commodity and Currency Markets**
Crude oil futures have increased by $0.22, reaching $79.45 per barrel, following a $0.60 gain to $79.23 per barrel on Thursday. Gold futures are up by $7.20 to $2,393.70 an ounce, recovering from a $9.40 dip to $2,385.50 an ounce in the previous session.
In currency trading, the U.S. dollar is valued at 155.80 yen compared to 155.39 yen at Thursday's close in New York. Against the euro, the dollar stands at $1.0840, slightly lower than the previous day's $1.0867.
**Asian Markets**
Asian stocks exhibited a mixed performance on Friday, with Chinese stimulus hopes counterbalancing interest rate concerns and mixed data from China.
The U.S. dollar's recent decline halted after three Federal Reserve officials advocated for patience regarding rate cuts until inflation trends more clearly toward the 2 percent target.
Gold and oil maintained modest gains in Asian trading amidst ongoing conflict in Gaza and a U.S. House of Representatives vote supporting a bill to resume arms deliveries to Israel.
Chinese markets surged following new measures to rejuvenate the property market. Shares in China Evergrande Group, the world's most indebted developer with liabilities exceeding $300 billion, surged nearly 18 percent, while peer China Vanke rose by 10 percent. This came after the central bank lowered the minimum down payment rate for first-time homebuyers and suggested government purchases of commercial real estate to boost the housing market.
China's Shanghai Composite Index rose by 1.0 percent to 3,154.03, and Hong Kong's Hang Seng Index increased by 0.9 percent to 19,553.61. Investors largely overlooked mixed economic data indicating an acceleration in industrial growth in April, alongside unexpected slowdowns in retail sales and fixed asset investment.
Japanese markets closed lower, impacted by concerns over a weak yen affecting corporate profits. The Nikkei 225 Index fell by 0.3 percent to 38,787.38, while the Topix Index edged up by 0.3 percent to 2,745.62. Tokyo Electron led the declines, closing approximately 2 percent lower, with Fast Retailing down by 0.9 percent.
In Seoul, the Kospi dropped by 1.0 percent to 2,724.62, following a six-week high on Thursday. Leading the losses were Samsung Electronics, SK Hynix, LG Energy Solution, and Samsung SDI, each falling 1-2 percent. However, Samyang Foods soared by 30 percent after exceeding first-quarter earnings expectations.
Australian markets fell, ending a two-day winning streak, with losses led by banks, technology, and healthcare sectors. The S&P ASX 200 Index declined by 0.9 percent to 7,814.40, while the All Ordinaries Index dropped by 0.8 percent to 8,082.30. In New Zealand, the S&P/NZX 50 Index dipped by 0.2 percent to 11,699.79 ahead of the Reserve Bank of New Zealand’s upcoming monetary policy decision.
**European Markets**
European stocks continued their downward trend on Friday, extending losses from the previous day when a nine-day winning streak ended. Renewed interest-rate concerns emerged after Federal Reserve officials emphasized maintaining high borrowing costs for longer.
Despite mixed economic data from China, the country’s central bank's efforts to support the property sector helped alleviate economic recovery concerns.
Closer to home, Eurozone CPI remained steady at 2.4 percent year-on-year in April, unchanged from March. ECB Vice-President Luis de Guindos projected that Eurozone inflation would approach the 2 percent target by 2025.
In the U.K., Chancellor Jeremy Hunt pledged additional tax cuts contingent on a Conservative victory in the general election.
Across the major European indices, the French CAC 40 Index fell by 0.5 percent, the U.K.'s FTSE 100 Index declined by 0.4 percent, and Germany's DAX Index slipped by 0.3 percent.
Corporate news highlighted Swiss luxury goods company Richemont, which surged by 5.3 percent after announcing board and management changes. Conversely, Electrolux fell by 1 percent following a reannounced recall of Frigidaire and Kenmore electric ranges due to fire and injury reports. British property firm Land Securities dropped by 2.3 percent after reporting a decrease in annual rental income earnings, down to £371 million from £393 million in 2023.Consumer goods giant Unilever gained 0.5% after initiating its €1.5 billion share buyback program.
French re-insurer SCOR SE dropped by 8% following a 36.8% decline in first-quarter group net income, falling to €196 million from last year's €311 million.
ENGIE decreased by 1.6%, with the utility reporting a slight drop in EBIT earnings for the first quarter, attributed to declining sales across nearly all segments.
### U.S. Economic Reports
The Conference Board is set to release its report on leading economic indicators for April at 10 AM ET. The leading economic index is anticipated to decrease by 0.3%, consistent with the decline observed in March.
At 10:15 AM ET, Federal Reserve Board Governor Christopher Waller will discuss payments innovation, technical standards, and the Fed's roles at the International Organization for Standardization Technical Committee 68 Financial Services' 44th Plenary Meeting.
San Francisco Federal Reserve President Mary Daly is scheduled to deliver the commencement address at the University of San Francisco School of Management at 12:15 PM ET.
