Sunday, May 26, 2024

Wall Street mixed in premarket after 3 days of gains

by BIZ Magazine

NEW YORK (AP) — Wall Street was pointed toward a mixed open Friday following three straight sessions of gains this week that were bolstered by strong corporate earnings reports.

Futures for the Dow Jones industrials inched up 0.2%, while futures for the S&P 500 inched down 0.1% before the bell.

Shares were mostly higher in Europe and Asia and oil prices fell again.

Sandwiched in between last week’s double-whammy of grim inflation data and next week’s Federal Reserve meeting, investors have seemed relieved this week to focus on corporate earnings reports, which have been broadly positive.

Most economists forecast that the Fed will raise its main borrowing rate at next week’s meeting by three-quarters of a point as it continues to battle four-decade high inflation.

Government data last week showed that consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981. Another report showed that producer prices — which measures inflation before it reaches consumers — rose by 11.3% in June compared with a year earlier.

Rapidly hiking rates risks tossing the U.S. economy into a recession, but it’s also the Fed’s most powerful tool to get price increases back to its 2% annual target.

In Europe at midday, Germany’s DAX rose 0.3% while the CAC 40 in Paris added 0.2%. Britain’s FTSE 100 inched up 0.1%.

Aside from U.S. corporate earnings, much of the focus this week has been on Europe. The European Central Bank opted, as expected, to raise its key interest rate Thursday, ending a yearslong experiment with negative interest rates. It was its first increase in 11 years.

Japan reported Friday that its inflation rose at a slower pace in June, with food prices growing 6.5% year-on-year compared to 12.3% in May and the increase in energy costs falling to 16.5% from 20.8%. Core inflation excluding volatile energy and food prices rose to 2.6% from 2.2% the month before.

The Bank of Japan has indicated that unlike the Federal Reserve and other central banks, it does not intend to raise its minus 0.1% benchmark interest rate to counter the trend given that wages are not rising in tandem with prices, constraining consumer demand.

Tokyo’s Nikkei 225 index gained 0.4% to 27,914.66 on Friday, while the Hang Seng in Hong Kong added 0.2% to 20,609.14. Australia’s S&P/ASX 200 lost less than 0.1% to 6,791.50.

In South Korea, the Kospi declined 0.7% to 2,393.14. The Shanghai Composite index slipped 0.1% to 3,2769.97.

A preliminary reading on factory activity for Japan, the world’s third-largest economy, showed output and new orders contracting to their worst levels in months. Companies blamed shortages of raw materials and rising costs, but demand may be weakening as the country endures yet another wave of coronavirus outbreaks, economists said.

July’s purchasing manager indexes “suggest that the manufacturing sector is slowing as demand weakens, while the latest COVID-19 is starting to hit the service sector,” Marcel Thieliant of Capital Economics said in a commentary.

PMIs in Europe likewise showed signs of contraction as the region contends with a resurgence of coronavirus outbreaks, the war in Ukraine and disruptions of gas supplies from Russia.

A key pipeline carrying Russian natural gas into the region reopened, though at 40% of capacity as worries persisted that Moscow may restrict supplies to punish allies of Ukraine. In Italy, Premier Mario Draghi resigned after his ruling coalition fell apart. That adds more uncertainty as Europe contends with the war in Ukraine, high inflation and the potential for trouble in Europe’s bond markets.

Shares in the camera and technology company Snap, which operates the Shapchat app, fell 30% in premarket trading after the Santa Monica, California company reporter a much wider loss — $422 million — than expected.

American Express rose 5% after beating Wall Street profit targets.

In other trading, U.S. benchmark crude oil slipped $1.15 to $95.20 per barrel in electronic trading on the New York Mercantile Exchange. It settled 3.5% lower on Thursday.

Brent crude, the pricing basis for international trading, retreated $1.06 to $98.42 per barrel.

In currency trading, the U.S. dollar bought 136.95 Japanese yen, down from 137.41 late Thursday. The euro slipped to $1.0189 from $1.0230.

On Thursday, the S&P 500 climbed 1%, returning to its highest level in six weeks. The Dow rose 0.5% and the Nasdaq rose 1.4%. The Russell 2000 gained 0.5%.

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