FX.co ★ Futures Pointing To Roughly Flat Open On Wall Street

U.S. index futures indicate a relatively flat, slightly higher, open on Friday, with stocks expected to lack direction following significant declines in the previous session.

Investors might take a breather after recent market volatility, which saw stocks surge on Wednesday only to pull back sharply on Thursday.

Early trading could be influenced by a Labor Department report revealing that U.S. producer prices rose slightly more than anticipated in June. Specifically, the producer price index for final demand increased by 0.2% in June, following a revised flat reading in May. Economists had forecast a marginal 0.1% increase, compared to the initially reported 0.2% decline for the previous month.

The report further highlighted that the annual rate of producer price growth accelerated to 2.6% in June from an upwardly revised 2.4% in May. Expectations were for the annual rate to creep up to 2.3% from an initially reported 2.2%.

Traders are also digesting earnings reports from several major financial institutions. Wells Fargo (WFC) is notably lower in pre-market trading after reporting weaker-than-expected net interest income for the second quarter. JPMorgan Chase (JPM) is also experiencing slight pre-market weakness despite exceeding analyst revenue estimates. Conversely, Citigroup (C) is showing initial strength after surpassing expectations on both the top and bottom lines in its second-quarter results.

Stocks experienced a significant downturn during Thursday's trading session, with the Nasdaq and the S&P 500 retreating sharply after hitting new intraday record highs early in the session. The Nasdaq, heavily weighted with tech stocks, recorded a steep decline, plunging 364.04 points or 2.0% to 18,283.41. The S&P 500 fell by 49.37 points or 0.9% to 5,584.54. Meanwhile, the Dow Jones Industrial Average hovered near the unchanged line for most of the day before closing up 32.39 points or 0.1% at 39,753.85.

Initial optimism about interest rate outlook fueled early strength on Wall Street, but buying interest quickly waned. Wednesday's rally had already priced in increased confidence in a September rate cut. The subsequent sell-off saw traders cashing in on recent market gains, with some of the year's biggest tech winners, like Nvidia (NVDA), leading the decline.

Despite the downturn, the Federal Reserve is still expected to lower rates in September. This anticipation is bolstered by a Labor Department report indicating that consumer prices in the U.S. unexpectedly edged lower in June. The consumer price index slipped by 0.1% in June after remaining unchanged in May, against economists' expectation of a 0.1% rise.

The dip in consumer prices was largely due to a significant drop in gasoline prices, which offset continued increases in shelter costs. Excluding food and energy prices, core consumer prices inched up by 0.1% in June after a 0.2% increase in May, slightly below the expected 0.2% rise.

Furthermore, the annual rate of consumer price growth slowed to 3.0% in June from 3.3% in May, with expectations set at 3.1%. The annual rate of core consumer price growth also decelerated, to 3.3% from 3.4%, contrary to expectations that it would remain unchanged.

Bill Adams, Chief Economist for Comerica Bank, commented, “This is the kind of CPI report the Fed wants to see to feel more confident that inflation is headed back toward their target. 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.”

In market movements, semiconductor stocks fell sharply, reversing recent gains. The Philadelphia Semiconductor Index plummeted by 3.5%, retreating from Wednesday's record closing high. Software and computer hardware stocks also registered notable declines, contributing to the steep drop in the Nasdaq.Housing stocks demonstrated notable strength amid optimism about upcoming interest rate reductions, propelling the Philadelphia Housing Sector Index up by 5.7 percent.

Similarly, gold stocks surged, evidenced by the NYSE Arca Gold Bugs Index climbing 2.8 percent, driven by a significant rise in the price of the precious metal.

Interest rate-sensitive sectors like commercial real estate, telecom, and utilities also showed strong performance. Oil service, transportation, and networking stocks experienced considerable gains as well.

### Commodity and Currency Markets

Crude oil futures are advancing, currently up $0.73 to $83.35 per barrel, following a $0.52 rise to $82.62 per barrel on Wednesday. Conversely, gold futures have declined by $18.40 to $2,403.50 an ounce after a steep increase of $42.20 in the previous session, ending at $2,421.90 an ounce.

In the currency markets, the U.S. dollar stands at 158.99 yen, slightly higher from Thursday's close of 158.84 yen in New York. Against the euro, the dollar is trading at $1.0879, up from $1.0868 the previous day.

### Asia

Asian markets displayed mixed results on Friday as investors assessed softer-than-expected U.S. inflation data, mixed Chinese trade figures, and comments from several Federal Reserve officials concerning interest rates.

Modest gains in the dollar, spurred by inflation data and a Pew Research Center poll reflecting former President Trump leading President Biden by 4 points among registered voters, contributed to these market movements.

Gold prices edged lower but remained on track for a third consecutive week of gains, while oil prices continued to rise, buoyed by easing inflationary pressures in the U.S., the world's largest oil consumer.

China's Shanghai Composite Index concluded a volatile session with a marginal gain following the release of conflicting trade data. Chinese exports increased by 8.6 percent year-on-year in June, while imports fell by 2.3 percent, according to customs data.

Hong Kong's Hang Seng Index jumped 2.6 percent to 18,293.38, driven by China's implementation of new restrictions on short selling.

Speculation ahead of next week's Third Plenum meeting suggested Chinese policymakers might announce tax reforms to address local government funding gaps.

Japanese stocks fell, with the Nikkei 225 Index dropping 2.5 percent to 41,190.68, and the broader Topix Index closing 1.2 percent lower at 2,894.56. The appreciation of the yen, amid speculations of potential intervention by authorities to support the currency, contributed to the market's decline. Major declines were seen in chip-making equipment companies like Tokyo Electron, which plummeted 6.2 percent, and Disco, which lost 8.8 percent, following a more than 3 percent drop in the Philadelphia Semiconductor Index overnight.

In South Korea, the Kospi fell sharply by 1.2 percent to 2,857.

Australian markets reached record highs, driven by bank stocks which surged on expectations that a Federal Reserve rate cut could influence the Reserve Bank of Australia's interest rate decisions. Major Australian banks rose between 1-2 percent. The benchmark S&P/ASX 200 Index reached a record high of 7,969.10 before closing up 0.9 percent at 7,959.30, with the All Ordinaries Index also climbing 0.9 percent to 8,206.10.

In New Zealand, the S&P/NZX-50 Index increased by 0.6 percent to 12,134.97, despite disappointing manufacturing data.

### Europe

European markets advanced for a third consecutive session on Friday, supported by unexpectedly soft U.S. inflation data, which fueled optimism for two Federal Reserve rate cuts this year.

The French CAC 40 Index rose by 0.7 percent, while both the German DAX Index and the U.K.'s FTSE 100 Index increased by 0.2 percent.

Swedish telecom giant LM Ericsson saw significant gains after its EBITA surpassed analysts' expectations in the second quarter. Similarly, Lifco AB experienced a substantial rise following better-than-expected quarterly earnings. Aker Solutions ASA also saw sharp gains after its second-quarter profits exceeded forecasts.

AstraZeneca's stock ascended following its ambitious projection to achieve $80 billion in revenue by 2030, as shared during its recent Investor Day.

Conversely, Ashmore Group's stock plummeted after reporting a $2.4 billion decline in assets under management for the quarter ending June 30, 2024.

### U.S. Economic Reports

The Labor Department released a report on Friday indicating that U.S. producer prices rose slightly more than anticipated in June, following softer-than-expected consumer price inflation data reported on Thursday. The producer price index for final demand increased by 0.2 percent in June, following a revised unchanged reading in May.Economists had anticipated that producer prices would rise slightly by 0.1 percent, following the previous month's decline of 0.2 percent, as initially reported.

The recent report also indicated that the annual producer price growth increased to 2.6 percent in June, following an upward revision to 2.4 percent in May.

It was expected that the annual rate of producer price growth would edge up to 2.3 percent, rather than the 2.2 percent initially reported for the previous month.

At 10 a.m. ET, the University of Michigan is set to release its preliminary reading on consumer sentiment for July. The consumer sentiment index is projected to slightly increase to 68.5 in July, after a decrease to 68.2 in June.