U.S. stock futures remained largely unchanged on Friday, stabilizing after a significant rally on Thursday fueled by optimism post-Federal Reserve interest rate hike. Meanwhile, Asian markets saw broad gains, with Japan’s central bank raising rates to a 31-year high due to inflation concerns. Oil prices dipped as hopes for increased Saudi supply outweighed fears from renewed Middle East tensions.
U.S. stock futures exhibited minimal changes early Friday, consolidating gains from a robust Thursday session. This market resilience follows the Federal Reserve's initial interest rate hike in three years, which occurred earlier in the week. The upward momentum on Thursday, particularly in technology shares, suggests a market looking beyond immediate rate adjustments, focusing instead on the long-term prospects of the artificial intelligence (AI) sector to bolster corporate earnings.
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Dow Jones Industrial Average futures rose a modest 41 points (0.08%), while S&P 500 and Nasdaq-100 futures remained largely unchanged. This follows Thursday's impressive performance where the Dow surged 316 points (0.6%), the S&P 500 rallied 1.1%, and the Nasdaq Composite leaped 1.7%. Brian Levitt, chief global market strategist at Invesco, highlighted the ongoing strength of the AI trade, noting on CNBC's "Closing Bell" that a market downturn typically occurs when investment in key areas, such as hyperscalers in AI, retracts – a scenario not currently observed.
Investors are also keenly awaiting further commentary from Federal Reserve officials on Friday, including Governor Michelle Bowman and Kansas City Fed President Jeffrey Schmid, hoping for additional clarity on Wednesday's unanimous decision to raise interest rates.
Globally, Asian markets opened mostly higher. Japan's Nikkei 225 climbed 1.90%, and the Topix gained 0.17%. South Korea's Kospi advanced 2.67%, with the small-cap Kosdaq up 0.45%. Hong Kong's Hang Seng index rose 0.67%, and mainland China's CSI 300 added 1.05%. Australia's benchmark S&P/ASX 200, however, traded flat.
The week has presented a mixed bag for major U.S. stock averages. As of Thursday's close, the Dow Jones Industrial Average was down 1.5%, heading for its third consecutive weekly decline. The S&P 500 was also lower week-to-date by 0.3%, while the tech-heavy Nasdaq Composite stood alone in posting weekly gains, up 0.3%.
Oil prices fall as Saudi supply hopes outweigh fresh Houthi strikes
Oil prices saw a decline on Friday as market participants weighed ongoing conflicts between Saudi Arabia and Yemen's Iran-backed Houthis against indications of increased Saudi crude supply. Brent crude futures, the international benchmark, fell 0.94% to $103.83 per barrel, and U.S. West Texas Intermediate futures were down 0.88% at $101.01 per barrel. Reports that Saudi Arabia is making more crude cargoes available to Asian refiners, via ship-to-ship transfers near Oman's Sohar port, helped ease concerns about potential energy supply disruptions stemming from heightened Middle East tensions.
Bank of Japan raises interest rates to 31-year high, flags concerns over inflation
In a notable policy move, the Bank of Japan (BOJ) increased its policy rate by 25 basis points to 1.25%, marking its highest level since 1995. This hike signifies an acceleration in the BOJ's monetary policy normalization efforts, occurring just three months after its last rate increase. The decision, which saw a 7-2 split vote with board members Toichiro Asada and Ayano Sato dissenting, was widely anticipated by economists. The BOJ's statement cited a risk of inflation deviating upward beyond its 2% target amidst a backdrop of rising inflation (August headline rate at 1.9%) and a historically weak yen.
Mainland China and Hong Kong shares rise amid broad gains in Asian markets
Reflecting wider regional optimism, mainland China and Hong Kong stock markets opened with gains. Hong Kong's Hang Seng index rose 0.65%, led by strong performances in the basic materials and industrials sectors. Mainland China's CSI 300 also advanced by 0.58%.
Japan's August inflation holds steady as BOJ set to announce rate decision
Inflation in Japan for August remained steady at 1.9%, ahead of the anticipated Bank of Japan policy rate decision. Core inflation, which excludes fresh food and energy, softened slightly to 1.7% from 1.8%, while the BOJ's closely watched 'core-core' inflation rate (stripping out both fresh food and energy) held at 1.9%.
Japan's Nikkei 225 gains 1% ahead of central bank rate decision
Early Friday trading in the Asia-Pacific region was broadly positive. Japan's Nikkei 225 added over 1%, though the broader Topix remained relatively flat. South Korea's Kospi advanced 2.31%, and the small-cap Kosdaq saw a gain of 0.89%. Australia's benchmark S&P/ASX 200 was up 0.41%.
Asia-Pacific markets set to open higher after Wall Street gains
Asia-Pacific markets were poised for a higher open on Friday, drawing strength from overnight gains on Wall Street, which benefited from lower oil prices and a retreat in treasury yields. Futures for Japan's Nikkei 225 and Hong Kong's Hang Seng index indicated positive starts to their trading sessions.
The Nasdaq Composite on track to post winning week
As of Thursday's close, the Nasdaq Composite was performing strongly, positioned to end the week with a 0.3% gain. In contrast, the Dow Jones Industrial Average was down 1.5% for the week, and the S&P 500 was also lower by 0.3%.
Stock futures open little changed
Stock futures showed minimal movement when markets opened Thursday night. Dow Jones Industrial Average futures edged up by 19 points (0.04%), while S&P 500 and Nasdaq-100 futures experienced slight declines of 0.05% and 0.08%, respectively.
