The U.S. stock index futures suggest a flat start on Friday, indicating a potential pause in momentum following a series of upward sessions. Investors appear cautious, likely holding back significant moves in anticipation of next week's Federal Reserve monetary policy meeting.
The expectation is that the Federal Reserve will maintain the current interest rates, but market participants will be keenly analyzing the accompanying statement for any insights into future rate directions. Recent economic indicators have sparked worries that the Fed might keep rates steady for an extended period. However, economists widely anticipate a rate cut in the first half of the year.
According to CME Group’s FedWatch Tool, there's a 69.9% probability of a rate decrease by at least a quarter point after the Fed’s meeting in June.
Thursday's trading saw stocks predominantly trending upwards, continuing the strong performance exhibited in recent sessions. The S&P 500 recorded its seventh rise in eight sessions, reaching a new peak. The major indices concluded the day with new highs, with the Dow advancing 408.34 points (0.9%) to 44,565.07, the S&P 500 gaining 32.34 points (0.5%) to 6,118.71, and the Nasdaq climbing 44.34 points (0.2%) to 20,051.68.
The ongoing rally in the markets has managed to counterbalance the sell-off from earlier this month. Optimism surrounding a pro-business approach under President Donald Trump’s administration has mitigated some of the anxiety regarding interest rate forecasts.
Adding to positive market sentiment, President Trump, during his speech at the World Economic Forum in Davos, Switzerland, stated his demand for immediate interest rate cuts. Trump also indicated plans to urge Saudi Arabia and OPEC to reduce oil prices, leading to a decrease in crude oil prices. Notably, Trump did not address the specifics of potential tariffs on certain nations, an ongoing point of contention regarding his presidency.
In economic updates from the U.S., the Labor Department reported a rise in initial jobless claims for the week ending January 18. The claims increased to 223,000, up 6,000 from the previous week’s consistent level of 217,000, slightly above economists’ expectations of 220,000. This rise indicates a rebound in jobless claims after hitting an eleven-month low earlier in January.
Biotechnology stocks showed significant strength throughout the trading day, as evidenced by the 1.8% rise in the NYSE Arca Biotechnology Index, marking its highest close in nearly four years. Networking stocks also demonstrated substantial gains, with the NYSE Arca Networking Index climbing 1.4% to a record closing high. Meanwhile, healthcare, pharmaceutical, and oil producer stocks were notably strong, whereas airline stocks faced challenges following American Airlines' (AAL) disappointing guidance.
**Commodities and Currency Markets**
Crude oil futures are on the rise, up $0.34 to $74.96 per barrel, following a previous decline of $0.82 to $74.62. Gold futures have rebounded, increasing by $24 to $2,789 an ounce after a $5.90 drop in the prior session.
In the currency markets, the U.S. dollar is trading at 156.34 yen, compared to 156.05 yen at Thursday's New York close. Against the euro, the dollar stands at $1.0466, down from $1.0484.
**Asia**
Asian markets were buoyant on Friday, spurred by U.S. President Donald Trump’s indication of a potentially amicable trade stance with China following a friendly discussion with President Xi Jinping, hinting at a reduced likelihood of tariff imposition.
Gold approached record levels in Asian markets amid the U.S. dollar's weakening, influenced by Trump’s call for immediate Fed rate cuts. Oil prices, however, showed mixed signals as Trump expressed that reduced oil prices could swiftly resolve the Ukraine conflict, coupled with his intent to encourage Saudi Arabia and OPEC to decrease oil costs.
China's Shanghai Composite Index advanced by 0.7% to 3,252.63. This followed guidance from the China Securities Regulatory Commission that mutual funds should increase their onshore stock holdings by at least 10% annually over three years, with large state-owned insurers required to allocate 30% of new policy premiums into stock markets this year. Hong Kong's Hang Seng Index surged 1.9% to 20,066.19, driven by gains in tech giants like Tencent and Baidu.The early gains seen in Japanese markets gave way to a flat conclusion as the Bank of Japan raised the short-term rate target by 25 basis points, in line with expectations. This shift was accompanied by new data revealing that core inflation had increased at the fastest rate in 16 months. Consequently, the yen appreciated and bond yields surged, as the central bank adjusted interest rates to levels not seen since the 2008 global financial crisis, enhanced its inflation outlook, and indicated potential further hikes, contingent on economic growth and prices meeting their projections.
The Nikkei 225 Index and the broader Topix Index both ended slightly lower, closing at 39,931.98 and 2,751.04, respectively. In company-specific news, Mitsubishi Motors experienced a steep decline of 6.9% following reports that it would not participate in Honda Motor Co. and Nissan Motor Co.'s plan to consolidate their businesses under a shared holding company.
Meanwhile, Seoul's markets reflected a strong performance, with the Kospi ending the session up 0.9% at 2,536.80. Korea Zinc saw a remarkable increase of 11.6% as Chairman Choi Yun-beom maintained control after a shareholders' meeting.
In Australia, markets achieved modest gains, closing just below record highs before the long weekend. The benchmark S&P/ASX 200 Index increased by 0.4%, reaching 8,408.90, driven by consumer discretionary stocks. The broader All Ordinaries Index similarly rose 0.4%, closing at 8,660.40. Premier Investments soared by 6.6% following its landmark agreement with Myer. However, New Zealand's benchmark S&P/NZX-50 Index declined by 0.3%, closing at 13,024.70.
**Europe**
In Europe, stocks started strongly on Friday, boosted by U.S. President Donald Trump's calls for reduced interest rates and lower oil prices, along with hints of a potential trade agreement with China. The euro remained stable after a survey indicated an increase in Euro area consumer confidence for the first time in three months.
Attention shifted towards the upcoming Federal Reserve and European Central Bank meetings. While no changes are anticipated for U.S. interest rates, the ECB is expected to lower rates again by 25 basis points.
The pan-European STOXX 600 Index rose by 0.4%, continuing its upward trajectory from the previous session. The French CAC 40 Index climbed 0.7%, and the German DAX Index advanced by 0.1%. However, the U.K.'s FTSE 100 Index experienced a 0.3% decline, bucking the general trend.
British luxury brand Burberry saw its shares rise following a smaller-than-anticipated drop in its fiscal third-quarter sales. Similarly, competitors like LVMH, Kering, Moncler, and Swatch reported gains. Assa Abloy AB's stock also increased after the acquisition of Uhlmann & Zacher GmbH, a German company specializing in access control solutions.
In contrast, Ericsson, a Swedish telecom equipment maker, suffered a setback with a reported 6% reduction in 2024 revenue. Additionally, Italian bank Banca Monte dei Paschi di Siena faced difficulties after launching a €13.3 billion takeover bid for its larger competitor, Mediobanca.
**U.S. Economic News**
The National Association of Realtors is set to release its December report on existing home sales at 10 am ET. It is anticipated that existing home sales will rise to an annual rate of 4.19 million, up from 4.15 million in November. Concurrently, at 10 am ET, the University of Michigan will publish its revised January reading on consumer sentiment. The consumer sentiment index is expected to remain unchanged from the preliminary figure of 73.2, which marked a decrease from December's 74.0.
