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Futures Pointing to Mixed Open on Wall Street
US Market
The major U.S. index futures are currently pointing to a mixed open on Friday, with the Dow futures moving lower and the Nasdaq futures moving higher.
Stocks may resume the lackluster performance that was seen on Thursday prior to reports of President Joe Biden’s plans to raise capital gains tax rates.
While the Dow and the S&P 500 reached new record highs last Friday, the major averages have largely been rangebound over the past few sessions.
Optimism about the economic recovery has helped prop up the markets, although concerns about high valuations and surging coronavirus cases overseas have led to worries about a near-term pullback.
A notable drop by shares of Intel (INTC) may weigh on the Dow, with the semiconductor giant slumping by 2.8 percent in pre-market trading.
The decline by Intel comes after the company reported better than expected first quarter results but provided guidance below analyst estimates.
Dow components American Express (AXP) and Honeywell (HON) are also seeing pre-market weakness despite reporting better than expected quarterly earnings.
After turning in a lackluster performance for much of the morning, stocks came under pressure in afternoon trading on Thursday. The major averages all pulled back sharply, offsetting the strong gains posted on Wednesday.
The major averages climbed off their worst levels but still closed firmly in negative territory. The Dow tumbled 321.41 points or 0.9 percent to 33,815.90, the Nasdaq slumped 131.81 points or 0.9 percent to 13,818.41 and the S&P 500 slid 38.44 points or 0.9 percent to 4,134.98.
The afternoon sell-off came following reports President Joe Biden plans to propose nearly doubling the capital gains tax rate for wealthy individuals to fund spending on child care and education.
According to media outlets including Bloomberg News and the New York Times, Biden’s so-called “American Families Plan” would raise the capital gains rate for those earning $1 million or more to 39.6 percent from 20 percent.
The report raised concerns the Biden administration’s tax policies could halt the nearly persistent advance by the markets throughout the past year.
Earlier in the day, traders were reacting to a Labor Department report unexpectedly showing a continued decline in initial jobless claims in the week ended April 17.
The report said initial jobless claims fell to 547,000, a decrease of 39,000 from the previous week’s revised level of 586,000.
The continued drop came as a surprise to economists, who had expected jobless claims to rebound to 617,000 from the 576,000 originally reported for the previous month.
With the unexpected decrease, jobless claims slid to their lowest level since hitting 256,000 in the week ended March 14, 2020.
Meanwhile, the National Association of Realtors released a report showing another steep drop in U.S. existing home sales in the month of March.
NAR said existing home sales tumbled by 3.7 percent to an annual rate of 6.01 million in March after plunging by 6.3 percent to a revised rate of 6.24 million in February.
Economists had expected existing home sales to dip by 0.5 percent to a rate of 6.19 million from the 6.22 million originally reported for the previous month.
Semiconductor stocks pulled back sharply after turning in some of the market’s best performances on Wednesday, dragging the Philadelphia Semiconductor Index down by 2.3 percent.
Considerable weakness was also visible among gold stocks, as reflected by the 2.1 percent drop by the NYSE Arca Gold Bugs Index. The weakness in the gold sector came amid a decrease by the price of the precious metal.
Brokerage stocks also came under pressure following the capital gains reports, resulting in a 1.7 percent drop by the NYSE Arca Broker/Dealer Index.
Chemical, oil and banking stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.
U.S. Economic Reports
The Commerce Department is scheduled to release its report on new home sales in the month of March at 10 am ET. Economists expect new home sales to spike by 14.3 percent to an annual rate of 886,000 in March after plummeting by 18.2 percent to a rate of 775,000 in February.
Stocks in Focus
Shares of Boston Beer (SAM) are moving sharply higher in pre-market trading after the Sam Adams brewer reported first quarter results that exceeded analyst estimates by a wide margin.
Toy maker Mattel (MAT) is also likely to see initial strength after reporting a narrower than expected first quarter loss on record sales growth.
Share of Snap (SNAP) may also move to the upside after the Snapchat parent unexpected broke even in the first quarter on better than expected revenues.
On the other hand, shares of Kimberly-Clark (KMB) may come under pressure after the consumer products company reported weaker than expected first quarter results and provided disappointing guidance.
Europe
European stocks have moved lower on Friday, as reports of U.S. tax hikes offset data showing that the eurozone economic recovery accelerated in April despite coronavirus restrictions.
While the German DAX Index has slumped by 0.9 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 0.6 percent.
Shares of Telia Co. AB have declined. The telecom company reported a decline in first-quarter net income attributable to owners of the parent to 965 million Swedish kronor from last year’s 1.11 billion kronor.
Senior Plc shares have also fallen after the company said trading for the three months ended March 2021 has been in line with expectations.
Remy Cointreau shares have also edged lower. The spirits maker said that sales were slightly higher in its full fiscal year, adjusted for currency effects.
EDF shares have also dropped. France’s Finance Minister Bruno Le Maire was quoted as saying by the Ouest-France newspaper in an interview that he was ditching the “Project Hercules” name of a planned restructuring of the power group.
Enterprise solutions company Software AG has also tumbled after its first quarter 2021 results proved to be a mixed bag.
On the other hand, Tod’s SpA has spiked after LVMH Moet Hennessy Louis Vuitton SE increased its stake in the Italian shoe maker to 10 percent.
FirstGroup shares have also surged after the bus operator confirmed it is selling its U.S. school bus business to infrastructure investor EQT in a £3.3bn ($4.6bn) deal.
Daimler has also risen. The luxury car maker increased the margin targets for its Mercedes-Benz and Mobility divisions for the year after reporting strong earnings growth in the first quarter.
In economic news, the flash reading of the IHS Markit eurozone composite purchasing managers index rose to a nine-month high of 53.7 in April from 53.2 in March.
The preliminary “flash” reading of the U.K. Composite Purchasing Managers’ Index rose to 60.0 in April, the highest reading since November 2013, from 56.4 in March.
A deluge of new orders swept through British businesses in the month as the country lifted some of its Covid-19 restrictions, the survey said.
Meanwhile, U.K. retail sales grew more than expected in March, as the easing of the restrictions related to the coronavirus lifted consumer spending, a government report showed.
Retail sales volume grew 5.4 percent month-on-month, faster than the 2.2 percent increase in February. This was the strongest growth since June 2020 and better than economists’ forecast of 1.5 percent.
Asia
Asian stocks turned in a mixed performance on Friday, with renewed worries over the coronavirus pandemic and reports suggesting U.S. President Joe Biden plans to raise capital gains taxes for wealthy individuals denting sentiment.
Chinese shares advanced as President Xi Jinping’s renewed green pledge bolstered clean energy stocks. The benchmark Shanghai Composite Index rose 9.05 points, or 0.3 percent, to 3,474.17, while Hong Kong’s Hang Seng Index ended up 323.41 points, or 1.1 percent, at 29,078.75.
Meanwhile, Japanese shares fell as a disappointing forecast from Nidec coupled with news that the government will declare “short and powerful” states of emergency for Tokyo, Osaka and two other prefectures added to the pessimistic mood at the start of the earnings season.
The Nikkei 225 Index dropped 167.54 points, or 0.6 percent, to 29,020.63, while the broader Topix closed 0.4 percent lower at 1,914.98.
Tech firms such as Advantest, Tokyo Electron, Screen Holdings and Fanuc lost 1-3 percent. Nidec Corp. plunged 5.1 percent after its profit forecast for this fiscal year missed estimates.
The manufacturing sector in Japan expanded at a faster pace, a flash estimate from Jibun bank revealed today, with a manufacturing PMI score of 59.6, up from 53.3 in March. Separately, a government report showed that consumer prices in Japan were down 0.2 percent year-on-year in March.
Australian markets ended on a flat note despite positive data on the country’s manufacturing sector. The benchmark S&P/ASX 200 Index finished marginally higher at 7,060.70, while the broader All Ordinaries Index edged up 0.1 percent to 7,320.70.
The manufacturing sector in Australia continued to expand in April, and at a faster pace, a flash estimate from Markit Economics revealed, with a survey record manufacturing PMI score of 59.6, up from 56.8 in March.
Miners ended mixed after iron ore prices fell on Thursday amid fresh tensions between Australia and China. In the energy sector, Santos and Origin Energy rose 1-2 percent.
Banks ANZ, Commonwealth and NAB rose less than half a percent. Troubled wealth manager AMP gained 0.9 percent after announcing a demerger plan.
Kogan.com shares plunged 14.3 percent after the e-commerce firm reported a 24 percent decline in adjusted earnings.
Seoul stocks edged higher despite spikes in domestic coronavirus cases and concerns surrounding capital gains tax increases in the United States. The benchmark Kospi inched up 8.58 points, or 0.3 percent, to 3,186.10. Shares in the steel, chemical and financial sectors led the gainers on optimism for a global economic rebound.
Commodities
Crude oil futures are slipping $0.11 to $61.32 a barrel after inching up $0.08 to $61.43 a barrel on Thursday. Meanwhile, after falling $11.10 to $1,782 an ounce in the previous session, gold futures are climbing $12.20 to $1,794.20 an ounce.
On the currency front, the U.S. dollar is trading at 107.54 yen versus the 107.97 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2070 compared to yesterday’s $1.2015.
