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U.S. stock futures flat ahead of Q3 GDP as earnings hit halfway mark

Stock Markets Oct 28, 2016 06:55AM ET
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© Reuters. Wall Street points to higher open with eyes on GDP and OPEC, Fed rate hike implications in focus
 
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Investing.com - Wall Street futures pointed to a flat open on Friday as investors remained cautious over the upcoming growth figure and its implication for the future path of Federal Reserve (Fed) monetary policy, while earnings season hits the halfway mark and eyes were on the technical meeting in Vienna where oil producers would haggle out details on the possibility of curbing oil output.

The blue-chip Dow futures gained 23 points, or 0.13%, by 6:53AM ET (10:53GMT), the S&P 500 futures advanced 4 points, or 0.16%, while the tech-heavy Nasdaq 100 futures rose 4 points, or 0.09%.

Friday’s spotlight will be on the preliminary data on third quarter gross domestic product (GDP) at 8:30AM ET (12:30GMT) Friday, though the risk for markets may be to the downside with Fed regional banks forecasting lower growth than expectations.

Consensus expects the reading to show a significant strengthening from the second quarter’s 1.4% growth to a 2.5% expansion.

However, the latest Atlanta Fed projection released on October 27 was at 2.1%, while the New York Fed’s forecast from October 21 was for 2.2% growth.

With several Fed officials having indicated that interest rates could rise in December if the economy remains on track, market participants were keeping a close eye on the reading.

The U.S. central bank holds its next two-day monetary policy meeting on November 1 and 2 with markets currently pricing in the odds of a rate hike at just 8.3%, according to Investing.com’s Fed Rate Monitor Tool.

Analysts widely believe that the U.S. central bank will hold off on making a move next week due to the fact that the presidential elections take place shortly afterwards on November 8.

Fed fund futures currently place the probability of a move at the following meeting in December at 73.9%.

In other economic data out Friday, the University of Michigan will revise its reading on consumer sentiment. The preliminary data, which showed the gauge hitting more than a one-year low, is expected to be slightly revised to the upside.

The other major event to watch on Friday was the beginning of the technical meeting of the Organization of the Petroleum Exporting Countries (OPEC) to discuss the details of an eventual agreement on oil production freezes and/or cuts by member countries.

Analysts have been skeptical that OPEC would reach a meaningful deal on curbing crude output as Iran, Iraq, Kenya and Libya –equivalent to one third of the cartel’s production- seen as being excluded from taking any action.

OPEC members were scheduled to meet on Friday with invited non-OPEC producers expected to join the group on Saturday to continue discussion and focus on Russia to see if Moscow will clarify its intent to participate.

Oil prices were lower ahead of the gathering.

U.S. crude futures fell 0.48% to $49.48 by 6:55AM ET (10:55AM GMT), while Brent oil lost 0.26% to $50.34.

In light of the pending Fed decision, corporate earnings were moving to the back burner after reports from S&P companies hit the halfway mark.

Specifically, 249 of the components of the S&P 500 had reported quarterly results as of Thursday, with earnings-per-share (EPS) having risen by 6.7% and sales having advanced by 1.6%, according to data from The Earnings Scout.

73% of those firms have beat on profit with 61% exceeding revenue expectations.

On Friday, investors will trade on earnings reported after the prior close. Alphabet (NASDAQ:GOOGL) saw shares rise nearly 1% in the after hours market as the Google parent beat on both top and bottom line.

However, Amazon.com (NASDAQ:AMZN) tumbled nearly 5% in Friday’s pre-market trade after its holiday season forecast disappointed.

Later in the session, market participants would focus on earnings reports from blue-chip oil companies Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM).

Mastercard Inc (NYSE:MA), Hershey Company (NYSE:HSY) and Xerox (NYSE:XRX) were also among firms scheduled to report before the open on Friday.

Outside equities, sovereign bonds were continuing their sell-off with yields rising to five-month highs as investors demand a higher payout to expectations of rising inflation and the speculation that the Fed will tighten policy at the end of the year.

Benchmark U.S. 10-Year and euro zone yields rose to their highest since May on Friday and UK 10-Year were firmly on track for their biggest monthly rise since January 2009, the second biggest in over 20 years.

U.S. Treasury yields could see another leg up in American trade if the U.S. GDP reading beats consensus, cementing the possibility of the next rate hike arriving in December.

U.S. stock futures flat ahead of Q3 GDP as earnings hit halfway mark
 

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