The major U.S. index futures are pointing to a roughly flat opening on Friday, with choppy trading likely to persist following the relatively lackluster seen in the previous session.
Traders may be reluctant to make any significant moves as they continue to digest the Republican tax reform plan and attempt to assess the path forward for the proposal.
A report from Bloomberg News said the vast majority of economists surveyed predicted that the tax reform plan would widen the budget deficit.
The Trump administration has argued that the stronger economic growth spurred by the tax cuts would offset the cost.
Nonetheless, the markets could benefit from window dressing, as some investors look to boost their portfolios on the final trading day of the third quarter.
Stocks turned in a relatively lackluster performance during trading on Thursday, with the major averages spending much of the day on opposite sides of the unchanged line. Despite the choppy trading, the S&P 500 reached a new record closing high.
The major averages all ended the day in positive territory, although the Nasdaq inched up just 0.19 points or less than a tenth of a percent to 6,453.45. The Dow rose 40.49 points or 0.2 percent to 22,381.20, and the S&P 500 edged up 3.02 points or 0.1 percent to 2,510.06.
The choppy trading on Wall Street came as traders continued to digest the tax reform plan unveiled by Republican lawmakers and President Donald Trump.
The GOP plan includes a reduction in the corporate tax rate to 20 percent from 35 percent, a consolidation in the personal income tax brackets to three from seven, and a sharp increase in the standard deduction.
In remarks touting the plan in Indiana on Wednesday, Trump suggested the tax reform proposal represents a historic opportunity.
“I’ve been waiting for this for a long time,” Trump said. “We’re going to cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans.”
He added, “And we are going to bring back the jobs and wealth that have left our country and most people thought left our country for good.”
While Republicans did not provide details about how the cost of the tax cuts would be offset, Trump’s top economic advisor Gary Cohn predicted the plan would be paid for by economic growth.
“We think we can drive a lot of business back to America, we can drive jobs back to America, we can make ourselves very competitive,” Cohn told CNBC. “We think we can pay for the entire tax cut through growth over the cycle.”
On the U.S. economic front, the Commerce Department released a report showing economic activity increased by slightly more than previously estimated in the second quarter.
The report said gross domestic product jumped by 3.1 percent in the second quarter compared to the previously estimated 3.0 percent growth. Economists had expected the pace of GDP growth to be unrevised.
A separate report from the Labor Department showed a rebound in initial jobless claims in the week ended September 23rd.
The report said initial jobless claims rose to 272,000, an increase of 12,000 from the previous week’s revised level of 260,000. Economists had expected jobless claims to rise to 270,000.
Most of the major sectors showed only modest moves on the day, contributing to the lackluster close by the broader markets.
Gold stocks saw notable strength, however, with the NYSE Arca Gold Bugs Index climbing by 1.1 percent. The gain by the index came after it ended the previous session at its lowest closing level in over a month.
Housing and semiconductor stocks also moved to the upside, while weakness was visible among computer hardware and natural gas stocks.
Commodity, Currency Markets
Crude oil futures are inching up $0.02 to $51.58 a barrel after sliding $0.58 to $51.56 a barrel on Thursday. Meanwhile, after edging up $0.90 to $1,288.70 an ounce in the previous session, gold futures are rising $3.80 to $1,292.50 an ounce.
On the currency front, the U.S. dollar is trading at 112.25 yen compared to the 112.34 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1830 compared to yesterday’s $1.1786.
Asian stocks closed broadly higher on Friday, although overall gains remained muted amid expectations of a rate hike by the U.S. Federal Reserve in December. Caution ahead of upcoming holidays in China and South Korea next week also kept a lid on potential gains.
The dollar rally paused and gold held near six-week lows on improved risk appetite following the tax reform speech by U.S. President Donald Trump, while oil prices rose after declining around 1 percent overnight.
Chinese stocks rose on hopes that next month’s twice-a-decade Communist Party Congress will likely make state-owned enterprise reform a priority.
The benchmark Shanghai Composite Index gained 9.57 points or 0.3 percent to finish at 3,349.22, while Hong Kong’s Hang Seng Index climbed 132.70 points or 0.5 percent to 27,554.30.
Australian shares eked out modest gains, led by material stocks after London copper prices rose for a third straight session. The benchmark S&P/ASX 200 Index inched up 11.20 points or 0.2 percent to 5,681.60, and the broader All Ordinaries Index ended up 13.40 points or 0.2 percent at 5,744.90.
Mining heavyweight BHP Billiton rose 0.8 percent and South32 gained 1.2 percent, while Rio Tinto and Fortescue Metals Group advanced around 1.6 percent each.
Woodside Petroleum and Santos fell 1.1 percent and 1.5 percent respectively after crude oil prices slipped more than 1 percent overnight.
Meanwhile, Japanese shares ended roughly flat even as a slew of data offered a mostly positive picture of the economy. Industrial output bounced back in August after falling in July, core inflation accelerated amid continued tightness in the labor market and household spending rose, while growth in the retail sector slowed.
Investors were wary of political developments after Tokyo Governor Yuriko Koike emerged as the main challenger to Japan Prime Minister Shinzo Abe ahead of the October 22nd election.
The Nikkei 225 Index closed marginally lower at 20,356.28 but rose 3.6 percent in September, marking its first monthly gain in three months. The broader Topix Index finished down 0.1 percent for the day but ended the month up by 3.5 percent.
Toshiba shares rallied 2.9 percent after the company struck an $18 billion deal to sell its flash memory unit to a consortium led by U.S. private equity firm Bain Capital.
European stocks have moved mostly higher over the course of the session. The day’s economic reports painted a mixed picture of regional economies.
While the French CAC 40 Index is just above the unchanged line, the German DAX Index is up by 0.4 percent and the U.K.’s FTSE 100 Index is up by 0.6 percent.
French telecommunications company Orange has risen after its CEO ruled out buying stakes in Bouygues or Vivendi.
British life and health insurer Aviva has also advanced after selling its entire shareholding in its joint venture in Italy, Avipop Assicurazioni S.p.A., to Banco BPM S.p.A for 265 million euros.
Meanwhile, Volkswagen has fallen after its former engine chief was reportedly arrested in connection with its diesel emission scandal.
Petra Diamonds has also moved to the downside in London after the diamond mining group said workers had ended a strike on pay at its Finsch and Koffiefontein mines.
In economic news, German retail sales climbed 2.8 percent year-on-year in August, the same rate of growth as seen in the July, figures from Destatis showed.
The unemployment rate in Germany hit a fresh record low of 5.6 percent in September as jobless claims fell more than expected.
French consumer price inflation rose slightly to 1 percent in September from 0.9 percent in August, matching expectations.
Data published by the Nationwide Building Society revealed that U.K. house prices increased at a slower pace in September, with London the weakest performing region for first time since 2005.
U.S. Economic Reports
The Commerce Department released a report showing personal income and spending both rose in line with economist estimates in the month of August.
The report said personal income edged up by 0.2 percent in August after rising by a downwardly revised 0.3 percent in July.
Economists had expected income to rise by 0.2 percent compared to the 0.4 percent increase originally reported for the previous month.
The Commerce Department said personal spending also inched up by 0.1 percent in August after climbing by an unrevised 0.3 percent in July. The uptick in spending matched expectations.
At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of September.
The Chicago business barometer is expected to edge down to 58.5 in September from 58.9 in August, although a reading above 50 would indicate continued growth.
The University of Michigan is due to release its revised report on consumer sentiment in September at 10 am ET. The consumer sentiment index is expected to be unrevised at 95.3.
At 11 am ET, Philadelphia Federal Reserve President Patrick Harker is scheduled to speak at a conference on the impact of financial technology on consumers, banking, and regulatory policy in Philadelphia, Pennsylvania.
Stocks In Focus
Shares of Zogenix (ZGNX) are spiking higher in pre-market trading after the pharmaceutical company said a late-stage trial of its experimental treatment for a rare form of epilepsy met the main goal.
Homebuilder KB Home (KBH) is also likely to see early strength after reporting fiscal third quarter results that exceeded analyst estimates.
Shares of Tyson Foods (TSN) are also likely to move to the upside after the meat producer raised its full year earnings guidance due to strength in the beef segment. The company also announced plans to cut 450 jobs.
On the other hand, shares of Merck (MRK) may move to the downside after the drug giant discontinued development of certain experimental hepatitis C treatments.
by RTT Staff Writer
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