The major U.S. index futures are currently indicating a lower opening on Friday, suggesting that stocks might experience a pullback after a strong rally in the previous session.
Investors may be looking to take profits from the recent market upswing, which drove the Nasdaq and the S&P 500 to close higher for six consecutive sessions. Although this recent uptick has largely mitigated the earlier sell-off seen this month, the major indices remain significantly below the record highs set in July.
However, selling pressure may be tempered due to recent economic data that has alleviated some concerns about the economic outlook and bolstered confidence that the Federal Reserve may cut interest rates next month. Despite yesterday's positive retail sales data reducing the likelihood of a more aggressive 50 basis point rate cut, the Fed is still widely anticipated to lower rates by at least 25 basis points.
Following a consistent upward trend over the past several sessions, stocks made another notable push higher during Thursday’s trading. The major averages all recorded significant gains, with the Nasdaq and the S&P 500 extending their winning streaks to six days. While the major averages did pull back from their peak levels before the close, they still ended sharply higher. The Nasdaq surged by 401.89 points or 2.3 percent to 17,594.50, the S&P 500 climbed 88.01 points or 1.6 percent to 5,543.22, and the Dow advanced by 554.67 points or 1.4 percent to 40,563.06.
The rally was largely driven by the Commerce Department's report of stronger-than-expected retail sales growth in July, which helped to ease economic concerns. According to the report, retail sales increased by 1.0 percent in July, following a revised 0.2 percent dip in June. Economists had forecasted a 0.3 percent rise in retail sales, as initially reported for the previous month.
Excluding a jump in sales by motor vehicle and parts dealers, retail sales still rose by 0.4 percent in July after an 0.8 percent increase in June. The market had expected ex-auto sales to inch up by just 0.1 percent.
Shares of Walmart (WMT) saw significant gains after the retail giant's fiscal second-quarter results surpassed analyst estimates, prompting an upward revision of its full-year guidance.
Additionally, investor sentiment was buoyed by a Labor Department report indicating an unexpected decline in first-time claims for U.S. unemployment benefits for the week ended August 10th. Initial jobless claims fell to 227,000, a decrease of 7,000 from the previous week's revised level of 234,000. Economists had anticipated jobless claims would inch up to 235,000 from the 233,000 originally reported for the previous week.
"If the economy continues to be resilient—especially in conjunction with slowing inflation—then the Fed can begin a rate-cutting cycle without the economy entering a recession. History shows this is an extremely positive environment for the stock market," stated Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
Conversely, traders appeared to dismiss a report from the Federal Reserve indicating that U.S. industrial production fell more sharply than expected in July. The report noted a 0.6 percent decrease in industrial production for July, following a downwardly revised 0.3 percent increase in June. Economists had projected a 0.3 percent dip, compared to the originally reported 0.6 percent increase for the previous month.
Substantial strength was observed in semiconductor stocks, with the Philadelphia Semiconductor Index spiking by 4.9 percent. Airline stocks also showed significant gains, with the NYSE Arca Airline Index soaring by 4.4 percent. Networking stocks rallied sharply as well, evidenced by a 3.5 percent surge in the NYSE Arca Networking Index. Cisco Systems (CSCO) led the sector higher after posting better-than-expected fiscal fourth-quarter results and announcing plans to reduce its workforce by 7 percent.
Moreover, considerable strength was witnessed in computer hardware, retail, and oil service stocks amid broad-based buying interest on Wall Street.
**Commodity, Currency Markets**
Crude oil futures are plunging by $2.12 to $76.04 per barrel after rising by $1.18 to $78.16 per barrel on Thursday. Meanwhile, gold futures are surging by $20.20 to $2,512.60 per ounce, following a $12.70 increase to $2,492.40 per ounce in the previous session.
On the currency front, the U.S. dollar is trading at 147.81 yen compared to 149.28 yen at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0988, up from yesterday's $1.0972.
**Asia**
[Additional context or information about Asian markets, if provided, would be placed here.]Asian stock markets enjoyed a boost on Friday as positive U.S. inflation and retail sales data alleviated concerns of a recession in the world's largest economy, simultaneously tempering traders' expectations for aggressive rate cuts by the Federal Reserve.
The dollar and U.S. Treasury yields remained mostly stable in Asian trading sessions, fueled by growing optimism that the U.S. economy is on course for a soft landing.
While gold slightly dipped, it was still on track for a weekly gain amid rising expectations of a 25-point rate cut by September. Similarly, oil prices saw a minor decline but appeared set for a weekly gain due to renewed optimism in the U.S. economic outlook and escalating tensions in the Middle East.
China's Shanghai Composite Index closed slightly higher at 2,879.43 following a volatile session. In Hong Kong, the tech-heavy Hang Seng Index surged by 1.9% to 17,430.16.
Japanese markets experienced a rally as the yen weakened and growth concerns diminished. The Nikkei 225 Index soared by 3.6% to 38,062.67, marking its second-largest daily gain for the year and achieving its best weekly gain in over four years. The broader Topix Index increased by 3.0% to 2,678.60.
Key players such as Fast Retailing saw a 6.2% hike, while electrical component manufacturer Fujikura skyrocketed by 11.4%. Major tech stocks like Advantest and Tokyo Electron also saw gains ranging between 5-7%.
In South Korea, the Kospi rose by 2.0% to 2,697.23, driven by robust performances in the technology sector. Samsung Electronics advanced by 3.9% and SK Hynix leaped by 7% as concerns over a U.S. economic slowdown waned. Automaker Hyundai Motor climbed 5.8%, with Kia Corp. adding 3.5%.
Australian markets enjoyed their sixth consecutive session of gains, particularly led by the mining sector, with BHP, Rio Tinto, and Fortescue Metals Group rising by 2-3%.
The benchmark S&P/ASX 200 Index finished 1.3% higher at 7,971.10, while the broader All Ordinaries Index increased by 1.3% to 8,189.90.
In New Zealand, the benchmark S&P/NZX-50 Index edged up by 0.1% to 12,727.75.
**Europe**
European stocks also saw positive momentum on Friday, marking their fourth consecutive session of gains as strong U.S. retail sales data and low weekly jobless claims allayed recession fears.
Upbeat producer and consumer price inflation figures from the U.S. this week have reinforced expectations for a 25 basis point rate cut by the Federal Reserve in September.
The pan-European STOXX 600 Index climbed by 0.2% after a 1.2% rise in the previous session. Germany's DAX Index grew by 0.5%, and the French CAC 40 Index saw a minor uptick of 0.1%, although the U.K.'s FTSE 100 Index declined by 0.6%.
The British pound strengthened against other major currencies following official data revealing that U.K. retail sales volumes rebounded in July, dampening investor hopes for a Bank of England rate cut in the fourth quarter. U.K. retail sales grew by 0.5% on a monthly basis in July, following a revised 0.9% drop in June, helped by summer discounts and the European football Championship. Sales volumes climbed 1.4% year-on-year, rebounding from poor performance in July 2023.
In corporate news, AstraZeneca shares saw a marginal increase after their supplemental Biologics License Application for Imfinzi to treat limited-stage small cell lung cancer received priority review from the U.S. FDA. Nibe Industrier AB saw significant gains after releasing better-than-expected second-quarter results.
**U.S. Economic Reports**
According to a Commerce Department report released on Friday, new residential construction in the U.S. saw a significant decline in July. Housing starts fell by 6.8% to an annual rate of 1.238 million, following a 1.1% rise to a revised rate of 1.329 million in June. Economists had predicted a 1.7% decline to an annual rate of 1.330 million.
The report also revealed that building permits dropped by 7.0% to an annual rate of 1.396 million in July, after a 3.9% surge to a revised rate of 1.454 million in June. Building permits, an indicator of future housing demand, were expected to drop by 1.1% to an annual rate of 1.430 million.
Later in the day, the University of Michigan is slated to release its preliminary reading on consumer sentiment for August. The consumer sentiment index is anticipated to marginally increase to 66.9, following a decline to 66.4 in July.Chicago Federal Reserve President Austan Goolsbee is slated to engage in a fireside chat at the Angeles Investors' Q3 Summit and Awards Event, scheduled for 1:25 PM ET.
**Stocks to Watch:**
- **H&R Block (HRB):** Shares are experiencing a significant uptick in pre-market trading. This follows the tax services company's announcement of better-than-expected fiscal fourth-quarter results, a 17% increase in their quarterly dividend, and a $1.5 billion stock buyback initiative.
- **JD.com (JD):** The Chinese e-commerce giant is poised for gains after reporting second-quarter results that surpassed analyst expectations both in revenue and earnings.
- **Applied Materials (AMAT):** Shares are showing pre-market weakness despite the semiconductor equipment maker reporting fiscal third-quarter results that exceeded expectations.
- **Estee Lauder (EL):** The beauty company's stock might face downward pressure after Bank of America downgraded the stock from a Buy to a Neutral rating.