FX.co ★ Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. indexes are predicted to open slightly lower on Friday, indicating a potential pull-back from the upward momentum of the recent trading sessions. Some investors may look to benefit from this recent strength by cashing in their positions.

This inclination could be fueled by an underlying uncertainty about future interest rates after the Federal Reserve's recent monetary policy announcement. According to the announcement, the Fed is sticking to its plan for three interest rate cuts this year yet, the exact timing of the first cut remains unclear.

According to traders' calculations on CME Group's FedWatch Tool, a quarter-point rate cut in June stands at a 65.9% likelihood. However, there remains a 27.8% chance that the Fed will not change rates at this meeting.

Despite some drop following an early rally on Thursday, all major averages ended the session at new record highs. While the Dow Jones closed significantly higher, the S&P 500, and the Nasdaq made modest gains. The Dow Jones gained 269.24 points or 0.7% closing at 39,781.37, the S&P 500 increased by 16.91 points or 0.3% finalizing at 5,241.53 and the Nasdaq grew by 32.43 points or 0.2% to end at 16,401.84.

The early rise in Wall Street was buoyed by the Federal Reserve's decision on Wednesday to leave interest rates unchanged. Some investors were concerned that the recent hotter-than-expected inflation data might influence Fed officials to reconsider lowering rates. Contrary to these fears, the Fed's consistent forecast for three rate cuts seems to fortify stocks' bullish sentiment.

Larry Tentarelli, President and Founder of the Blue Chip Daily Trend Report, interpreted the Fed’s decisions as conducive to a softer landing scenario and viewed it as beneficial for equity markets.

In additional U.S. economic news, an unexpected slight decrease in initial claims for U.S. unemployment benefits (from 212,000 to 210,000) during the week ending March 16 was reported by the Labor Department. This defied economists' expectations of an increase to 215,000 claims from the originally reported 209,000 for the previous week.

Furthermore, the National Association of Realtors (NAR) reported an unexpected persistent rise in existing home sales in February. NAR's index revealed a 9.5% increase of sales at an annual rate amounting to 4.38 million after a 3.1% jump to 4.00 million in January. This ongoing surge has led existing home sales to reach the highest level since the annual rate of 4.530 million in February 2023.

Throughout the trading session, the semiconductor sector was notably strong, reflected in a 2.3% surge of the Philadelphia Semiconductor Index. The chipmaker Micron's 14.1% rise following its above-estimate fiscal second-quarter results significantly contributed to this sector growth.

Financial and housing stocks also exhibited significant strength, primarily driven by existing home sales data. A noteworthy advancement was also observed in the computer hardware, networking, and transportation stocks sector, despite weakness in the tobacco and telecom stocks.

In commodity and currency markets, crude oil futures modestly increased by $0.14 to $81.21 a barrel, following a slight dip of $0.20 to $81.07 a barrel on Thursday. However, gold futures dropped by $9.30 to $2,175.40 an ounce after a $23.70 surge to $2,184.70 an ounce in the previous session.

The U.S. dollar is currently valued at 151.10 yen, a slight decrease from the 151.62 yen at Thursday's New York trading close. When compared to the euro, the dollar is worth $1.0826 - again, a small decrease from the previous day's $1.0860.

Asian equity markets have delivered varied results at the close of trading on Friday, owing to Japan's inflation increase and speculations about Federal Reserve rate cuts. The general mood was influenced by the dollar's bounce-back and mixed corporate earnings.

China's Shanghai Composite Index dipped 1.0 percent to close at 3,048.03, with Hong Kong's Hang Seng Index dropping 2.2 percent to close at 16,499.47. Meanwhile, the Nikkei 225 Index in Japan gained 0.2 percent to end at 40,888.43.

In corporations, there were noteworthy gains for Sharp Corp. and Suzuki Motor Corp., among others, while Chugai Pharmaceuticals and Advantest Corp. saw significant stock price decreases.

The situation was similar in South Korea and Australia with the Kospi Index dropping 0.2 percent and the S&P/ASX 200 Index experiencing a minor reduction. However, there were some stock price surges for various companies.

The New Zealand Stock Exchange saw modest growth of 0.5 percent, closing at 11,978.62. Fisher & Paykel Healthcare and Manawa Energy saw a rise in their share prices, while Tourism Holdings and Vista Group International experienced decreases.

European stocks are currently giving mixed signals. With records set recently, investors are proceeding with caution, balancing a comprehension of new regional economic data with corporate headlines.

Despite the Federal Reserve maintaining rates while hinting at potential cuts, the Bank of England and Swiss National Bank have shown an interest in rate reductions, resulting in a boost for investor sentiment.

Currently, the UK's FTSE 100 Index has experienced a lift of 0.5 percent, the German DAX Index remains unchanged, and the French CAC 40 Index dropped by 0.4 percent. Particular corporations in these areas have experienced stock price changes of note.

UK retail sales data from the Office for National Statistics indicate no change in February, after the 3.6 percent increase in January. When auto fuel is isolated, however, the monthly growth appears slower, at 0.2 percent for February, down from January's 3.4 percent increase. Yearly retail sales figures show a slight decrease of 0.4 percent.In March, UK consumer confidence remained stagnant, however, households felt positive about their future financial circumstances for the first time since 2021, according to the survey results by the market research group, GfK. The consumer sentiment index remained at -21 in March, even though it had been predicted to rise to -19.

Statistics from Destatis showed that in January, Germany's import prices fell by 5.9% year on year, a slower decline than the 7% fall in December. Prices have been decreasing since March 2023. Following the transition to the new base year (2021) for import and export prices, this is the initial result, as noted by Destatis.

Survey results from the ifo Institute indicated that German business confidence improved in March. The business sentiment index climbed to 87.8 in March, exceeding forecasts, which expected the score to reach 86.0 from the preliminary estimate of 85.5 in February.

Regarding US economic reports, Federal Reserve Chairman Jerome Powell is set to provide opening remarks at a "Fed Listens" event. The event will allow for discussions around current economic conditions and the impact of the pandemic on the economy and the workforce. Following Powell's remarks, Federal Reserve Board Governor Michelle Bowman will moderate the first panel on "Evolving Conditions for Families and Job Seekers", followed by Vice Chair Philip Jefferson moderating the second panel on "Industry Perspectives".

At 12:15 pm ET, the Federal Reserve Vice Chair for Supervision, Michael Barr, will participate in a discussion on "International Economic and Monetary Design" at the Transnational Law Conference on the International Law of Money. Later in the day, Atlanta Federal Reserve President Raphael Bostic will take part in a moderated conversation on "Household Finance" for the 2024 Household Finance Conference.

Turning to the stock market, Lululemon's stock took a dive in pre-market trading after the fitness apparel retailer reported higher than expected fiscal fourth quarter results but disappointing future guidance. Nike's stocks may also feel the pressure following their fiscal third quarter earnings and revenues that surpassed estimates, but showed slowing growth in China. Contrastingly, FedEx stocks seem to be strengthening in pre-market trading, following the delivery company's fiscal third-quarter results that beat expectations and the announcement of a new $5 billion share repurchase program. Best Buy may see a positive shift after JPMorgan upgraded its rating on the company's stock to Overweight from Neutral.