Top 5 Things to Know In the Market on Friday

1. Retail sales set to recover in second quarter

After the retail sector tanked Thursday as worrisome earnings sent Macy’s (NYSE:M) crashing 17%, investors will keep a sharp eye out on data to gauge consumer strength at the beginning of the second quarter.

The Commerce Department will publish data on April retail sales at 8:30AM ET (12:30GMT) Friday. The consensus forecast is that the report will show retail sales rose 0.6% last month, snapping back after two straight declines.

Core sales are forecast to inch up 0.5%, after holding flat a month earlier.

Markets will also pay close attention to preliminary data on consumer sentiment in May out from the University of Michigan at 10:00AM ET (16:00GMT). The index is expected to remain steady at 97.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

2. Fed will keep eye on inflation data

Apart from retail sales, markets will also look for trends in prices on Friday and gauge their impact on Federal Reserve (Fed) policy.

The Commerce Department will also publish April inflation figures at 8:30AM ET (12:30GMT) Friday. Market analysts expect consumer prices to ease up 0.2%, while core inflation is forecast to increase 0.2%.

On a yearly base, core CPI is projected to climb 2%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

Rising inflation would be a catalyst to push the Fed toward raising interest rates.

According to Investing.com’s Fed Rate Monitor Tool, Fed fund futures currently price in the chance of the first hike arriving in June at around 74%, while odds for two increases by the end of the year hovered around the 50% threshold.

3. Global stocks mixed ahead of key U.S. data

Asian stocks retreated from a near two year high on Friday, but the Shanghai Compositebroke the general trend, paring its fifth weekly decline.

European equities moved slightly higher Friday after preliminary data earlier showed that German gross domestic product rose 0.6% in the first quarter, beating smaller expansions seen in the U.S., U.K. and France.

U.S. stock futures pointed to a slightly lower open on Friday as investors looked ahead to key economic reports. At 5:41AM ET (9:41GMT), the blue-chip Dow futures lost 0.18%, S&P 500 futures fell 0.24% and the Nasdaq 100 futures traded down 0.19%.

4. Oil on track for weekly gains of 3%

Oil pulled back on Friday as investors took profit after two sessions of strong gains.

Market players showed caution Friday ahead of the latest weekly data on U.S. drilling activity and continuing concern that the increase in stateside production would derail OPEC’s attempts to cut down on the global supply glut.

Last week, oilfield service provider Baker Hughes said rigs rose by 6 to 703 for the sixteenth straight weekly increase.

U.S. crude oil futures slipped 0.08% to $47.79 at 5:42AM ET (9:42GMT), while Brent oildropped 0.08% to $50.73.

5. U.S.-China trade relations ‘hitting a new high’

The United States and China will expand trade in beef and chicken and increase access for financial firms, as part of a plan to reduce the massive U.S. trade deficit with Beijing, U.S. Commerce Secretary Wilbur Ross said on Thursday.

As part of a deal that began to be negotiated between the world’s two largest economies last month, the countries have agreed that China will allow imports of U.S. beef, while Chinese cooked poultry may now enter U.S. markets.

U.S.-China relationships are now hitting a new high, especially in trade,” U.S. commerce secretary Wilbur Ross told reporters, adding that the agreement will help to bring down the trade deficit.

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