The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move back to the upside after ending yesterday’s lackluster session mostly lower.
Early buying interest may be generated in reaction to a continued decrease by treasury yields, as the yield on the benchmark ten-year note is moving lower for the fourth straight day after reaching its highest closing level in over a year on Monday.
The recent retreat by treasury yields comes as the U.S. inflation data released over the past few days has led to renewed optimism about the outlook for interest rates.
Adding to the interest rate optimism, Federal Reserve Governor Christopher Waller told CNBC the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.
“As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” Waller said during an interview with Sara Eisen on CNBC’s “Squawk on the Street” on Thursday.
Waller said the number of rate cuts would be driven by the data, suggesting the Fed could cut rates three or four times if there is a lot of progress on inflation or cut rates twice or only once if inflation remains sticky.
The upward momentum on Wall Street may also reflect optimism about the outlook for the markets under President-elect Donald Trump, who is due to be sworn in for the second time on Monday.
Stocks surged in reaction to Trump’s election in November amid expectations of more pro-business policies in the new administration, although there are also concerns about impact of proposed tariffs.
Following the substantial rally seen during Wednesday’s session, stocks turned in a relatively lackluster performance during trading on Thursday. The major averages fluctuated over the course of the trading day before eventually closing in negative territory.
The tech-heavy Nasdaq ended the day more firmly in the red amid a slump by shares of Apple (NASDAQ:AAPL), sliding 172.94 points or 0.9 percent to 19,338.29.
The Dow and the S&P 500 posted more modest losses. The Dow dipped 68.42 points or 0.2 percent to 43,153.13 and the S&P 500 slipped 12.57 points or 0.2 percent to 5,937.34.
The choppy trading on Wall Street came as traders took a step back to assess the near-term outlook for the markets following Wednesday’s rally, which saw the major averages post their largest daily percentage gains in over two months.
Traders were also digesting a slew of U.S. economic data, including reports on weekly jobless claims, retail sales and import prices.
The Labor Department released a report showing initial jobless claims climbed to 217,000 in the week ended January 11th, an increase of 14,000 from the previous week’s revised level of 203,000. Economists had expected jobless claims to rise to 210,000.
The bigger than expected increase came after jobless claims fell to their lowest level since hitting 200,000 in the week ended February 17, 2024.
The Commerce Department also released a report showing retail sales in the U.S. increased by less than expected in the month of December.
The report said retail sales rose by 0.4 percent in December after advancing by an upwardly revised 0.8 percent in November. Economists had expected retail sales to climb by 0.6 percent.
Meanwhile, the report said core retail sales, which exclude automobiles, gasoline, building materials and food services, climbed by 0.7 percent in December after rising by 0.4 percent in November.
“Retail sales in December were flattered by a price-related increase in gasoline station sales, but the details were generally encouraging, with a broad-based underlying control group rising at a strong pace,” said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.
Following yesterday’s more closely watched report on consumer price inflation, the Labor Department also released a report showing import prices in the U.S. crept up in line with estimates in the month of December.
The Labor Department said import prices inched up by 0.1 percent in December, matching the upticks seen in November and October as well as expectations.
“Import prices rose modestly in December, capping off an encouraging week of inflation data and keeping the Fed on track to cut rates in the first half of this year,” said Matthew Martin, Senior U.S. Economist at Oxford Economics.
He added, “The recent rise in global oil prices will feed through to higher fuel import prices and some volatility to the data, but we expect the Fed will look through any temporary sources of inflation.”
Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves.
Interest rate-sensitive utilities and commercial real estate stocks saw considerable strength, however, with the Dow Jones Utility Index and the Dow Jones U.S. Real Estate Index jumping by 2.3 percent and 2.2 percent, respectively.
Brokerage stocks also added to the strong gains posted on Wednesday, driving the NYSE Arca Broker/Dealer Index up by 1.7 percent to its best closing level in over a month.
Natural gas and pharmaceutical stocks also saw notable strength on the day, while some weakness was visible among computer hardware and gold stocks.
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