The major U.S. index futures are currently pointing to a roughly flat higher open on Friday, with stocks likely to show a lack of direction following the substantial downturn seen over the course of the previous session.
Traders may take a step back following the recent volatility in the markets, which saw stocks surge on Wednesday before pulling back sharply on Thursday.
Early trading may be impacted by reaction to a Labor Department report showing producer prices in the U.S. increased by slightly more than expected in the month of June.
The Labor Department said its producer price index for final demand rose by 0.2 percent in June following a revised unchanged reading in May.
Economists had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.
The report also said the annual rate of producer price growth accelerated to 2.6 percent in June from an upwardly revised 2.4 percent in May.
The annual rate of producer price growth was expected to creep up to 2.3 percent from the 2.2 percent originally reported for the previous month.
Traders are also reacting to earnings news from several big-name financial companies, with Wells Fargo (NYSE:WFC) moving sharply lower in pre-market trading after reporting weaker than expected net interest income for the second quarter.
Shares of JPMorgan Chase (NYSE:JPM) are also seeing modest pre-market weakness even though the financial giant reported second quarter revenues that exceeded analyst estimates.
On the other hand, shares of Citigroup (NYSE:C) are likely to see initial strength after the company reported second quarter results that beat expectations on both the top and bottom lines.
Stocks showed a substantial downturn over the course of the trading session on Thursday, with the Nasdaq and the S&P 500 pulling back sharply after reaching new record intraday highs in early trading.
The tech-heavy Nasdaq posted a particularly steep loss on the day, plunging 364.04 points or 2.0 percent to 18,283.41, while the S&P 500 slumped 49.37 points or 0.9 percent to 5,584.54.
The narrower Dow, on the other hand, spent most of the day lingering near the unchanged line before closing up 32.39 points or 0.1 percent at 39,753.85.
While optimism about the outlook for interest rates contributed to early strength on Wall Street, buying interest waned shortly after the start of trading.
Traders may have seen the increased confidence in a September rate cut as already priced into the markets following Wednesday’s rally.
The subsequent sell-off came as traders took the opportunity to cash in on the recent strength in the markets, with some of the biggest tech winners of the year like AI darling Nvidia (NASDAQ:NVDA) leading the pullback.
Nonetheless, the Federal Reserve is still seen as likely to lower rates in September after a report from the Labor Department showing showed prices in the U.S. unexpectedly edged slightly lower in the month of June.
The Labor Department said its consumer price index slipped by 0.1 percent in June after coming in unchanged in May. Economists had expected consumer prices to inch up by 0.1 percent.
The unexpected dip by consumer prices came as another steep drop by gasoline prices more than offset a continued increase in shelter costs.
Excluding food and energy prices, core consumer prices crept up by 0.1 percent in June after rising by 0.2 percent in May. Core prices were expected to increase by another 0.2 percent.
The report also said the annual rate of consumer price growth slowed to 3.0 percent in June from 3.3 percent in May. Economists had expected the pace of price growth to decelerate to 3.1 percent.
The annual rate of core consumer price growth also slowed to 3.3 percent in June from 3.4 percent in May. The pace of growth was expected to remain unchanged.
“This is the kind of CPI report the Fed wants to see [to] feel more confident that inflation is headed back toward their target,” said Bill Adams, Chief Economist for Comerica Bank. “The Fed targets 2% inflation by the personal consumption expenditures price index, which usually runs a little cooler than the CPI.”
He added, “The CPI report won’t be enough to convince the Fed to cut interest rates at their decision this month, but a rate cut at the following decision in September is quite likely.”
Semiconductor stocks moved sharply lower over the course of the session, giving back ground following recent strength in the sector.
The Philadelphia Semiconductor Index plunged by 3.5 percent, pulling back off the record closing high set on Wednesday.
Software and computer hardware stocks also showed notable moves to the downside, contributing to the steep drop by the tech-heavy Nasdaq.
On the other hand, housing stocks saw substantial strength amid optimism about lower interest rates, resulting in a 5.7 percent spike by the Philadelphia Housing Sector Index.
Considerable strength also emerged among gold stocks, as reflected by the 2.8 percent surge by the NYSE Arca Gold Bugs Index. The strength in the sector came amid a sharp increase by the price of the precious metal
Interest rate-sensitive commercial real estate, telecom and utilities stocks also saw significant strength, while oil service, transportation and networking stocks also showed strong moves to the upside.