FX.co ★ U.S. Stocks May Lack Direction Following Recent Strength

U.S. index futures indicate a flat start to Friday's trading, as stocks appear to seek direction following a strong upward trajectory in recent sessions.

Investors might take a pause after Wall Street's rally, which propelled major indices to unprecedented heights. This uptick has been fueled by a favorable response to President Donald Trump's emphatic win in the U.S. presidential election.

Trump's anticipated return to the White House is perceived as beneficial for both corporations and the broader U.S. economy. Nonetheless, there are concerns regarding the inflationary pressures of proposed tariff hikes.

While some investors may be inclined to capitalize on recent market gains, others may worry about missing out on possible further gains. The markets extended their upward movement sharply on Tuesday and Wednesday, with another robust gain occurring on Thursday, pushing the Nasdaq and S&P 500 to new record closing highs.

The tech-focused Nasdaq led this ascent, climbing 285.99 points or 1.5% to 19,269.46, while the S&P 500 edged up 44.06 points or 0.7% to 5,973.10. Conversely, the narrower Dow hovered near stability for much of the day, eventually closing down by just 0.59 points at 43,729.34.

Wall Street's sustained strength partly mirrors positive sentiment about the economic implications of Trump’s leadership return. Markets were also reassured by Trump’s decisive victory over Vice President Kamala Harris, which averted the uncertainty typically brought on by extended vote tallies and potential legal disputes.

Further lifting of stocks came as the Federal Reserve announced a widely anticipated rate cut of a quarter percentage point. Following a prior aggressive cut of 0.5% in September, the Fed reduced the federal funds rate target range by 25 basis points to 4.50%-4.75%.

This decision reflected the easing conditions in the labor market and progress toward the Fed's 2% inflation target. However, risks related to achieving long-term maximum employment and stable inflation remain balanced.

"The economic outlook remains uncertain," the Fed stated, emphasizing attentiveness to various risks concerning its dual mandate. Future rate adjustments will be guided by ongoing data analysis and the evolving economic outlook, assessed on a meeting-by-meeting basis, as underscored by Fed Chair Jerome Powell.

Powell also articulated that the Fed is flexible in its approach to rates, able to implement changes at varying speeds depending on economic developments.

Semiconductor stocks continued their upward trend, sending the Philadelphia Semiconductor Index up by 2.3%. Significant gains were also observed among software stocks, mirrored by a 1.9% jump in the Dow Jones U.S. Software Index, and strength in gold stocks in response to the precious metal's price surge, alongside notable moves in retail and commercial real estate stocks.

Conversely, banking stocks saw a notable pullback following Wednesday's gains, leading the KBW Bank Index down by 2.7%. Similar retreats were noted in telecom, oil services, and brokerage stocks.

**Commodity and Currency Markets**

Crude oil futures have dipped $1.22 to $71.14 per barrel, after an increase of $0.67 to $72.36 per barrel on Thursday. Meanwhile, gold futures have declined by $4.90 to $2,700.90 per ounce after the previous session's surge of $29.50 to $2,705.80 per ounce.

In currency exchanges, the U.S. dollar is trading at 152.69 yen, slightly down from Thursday's closing rate of 152.94 yen. Against the euro, the dollar is currently valued at $1.0759, down from $1.0805.

**Asia**

Asian markets concluded with mixed results on Friday following quarter-point rate cuts by both the Bank of England and the U.S. Federal Reserve.

Attention is turning to China for potential stimulus announcements as the National People's Congress Standing Committee meeting concludes.

In Asian markets, the dollar weakened following Fed Chair Jerome Powell's remarks on adjusting interest rate strategy based on data evaluation. Gold prices fell significantly, retracting gains of over 1% from Thursday, while oil prices slipped but remained on track for a weekly increase.Chinese and Hong Kong markets witnessed declines as investors awaited the specifics of a highly anticipated economic stimulus package aimed at revitalizing China's sluggish economy.

The Shanghai Composite Index in China closed 0.5% lower at 3,452.30 following a volatile trading session. Meanwhile, Hong Kong's Hang Seng Index decreased by 1.1% to 20,728.19, relinquishing early gains.

In contrast, Japanese markets experienced modest gains as technology stocks mirrored the upward trend of their U.S. counterparts. However, the gains were limited due to weak household spending data and the yen's relative strength. The Nikkei 225 Index advanced 0.3% to 39,500.37, while the broader Topix Index ended slightly lower at 2,742.15.

SoftBank Group, an investor in AI-focused startups, rose by 1.6%, and Tokyo Electron increased by 0.9%. Conversely, Nissan Motor saw a severe drop in its shares, declining over 6%, after announcing plans to cut 9,000 jobs and reduce its global manufacturing capacity by 20% following a significant fall in net income during the first half of the year.

In Seoul, stocks closed with slight losses amid persistent concerns about a potential second presidential term for Donald Trump. The Kospi dipped by 0.1% to 2,561.15.

Australian markets surged to a two-week high, spearheaded by gains in mining and gold stocks. The S&P/ASX 200 Index climbed 0.8% to 8,295.10, with the broader All Ordinaries Index closing up 0.8% at 8,552.60. Despite reporting a 9% drop in annual profit, lender ANZ's share price rose by 1.3%. In New Zealand, the S&P/NZX 50 Index rose 1.5% to 12,770.33.

**European Markets**

European stocks edged lower on Friday following the National People's Congress in China approving an $838 billion increase in local government debt limits. Expectations for a more extensive and immediate stimulus were unmet, leading to some investor disappointment.

The French CAC 40 Index fell 0.9%, Germany's DAX Index dropped 0.8%, and the FTSE 100 Index in the UK decreased 0.6%. Meanwhile, Eurozone bond yields declined after a busy week of central bank meetings and amid the dissolution of the German government.

Friedrich Merz, Germany's opposition leader, criticized Chancellor Olaf Scholz for allegedly postponing early elections to March for political gain, calling instead for a January election to implement necessary reforms for Europe's largest economy.

In corporate news, Vistry Group's shares plummeted after revising down its annual adjusted profit before tax due to challenges in its South Division and lower completion expectations. Richemont, known for owning Cartier, also faced declines after reporting a 20% drop in its first-half net profit. Consequently, French counterparts LVMH, Kering, and Hermes saw declines between 2-3%.

Conversely, German telecom company Freenet soared after upping its full-year forecast. AstraZeneca also saw gains, as its Phase III WAYPOINT study of Tezspire, in conjunction with Amgen, reached its co-primary endpoints in chronic rhinosinusitis with nasal polyps patients. Moreover, IAG, owner of British Airways, saw significant gains after announcing a quarterly profit that exceeded expectations.

**U.S. Economic Developments**

The University of Michigan is scheduled to release its preliminary consumer sentiment report for November at 10 a.m. ET. The index is projected to increase slightly to 71.0 in November from 70.5 in October.

Additionally, Federal Reserve Board Governor Michelle Bowman is set to engage in a discourse on banking topics at the University of Mississippi School of Business' Banking & Finance Symposium at 11 a.m. ET. At 2:30 p.m. ET, St. Louis Federal Reserve President Alberto Musalem will deliver welcome remarks during the 22nd Annual St. Louis Fed Professors Conference.