Dow Jones and S&P 500 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.