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Investing.com – U.S. futures rose on Friday as signs of a dovish policy shift from the Federal Reserve left major averages on track to post their seventh straight week of gains. Elsewhere, Costco's quarterly results beat estimates, thanks in part to cost-conscious shoppers taking advantage of its budget-friendly options for groceries and essentials.
1. Futures rise
U.S. stock futures edged higher on Friday, suggesting a possible extension of this week's equity rally fueled by an unexpectedly dovish policy outlook from the Federal Reserve.
As of 05:04 ET (10:04 GMT), the contract had gained 117 points, or 0.3%, was up 13 points, or 0.3%, and was up 54 points, or 0.3%.
Wall Street's major indices all closed in the green the previous session, with all three posting positive results for the seventh consecutive session. It would be their best weekly winning streak since 2019. They closed 0.4% in the green after the 30-stock average ended at an all-time high on Wednesday. The benchmark also gained 0.3% on Thursday, while the tech-heavy stock gained 0.2%.
Encouraging stock markets on Wednesday was commentary from the Federal Reserve that suggested the central bank would begin cutting interest rates next year from more than two-decade highs. Stronger-than-expected retail sales on Thursday and cooling annual inflation numbers earlier in the week raised hopes that the Fed can sustain a so-called “soft landing” – a scenario in which price growth is slowed without an economic collapse and rise to trigger unemployment.
2. Gold is rising
Gold prices rose in European trading on Friday, extending a rise above key levels sparked by a decline in the dollar and Treasury yields after the Fed signaled it will cut interest rates in 2024.
The yellow metal rebounded from recent losses this week as the bank's comments led markets to price in at least three central bank interest rate cuts next year.
According to Investing.com, there is currently about a 67% chance that the first one will come as early as March. The prospect of lower interest rates reduces the opportunity cost of investing in gold, which offers no return and is largely driven by sentiment and safe-haven demand.
The dollar is also now on track for its biggest weekly decline in five months, with the greenback weakening particularly against the British pound and the euro after central banks in Europe took a much tougher policy stance than their US counterparts.
The weakening dollar helped make gold cheaper for foreign buyers, contributing 0.3% to $2,042.21 an ounce by 5:04 a.m. ET.
3. Crude oil rates set for first weekly rise in two months
Oil prices rose slightly on Friday, on track for their first weekly rise in two months, boosted by increasing optimism about demand growth next year as well as the weaker dollar.
At 5:03 a.m. ET, futures were trading 0.2% higher at $71.69 a barrel, while the contract rose 0.1% to $76.69 a barrel.
Both benchmarks are on track to gain about 1% this week, breaking a streak of seven straight weeks of losses.
The Fed's indications that borrowing costs could be lower in 2024 underpinned confidence that a stronger U.S. economy will support crude oil demand in 2024. The International Energy Agency backed up that belief by raising its global oil demand forecast for next year, citing an improving outlook for U.S. demand and lower oil prices.
Meanwhile, the dollar's decline has made oil denominated in the U.S. currency cheaper for foreign buyers.
4. Costco beats quarterly estimates
Costco Wholesale (NASDAQ:) shares rose in premarket trading in New York after the membership retailer posted quarterly sales and profits that beat forecasts.
Known for its massive warehouse locations and cheap everyday items, Costco has decided to keep prices low to attract budget-conscious shoppers wary of overspending at a time of high inflation and interest rates. Demand has increased sharply for the group's private label Kirkland Signature as well as its consumer goods categories such as groceries and sundries.
In a slightly rosier take on discretionary spending heading into the holiday season compared to many of Costco's competitors, Chief Financial Officer Richard Galanti added that spending on big-ticket items like televisions and appliances had improved somewhat. Sales on Black Friday and Cyber Monday were also better than forecast.
Costco reported first-quarter earnings per share of $3.58 and total sales rose 6.1% to $57.8 billion.
5. Chinese data is mixed as economic concerns remain
Chinese industrial production grew more than forecast in November even as retail sales rose less than expected, highlighting the ongoing challenge facing policymakers eager to revive growth in the world's second-largest economy.
Industrial production rose 6.6% year-on-year last month, data from the National Bureau of Statistics showed on Friday. The reading was above expectations for a 5.6% increase and accelerated from 4.6% the previous month. But retail sales rose 10.1% year-on-year, missing forecasts of 12.5%.
A key factor in the numbers was a low basis of comparison as Chinese factories and stores were still struggling with the final stages of COVID-era lockdowns at the end of 2022.
The continued sluggishness of China's post-pandemic recovery has worried investors. Ratings agency Moody's recently decided to lower its outlook for the country, pointing to a possible downgrade of its credit rating. Calls for the Chinese government to provide more targeted fiscal support are also becoming louder.
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