US Stocks On Track To Finish Week On A High As Positive Earnings, Rate Pause Hopes Lend Support

The resilient market looks set to open the week’s last trading session on a modestly positive note. Stocks have been mostly higher this week following the release of a tame consumer price inflation report on Tuesday, although the upward move hasn’t been very convincing. On Friday, stocks will likely get a lift from some positive earnings reports. Traders may also keep an eye on speeches by Federal Reserve officials.

Cues From Thursday's Trading:

Stocks closed Thursday’s session on a narrowly mixed note as they digested a batch of data underlining the economy’s softness and negative earnings from some high-profile companies.

Jobless claims for the recent reporting week rose more than expected, industrial production and homebuilder confidence fell more than expected, and a regional manufacturing survey showed continued contraction in the Philadelphia region. On the corporate front, earnings reports from Walmart, Inc. WMT and Cisco Systems, Inc. CSCO triggered markedly negative reactions.

The Nasdaq Composite and the S&P 500 indices traded mostly below the unchanged line before moving decisively higher in the final hour of trading. The former closed at a fresh 3-1/2 month high, while the latter at a 2-1/2 month high.

The Dow Industrials languished below the flat line throughout, save for a few moments in early trading. Breaking a four-session winning streak, the 30-stock average ended lower.

In recent sessions, small-caps underperformed and closed in the red, in line with the see-sawing sentiment toward these stocks.

Communication services, IT services, IT, and utility stocks were among the session’s biggest gainers, while energy, consumer staples, and consumer discretionary stocks came under intense selling.

US Index Performance On Thursday

Analyst Color:

Following Thursday’s weak economic data, Jamie Cox, Managing Partner at Harris Financial Group, said the rate cuts are closer than people think, potentially as early as even March 2024.

“The lags in monetary policy are catching up with the economy now–from input costs to industrial production to labor,” the analyst said.  Now, the fight shifts from inflation to preserving economic growth and averting recession, he added.

LPL Chief Global Strategist Quincy Krosby said the market should work its way through overbought conditions as it waits for catalysts to guide its next move higher. He sees Nvidia providing the catalyst the markets are hoping for with their earnings report.

“Positive seasonality, end of the year window dressing when market leaders find new buyers, and earlier and earlier expectations for a Santa Claus rally could help underpin the rally investors and traders alike are hoping for and expecting,” he said.

Futures Today

Futures Performance On Friday

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY rose 0.25% to $451.36, and the Invesco QQQ ETF QQQ edged up 0.01% to $385.98, according to Benzinga Pro data.

Upcoming Economic Data:

The Commerce Department is scheduled to release its housing starts report for October at 8:30 a.m. EDT. Economists, on average, expect housing starts to come in at a seasonally adjusted annual rate of 1.345 million units, down slightly from the 1.358-million-unit rate in September. Building permits, an indicator of future housing starts, are expected to decline from 1.471 million units to 1.450 million units.

Among the Fed speakers scheduled to speak are:

• Fed Vice Chair for Supervision Michael Barr: 8:45 a.m. ET
• Boston Fed President Susan Collins: 8:45 a.m. ET and 10:15 a.m. ET
• Chicago Fed President Austan Goolsbee: 9:45 a.m. ET
• San Francisco Fed President Mary Daly: 10 a.m. ET

See also: Futures Vs. Options

Stocks In Focus:

• Applied Materials, Inc. AMAT fell nearly 7.5% in premarket trading following the release of its quarterly results. Peers KLA Corp. KLAC and Lam Research Corp. LRCX also moved lower.
• Among the other stocks reacting to earnings reports are The Gap, Inc. GPS (up over 17%), Ross Stores, Inc. ROST (up nearly 7%)and Beazer Homes USA, Inc. BZH (up about 3.5%).
• ChargePoint Holdings, Inc. CHPT plunged more than 27% in reaction to its preannouncement.
• BJ’s Wholesale Club Holdings, Inc. BJ, The Buckle, Inc. BKE, and Spectrum Brands Holdings, Inc. SPB are among the notable companies reporting ahead of the market open.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rebounded 1.17% to $73.75 in early European session on Friday following Thursday’s 4.70% plunge. This took the black gold to its lowest since early July. United States Oil Fund, LP USO, while falling 4.61% on Thursday, rebounded by 1.18% to $68.85 in premarket trading.

The benchmark 10-year Treasury note dipped 0.046 percentage points to 4.399% on Friday.

Cryptocurrencies are seen extending their weakness, with Bitcoin BTC/USD trading below the $37,000 psychological resistance.

In the currency market, the U.S. dollar traded lower against all major currencies, reflecting muted expectations concerning the domestic economy.

Among the global equity markets, Asian stocks ended mixed, with Hong Kong’s Hang Seng Index declining sharply, while the Japanese, Chinese, Indonesian, and Taiwanese found some strength. Alibaba Group Holding Limited BABA dragged the Hong Kong market after it announced Thursday that it is shelving plans to spin off its Cloud computing business.

Stocks in Europe rallied strongly, encouraged by the benign inflation data from the euro area.

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