Profit Taking May Contribute To Initial Dip On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a slightly lower open on Friday, with stocks likely to give back ground following the strong upward move seen in the previous session.

Profit taking may contribute to initial weakness on Wall Street following yesterday's rally, which lifted the major averages to new record closing highs.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve's monetary policy announcement next Wednesday.

With recent data showing relatively subdued inflation and a weakening labor market, the Fed is widely expected to lower interest rates by at least a quarter point.

CME Group's FedWatch Tool is currently indicating a 92.5 percent chance the Fed will cut rates by 25 basis points and a slim 7.5 percent chance of a half-point rate cut.

Traders are likely to pay close attention to the Fed's accompanying statement as well as Fed Chair Jerome Powell's post-meeting comments for clues about the likelihood of further rate cuts.

Currently, the Fed is widely expected to lower rates by another 25 basis points at both its October and December meetings, although Powell is likely to say future rate cuts will depend on incoming economic data.

Stocks showed a strong move to the upside during trading on Thursday, with the major averages all moving notably higher following the mixed performance seen during Wednesday's session. With the upward move, the major averages all reached new record closing highs.

The major averages finished the session just off their best levels of the day. The Dow surged 617.08 points or 1.4 percent to 46,108.00, the S&P 500 jumped 55.43 points or 0.9 percent to 6,587.47 and the Nasdaq advanced 157.01 points or 0.7 percent to 22,043.07.

The strength on Wall Street came amid a positive reaction to separate Labor Department reports on consumer price inflation and weekly jobless claims.

A closely watched Labor Department report showed U.S. consumer prices rose by slightly more than expected in the month of August.

The Labor Department said its consumer price index climbed by 0.4 percent in August after inching up by 0.2 percent in July. Economists had expected consumer prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth accelerated to 2.9 percent in August from 2.7 percent in July, in line with economist estimates.

Meanwhile, the Labor Department said core consumer prices, which exclude food and energy prices, rose by 0.3 percent in August, matching the increase seen in July as well as expectations.

The annual rate of core consumer price growth in August was unchanged from the previous month at 3.1 percent, in line with economist estimates.

The Labor Department also released a report showing first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended September 6th.

The report said initial jobless claims climbed to 263,000, an increase of 27,000 from the previous week's revised level of 236,000. Economists had expected jobless claims to edge down to 235,000 from the 237,000 originally reported for the previous week.

With the unexpected increase, jobless claims reached their highest level since hitting 268,000 in the week ended October 23, 2021.

While consumer prices rose slightly faster than expected on a monthly basis, the annual growth in line with estimates along with signs of weakness in the labor market added to recent optimism about the outlook for interest rates.

Computer hardware stocks turned in some of the market's best performances on the day, with the NYSE Arca Computer Hardware Index surging by 2.7 percent to a record closing high.

Substantial strength was also visible among networking stocks, as reflected by the 2.7 percent jump by the NYSE Arca Networking Index. The index also reached a new record closing high.

Biotechnology stocks also showed a significant move to the upside, driving the NYSE Arca Biotechnology Index up by 2.6 percent.

Housing, telecom and airline stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are surging $1.41 to $63.78 a barrel after tumbling $1.30 to $62.37 a barrel on Thursday. Meanwhile, after slipping $8.40 to $3,673.60 an ounce in the previous session, gold futures are inching up $5.30 to $3,678.90 an ounce.

On the currency front, the U.S. dollar is trading at 147.96 yen versus the 147.21 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1705 compared to yesterday's $1.1734.

Asia

Asian stocks followed Wall Street higher on Friday, as rising jobless claims coupled with largely in-line U.S. consumer price inflation data spurred expectations for more Federal Reserve rate cuts.

Falling bond yields, easing tariff concerns and extravagant expectations for AI-related earnings growth also helped underpin investor sentiment heading into the weekend.

China's Shanghai Composite Index edged down 0.1 percent to 3,870.60 after a recent string of gains. Beijing has warned of countermeasures after Mexico proposed a 50 percent import tax on Chinese and Asian cars to protect local jobs.

We "hope Mexico will be extremely cautious, and think twice before acting," China's Ministry of Commerce said in a statement late Thursday.

Hong Kong's Hang Seng Index jumped 1.2 percent to 26,388.16 in line with Wall Street's strong overnight finish.

Japanese markets rose notably after U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato reaffirmed in a joint statement that neither country would target currency levels in their policies.

The Nikkei 225 Index climbed 0.9 percent to 44,768.12, reaching a record high, with chip-related stocks contributing to the increase. Tokyo Electron soared 5.5 percent and Advantest gained 1.8 percent.

Technology investor SoftBank rose 1.82 percent to extent recent gains following Oracle's upbeat AI guidance tied to the $500 billion Stargate program.

Seoul stocks soared to a new record high for the third consecutive day, buoyed by a rally of semiconductor shares. The Kospi surged 1.5 percent to 3,395.54, extending gains to a ninth session.

Market bellwether Samsung Electronics rallied 2.7 percent and its chipmaking rival SK Hynix shot up 7 percent. SK Square, an investment firm for the semiconductor and IT sectors, soared 8.4 percent.

Australian markets closed higher led by financials and resource stocks. Lower oil prices weighed on energy stocks, with Woodside Energy tumbling 3.4 percent and Santos falling 2.2 percent.

The benchmark S&P/ASX 200 Index rose 0.7 percent to 8,864.90, while the broader All Ordinaries Index closed up 0.6 percent at 9,128.70.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index ended marginally lower at 13,227.90, as a survey showed New Zealand's manufacturing slump returned in August, erasing July's rebound.

Europe

European stocks are mostly lower on Friday, with U.K. stocks bucking the weak trend as the pound faced pressure on weak GDP data.

German consumer price inflation increased as initially estimated in August to the highest level in five months, the latest figures from the statistical office Destatis showed earlier today.

The consumer price index rose 2.2 percent year-on-year following a 2.0 percent increase in each of the previous two months. That was in line with the flash data published on August 29.

French consumer price inflation eased slightly as initially estimated in August, INSEE reported. Consumer price inflation moderated to 0.9 percent in August from 1.0 percent in July, in line with the flash data published on August 29.

Elsewhere, the U.K. economy stagnated in July as expansions in the services and construction sectors were offset by a decline in industrial production, the Office for National Statistics said.

Real gross domestic product showed no growth in July, as expected, after rising 0.4 percent in June. On a yearly basis, GDP was up 1.4 percent in July, slightly slower than the economists' forecast of 1.5 percent.

While the U.K.'s FTSE 100 Index is up by 0.4 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is down by 0.3 percent.

Energy stocks slipped, with BP Plc and TotalEnergies falling around 1 percent, as crude prices extended steep overnight losses on rising worries about oversupply.

German software giant SAP was marginally lower after completing the acquisition of SmartRecruiters, a leading provider of enterprise-grade talent acquisition software.

U.S. Economic News

The University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of September at 10 am ET. The consumer sentiment index is expected to edge down to 58.0 in September after falling to 58.2 in August.