Wall Street stocks set to run out of fuel after an upbeat week
New York (Oct 9) Investors may have trouble pushing US stocks higher on Friday, with stock futures indicating a struggle at the end of a week that has delivered sizeable gains.
Some gloomy news came after the close Thursday, as Alcoa Inc. slashed its outlook for China’s production of cars and heavy-duty trucks. Also, some euphoria after the release of minutes from the latest Federal Reserve policy meeting seemed to be dissipating.
While global markets pushed higher Friday, futures for the Dow industrials ESZ5, +0.12% were barely moving at 16,966, while those for the S&P 500 index YMZ5, +0.14% dipped 6 points to 2,005. Futures for the Nasdaq 100 index YMZ5, +0.14% fell 6.25 points to 4,338.50.
Alcoa AA, -3.09% shares dipped 4% in thin premarket trade after the aluminum producer said it now expects 2015 automotive production growth in China to be in the range of 1% to 2%, down from a previous outlook of 5% to 8% growth. Alcoa’s results are considered the unofficial kickoff of earnings season.
“If last night’s Alcoa figures are setting a template for this latest U.S. reporting season, then markets could see last quarter’s $11 trillion equity valuation collapse being added to,” said Alastair McCaig, senior market analyst at IG. “Once again, the institutional analysts had set a relatively low bar, and yet Alcoa still tripped.”
Futures pulled back on the heels of Thursday’s fifth straight session of gains for the Dow industrials DJIA, +0.82% as it scored a triple-digit gain and closed above 17,000 for the first time since August. The S&P 500 index SPX, +0.88% rose 0.9% to 2,013.43, closing above its 50-day moving average. Those indexes are up a respective 3.5% and 3.2% on the week.
Those advances came after Fed minutes showed officials were reluctant to hike interest rates due to global risk concerns. Mike O’Rourke, chief market strategist at JonesTrading, criticized the post-minutes gains, saying they were “another example of today’s broken markets”.
“Who is gleaning market-moving insights into three-week-old minutes while the data has shifted over the subsequent time?” said O’Rourke in a note. “The equity market is once again in the position where the price action is the lone bullish catalyst.” And that, he says is the most fleeting of all potential drivers of asset prices.
Stocks to watch: Outside of post-earnings reaction from Alcoa, shares of Gap Inc. GPS, +1.97% could see some pressure after the fashion retailer reported late Thursday that total sales fell 1% in September, hit by a stronger dollar and weakness for its Banana Republic unit.
Shares of Ascena Retail Group Inc. ASNA, +0.07% looked set to rise 9% in premarket trading, after Golden Gate Capital disclosed that it has a 9% stake in the company.
Shares of Apple Inc. AAPL, -1.16% could be active after two reports out Thursday showed continued declines in personal-computer shipments, but Apple‘s market share increasing.
Read: Elon Musk: Here’s why we call Apple the ‘Tesla graveyard’
Other markets: While U.S. stocks looked set to run out of steam, Asian shares rallied in the wake of the Fed minutes and hopes for lower U.S. rates for longer. The Shanghai Composite Index SHCOMP, +1.27% closed up 1.2%, while the Nikkei 225 index NIK, +1.64% gained 1.6%.
European stocks SXXP, +0.87% were also enjoying a rally, driven by gains for commodity-related stocks.
A weaker dollar gave way to a rally for crude oil, with U.S. futures prices CLX5, +1.72% up $1 to $50.39 a barrel. Gold prices GCZ5, +0.82% climbed as the dollar pulled back, gaining $11.10 to $1,155.40 an ounce.
Source: MarketWatch
