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Profit Taking May Contribute To Initial Pullback On Wall Street

iHub News
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June 14 2024 9:32AM

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground after ending yesterday’s choppy trading session mostly higher.

Profit taking may contribute to initial weakness on Wall Street after the Nasdaq and the S&P 500 ended the previous session at new record closing highs.

Encouraging inflation data has contributed to recent strength, although traders remain wary about the outlook for interest rates after the Federal Reserve forecast just one rate cut this year.

Potentially helping to alleviate the concerns, the Labor Department released a report this morning showing unexpected decrease by U.S. import and export prices in the month of May.

The Labor Department said import prices fell by 0.4 percent in May following a 0.9 percent advance in April. Economists had expected import prices to inch up by 0.1 percent.

Prices for fuel imports led the way lower, tumbling by 2.0 percent, although prices for non-fuel imports also dipped by 0.3 percent.

Meanwhile, the report said export prices slid by 0.6 percent in May after climbing by an upwardly revised 0.6 percent in April.

Economists had expected export prices to come in unchanged compared to the 0.5 percent increase originally reported for the previous month.

Stocks turned in a relatively lackluster performance during trading on Thursday, as traders took a breather following the rally seen in Wednesday’s session. Despite the choppy trading, the Nasdaq and the S&P 500 once again reached new record closing highs.

The Nasdaq climbed 59.12 points or 0.3 percent to 17,667.56 and the S&P 500 rose 12.71 points or 0.2 percent to 5,433.74. The Dow once again bucked the uptrend, however, with the blue chip index slipping 65.11 points or 0.2 percent to 38,647.10.

The choppy trading on Wall Street came despite the release of U.S. economic data that seemed likely to add to optimism about the outlook for interest rates.

While the data may have generated some hopes Federal Reserve officials were being conservative when they forecast just one rate cut this year, traders may have been reluctant to continuing buying stocks following yesterday’s surge.

Following yesterday’s tamer-than-expected consumer price inflation data, the Labor Department released a report unexpectedly showing a modest decrease by producer prices in the month of May.

The report said the producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Economists had expected producer prices to inch up by 0.1 percent.

The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April.

Economists had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month.

The Labor Department also released a separate report showing an unexpected increase by first-time claims for U.S. unemployment benefits in the week ended June 8th.

The report said initial jobless claims climbed to 242,000, an increase of 13,000 from the previous week’s unrevised level of 229,000. Economists had expected jobless claims to edge down to 225,000.

With the unexpected increase, jobless claims reached their highest level since hitting 248,000 in the week ended August 12, 2023.

“The latest data in hand nudge the door a little wider open for the Fed to begin making an interest rate cut later this year,” said Bill Adams, Chief Economist for Comerica Bank. “Comerica forecasts for the Fed to make its first cut of this cycle in September, followed by a second cut in December.”

Semiconductor and computer hardware stocks showed strong moves to the upside on the day, contributing to the modest gain posted by the tech-heavy Nasdaq.

Reflecting the strength in the sectors, the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index climbing by 1.5 percent and 1.4 percent, respectively.

Within the semiconductor sector, shares of Broadcom (NASDAQ:AVGO) soared by 12.3 percent after the chipmaker reported better than expected fiscal second quarter results and announced a 10-for-1 stock split.

Meanwhile, gold stocks pulled back sharply along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent.

Oil service stocks also saw considerable weakness despite a modest increase by the price of crude oil, with the Philadelphia Oil Service Index tumbling by 2.1 percent.