Friday is light on economic news But Tesla, Kroger, a…

Stock index futures point to a higher open in light of economic news, but heavy results for individual stocks like Tesla, Kroger, Zscaler, DocuSign, and more.

5 minute read

Photo by Getty Images

Key points to remember

  • The Bulls are looking to extend their winning streak to three days in a row

  • Stocks rose on Thursday despite the ECB’s 75 basis point rate hike

  • Falling oil prices could hurt the Canadian loonie

Shawn Cruz, Chief Operations Strategist, TD Ameritrade

(Friday market open) Stock index futures point to a higher open in light of the economic news.

Market potential movers

Investors are looking to end the shortened trading week on a positive note as the S&P 500 Futures Contracts were up 0.69% before the opening bell. If the bulls can hold on to those gains, they will have a three-day winning streak heading into the weekend.

The Cboe Market Volatility Index (VIX) shows that investor confidence is higher because the VIX is lower. Yesterday, the VIX fell back below the key level of 24.5. Today, the VIX was even lower approaching the 23 level before the opening bell.

One of the reasons for the positivity is a weaker US dollar. The US dollar index ($DXY) was down 0.64% before the opening bell on what has already been a volatile day for the greenback. The euro had a strong push against the dollar in the spot market, but the greenback was able to push back and pare some of its losses against the euro.

On a day like today, it’s important to keep volumes in mind, as low volume rallies often reverse quickly.

In the absence of economic news, several companies are making headlines.

You’re here (TSLA) rose 1.3% in premarket trading after learning the company plans to build a lithium refinery for its electric vehicle battery production in Texas.

navigate (NAVI) was downgraded by Barclays because the student loan manager’s revenue is expected to suffer under President Biden’s loan forgiveness program.

A few other stocks also reported profits. Kroger (KR) reported earnings before the opening bell that were better than expected, then raised its full-year earnings forecast. The news prompted the stock to rebound 3.72% in the premarket session.

After the market closed on Thursday, a few cloud computing companies reported earnings. DocuSign (DOCU) reported better-than-expected earnings and revenue, sending the stock up 19% in extended trading hours. Around the same time, Z-scale (ZS) reported earnings and revenue above expectations. The cloud security company raised its earnings forecast, prompting the stock to rebound 10.6%.

Two outdoor companies may be looking for help after disappointing earnings reports last night. Smith & Wesson brands (SWBI) saw sales fall to their lowest level in 13 years, leading to earnings falling short of expectations. SWBI fell 4.47% in trading after the close. Meanwhile, American outdoor brands (AUG) plunged 6.52% after its earnings fell short of target. AUGUST surprised investors with a loss for the quarter instead of the seven cents per share that analysts had predicted.

Luxury furniture retailer HR (RH) beat earnings and revenue, but offered a weaker-than-expected revenue outlook after yesterday’s bell. The stock was down about 1% in after-hours trading, but rose 1% in the pre-market session.

Market Minutes Review

The European Central Bank (ECB) yesterday raised its key rate by 75 basis points, in line with market expectations. The only real surprise was that the ECB did not cut its economic growth outlook as much as expected. This move was expected, so European equities were relatively unaffected by the announcement. The Europe STOXX 600 rose 0.50% on the day.

The US dollar index ($DXY) traded lower as the euro appreciated against the dollar.

Dollar weakness did not help equities as investors appeared hesitant to take advantage of Wednesday’s gains. However, a late-day surge pushed the major indices into positive territory. The S&P 500® Index (SPX), Nasdaq ($COMP) and the Dow Jones Industrial Average ($DJI) increased by 0.66%, 0.60% and 0.61% respectively.

A weekly report on jobless claims below expectations showed that the labor market remains strong. This was a red flag for the Federal Reserve and its goal of curbing inflation. Fed Chairman Jerome Powell also reiterated the central bank’s determination to bring inflation down during a televised CATO Institute monetary conference yesterday morning. In response to inflationary news, the 2-year Treasury yield rose about five basis points to 3.49% and the 10-year Treasury yield (TNX) gained three basis points to 3.29%.

Investors appeared to avoid two defensive sectors, Utilities and Consumer Staples, and these were the only sectors to end the day in the red. However, defensive sector healthcare was the best performer.

Energy finished in the middle of the pack as WTI Crude Oil Futures rode a rally but failed to clear the former support level which appears to be resistance now. Oil eventually stabilized at $83.26 a barrel for a gain of 1.7%.

CHART OF THE DAY: The US Dollar/Canadian Dollar Spot (USD/CAD—candlesticks) rises when the greenback is stronger than the loonie, but falls when the loonie is stronger than the dollar. USD/CAD often moves against WTI Crude Oil Futures (/CL—pink) because almost all of Canada’s oil and gas is exported to the United States. Data sources: ICE, S&P Dow Jones indices. Chart source: the thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Three things to watch out for

BALANCE OF PAYMENTS: In 2022, we saw how a currency can be strengthened by raising interest rates to induce foreign investors to swap their currency for the higher yielding currency. Another influence on the strength of a currency is the balance of payments. It is the need to exchange one currency to buy goods and services in another currency. For example, US companies may need to buy oil from a Canadian oil company. The American company must exchange its American dollars for Canadian dollars, which increases the supply of greenbacks and the demand for loonies.

THE CANADIAN MINT: The Canadian dollar had an interesting week this week as the Bank of Canada raised its key rate by 75 basis points, which should have strengthened the loonie. However, the fall in oil prices portends a drop in oil demand and a decline in the balance of payments which could weaken the loonie.

FRACTURE AND DRILLING: Alongside the UK’s plan to cap energy costs for British citizens, the same bill could also reopen fracking and offshore drilling to energy companies. The news is likely to be a boon for UK shale gas companies that use fracking techniques like IGas Energy PLC and Egdon Resources PLC. Offshore drilling companies like Oil and gas in the UK, Union Jack Oiland API BP (BP) could also benefit.

In addition, the New York Stock Exchange observed a minute of silence in honor of the death of Queen Elizabeth II of Great Britain.

Notable Calendar Items

September 12: Oracle Earnings (ORCL)

September 13: August Consumer Price Index (CPI) and United Natural Foods (UNFI) earnings

September 14: August Producer Price Index (PPI)

September 15: US August Retail Sales, Philadelphia Fed Manufacturing Index and Adobe Earnings (ADBE)

September 16: Michigan Consumer Sentiment

good trade,

Shawn Cruz

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