U.S. Stocks May Regain Ground Amid Sharp Pullback By Crude Oil Prices

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to regain ground after trending lower over the past several sessions.

Early buying interest is likely to be generated in reaction to a sharp pullback by the price of crude oil, which has skyrocketed over the past few days.

After soaring by more than 12 percent since the start of the week, U.S. crude oil futures are plunging by nearly 3 percent on the day.

Crude oil futures have pulled back below $100 a barrel after the Financial Times reported Iran and Oman will meet with Gulf states next week to discuss reopening shipping through the Strait of Hormuz.

Bargain hunting is also likely to contribute to initial strength on Wall Street after the recent weakness dragged the Dow and S&P 500 down to their lowest levels in over a month.

The futures remained firmly positive following the release of the Labor Department’s closely watched report on consumer price inflation in the month of August.

The report showed consumer prices increased in line with economist estimates, although core consumer prices rose by slightly more than expected.

The Labor Department said its consumer price index climbed by 0.4 percent in August after inching up by 0.1 percent in July.

Meanwhile, excluding sharply higher energy prices and an uptick in food prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

The report also said the annual rate of consumer price growth was unchanged at 3.4 percent, while the annual rate of core consumer price growth dipped to 2.4 percent in August from 2.5 percent in July, which matched expectations.

Stocks moved mostly lower during trading on Thursday, extending the downward move seen over the past several sessions. With the continued weakness, the Dow and S&P 500 dropped to their lowest closing levels in over a month.

The major averages all finished the day firmly in negative territory. The Dow fell 316.56 points or 0.6 percent to 52,064.10, the Nasdaq slid 171.62 points or 0.7 percent to 26,081.72 and the S&P 500 declined 44.66 points or 0.6 percent to 7,591.70.

The continued weakness on Wall Street came as the price of crude oil skyrocketed, with U.S. crude oil futures soaring above $100 a barrel for the first time since May amid concerns about a prolonged war between the U.S. and Iran.

A Wall Street Journal report citing U.S. officials said top White House advisers have privately raised the prospect with President Donald Trump that the war could drag on through the remainder of his term.

Trump suggested on Wednesday that the U.S.-Iran war would end immediately after the midterm elections, although he has repeatedly claimed that the seven-month-old conflict would end soon.

The spike in crude oil prices contributed to a continued surge in treasury yields, with the yield on the benchmark ten-year note jumping to its highest levels in almost three years.

Higher crude oil prices and treasury yields have added to concerns about the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting next week.

Gold stocks moved sharply lower along with the price of the precious metal, resulting in a 3 percent nosedive by the NYSE Arca Gold Bugs Index.

Substantial weakness also emerged among semiconductor stocks, as reflected by the 2.7 percent plunge by the Philadelphia Semiconductor Index.

Computer hardware stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Computer Hardware Index down by 2.3 percent.

Housing, airline and biotechnology stocks also saw notable weakness, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are plunging $3.31 to $99.17 a barrel after soaring $6.43 to $102.48 a barrel on Thursday. Meanwhile, after tumbling $53.40 to $4,407.30 an ounce in the previous session, gold futures are falling $16.10 to $4,426.80 an ounce.

On the currency front, the U.S. dollar is trading at 153.66 yen versus the 154.42 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1596 compared to yesterday’s $1.1610.

Asia

Asian stocks fell sharply on Friday following a fourth straight session of losses on Wall Street. Inflation and interest rate worries weighed on markets after Brent crude prices jumped to their highest level since May on escalating Middle East tensions.

A measure of U.S. producer price inflation came in stronger than expected, pushing the probability of a Federal Reserve rate hike next week to 72 percent.

The outlook remains highly uncertain, with risks tilted upward for inflation and downward for growth, European Central Bank (ECB) President Chritine Lagarde warned Thursday after raising three key interest rates by 25 basis points.

All eyes now turn to the U.S. consumer price index reading for August later in the day, with economists projecting headline inflation at 0.4 percent month-on-month and 3.4 percent year-on-year. The CPI data will be a key input for the Federal Reserve’s September 16 interest rate decision.

The U.S. dollar held gains in Asian trading, while gold climbed to $4,353 an ounce, after having hit a one-week low earlier.

Brent crude futures fell more than 2 percent toward $105 a barrel after the Financial Times reported that Iran and Oman were meeting with Gulf states to reopen shipping through the Strait of Hormuz.

It was said that Gulf foreign ministers plan to meet their Iranian counterpart in the Omani coastal city of Salalah this coming Monday to secure a deal to manage commercial shipping through Hormuz.

China’s Shanghai Composite Index slid 1.2 percent to 3,888.11, while Hong Kong’s Hang Seng Index dropped 0.6 percent to 24,805.63 on expectations of further U.S. interest rate hikes.

Japanese markets tumbled on concerns over surging oil prices and rising U.S. Treasury yields. The Nikkei 225 Index slumped 1.9 percent to 64,011.34, while the broader Topix Index closed 0.7 percent lower at 4,028.30. Kioxia lost 7 percent and Resonac Holdings plummeted 10.7 percent, while oil explorer Inpex rose 1.4 percent.

Seoul stocks fell sharply, with tech stocks such as Samsung Electronics and SK Hynix pacing the declines. The Kospi Index plunged 1.8 percent to 6,909.91.

Australian markets ended notably lower to end at a more than two-month low as weaker commodity prices weighed on the mining sector. BHP Group shares fell over 4 percent and Rio Tinto gave up 3.5 percent.

The benchmark S&P/ASX 200 Index dropped 0.9 percent to 8,741.20 while the broader All Ordinaries Index closed 1 percent lower at 8,920.20.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index fell 1 percent to 13,580.33, extending losses from the previous session.

Europe

European stocks have moved mostly higher on Friday as oil prices pull back from recent highs and data showed the U.K. economy expanded at a faster pace in July, driven by services and industrial production.

Brent crude futures fell more than 3 percent to trade below $104 a barrel after the Financial Times reported that Iran and Oman were meeting with Gulf states to reopen shipping through the Strait of Hormuz.

It was said that Gulf foreign ministers plan to meet their Iranian counterpart in the Omani coastal city of Salalah this coming Monday to secure a deal to manage commercial shipping through Hormuz.

U.K. GDP grew 0.4 percent month-on-month in July following an increase of 0.3 percent in June and no growth in May, the Office for National Statistics reported. On a yearly basis, GDP climbed 1.6 percent in July compared to forecasts of 1.2 percent.

While the German DAX Index is up by 0.5 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.6 percent.

French train manufacturer Alstom has rallied after signing contracts worth 1.2 billion euros with TransPennine Express.

Transport company Fraport has also advanced. The company said that around 6.3 million passengers flew via Frankfurt Airport in August, 0.3 percent lower than same month last year.

Trainline has also jumped. The British rail ticketing platform announced a £100 million share repurchase program over 12 months.

Meanwhile, United Internet has slumped. The German internet services company has launched cost-saving programs at its subsidiaries 1&1 and Ionos that include job cuts.

U.S. Economic News

A closely watched report released by the Labor Department on Friday showed consumer prices in the U.S. increased in line with economist estimates in the month of August.

The Labor Department said its consumer price index climbed by 0.4 percent in August after inching up by 0.1 percent in July.

Excluding sharply higher energy prices and an uptick in food prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

The report also said the annual rate of consumer price growth was unchanged at 3.4 percent, while the annual rate of core consumer price growth dipped to 2.4 percent in August from 2.5 percent in July, which matched expectations.

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of September. The consumer sentiment index is expected to edge down to 51.0 in September from 51.7 in August.