Profit Taking May Lead To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to give back ground following the strong upward move seen over the past several sessions.

Traders may take a breather following the strong upward move seen in recent days, which has driven the major averages to new record highs.

The Dow and the S&P 500 have both closed higher for six consecutive sessions, while the Nasdaq has risen in five out of the past six sessions.

Profit taking may contribute to initial weakness on Wall Street, although any selling pressure is likely to be relatively subdued as traders worry about missing out on further upside.

Optimism about more fiscal stimulus may also provide support for the markets along with the recent slowdown in coronavirus infection rates.

House Democrats have unveiled a proposal providing $1,400 stimulus checks to individuals making up to $75,000 a year and couples who earn up to $150,000 a year.

Those income levels are unchanged from previous stimulus checks, although the proposal would phase out payments faster than previous bills and completely cut off individuals making more than $100,000 and couples making more than $200,000.

Following the strong upward move seen last week, stocks saw continued strength during trading on Monday. With the continued advance, the major averages all ended the session at new record closing highs.

The major averages saw further upside going into the close, finishing the day at their highs of the session. The Dow climbed 237.52 points or 0.8 percent to 31,385.76, the Nasdaq jumped 131.35 points or 1 percent to 13,987.64 and the S&P 500 advanced 28.76 points or 0.7 percent to 3,915.59.

The markets continued to benefit from recent upward momentum, which has propelled the major averages higher over the past several sessions.

A slowdown in the spread of the coronavirus in different parts of the world and vaccine rollout efforts have helped generate continued buying interest.

Traders also remain optimistic about the outlook for the global economy and the likelihood of additional U.S. fiscal stimulus.

Democrats have taken the first steps toward passing President Joe Biden’s $1.9 trillion relief package without Republican support but continue to favor a bipartisan approach.

Nonetheless, trading activity was somewhat subdued amid a quiet day on the U.S. economic front, with some traders away from their desks following the Super Bowl on Sunday.

Energy stocks turned in some of the market’s best performances in morning trading, moving higher along with the price of crude oil.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index surged up by 4.4 percent and the Philadelphia Oil Service Index spiked by 3.1 percent.

Considerable strength was also visible among airline stocks, with the NYSE Arca Airline Index soaring by 3.7 percent to its best closing level in almost a year.

Semiconductor, housing and networking stocks also saw significant strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.21 to $57.76 a barrel after jumping $1.12 to $57.97 a barrel on Monday. Meanwhile, after soaring $21.20 to $1,834.20 an ounce in the previous session, gold futures are climbing $10.70 to $1,844.90 an ounce.

On the currency front, the U.S. dollar is trading at 104.66 yen compared to the 105.23 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2096 compared to yesterday’s $1.2050.

Asia

Asian stocks ended mixed on Tuesday as U.S. lawmakers edged closer to new stimulus for the world’s top economy and a senior Federal Reserve official shrugged off concerns that further fiscal stimulus might generate an unhealthy jump in inflation this year.

Chinese shares led regional gains as investors cheered Beijing’s latest reform measures for the stock market. The benchmark Shanghai Composite Index rallied 71.04 points, or 2 percent, to 3,603.49, finishing above the 3,600 level for the first time since December 2015. Hong Kong’s Hang Seng Index edged up 0.5 percent to 29,476.19.

Japanese shares rose for the third straight day to close at a fresh 30-year high, with sentiment underpinned by strong domestic corporate earnings and hopes for additional U.S. stimulus.

Meanwhile, with the European Union approving the first shipment of Pfizer Inc.’s Covid-19 vaccine to Japan, the country hopes to begin vaccinating selected healthcare workers next week.

The Nikkei 225 Index rose 117.43 points, or 0.4 percent, to 29,505.93, its highest closing level since August 3, 1990. The broader Topix finished marginally higher at 1,925.54. Mining, securities brokerage, and information and communication stocks led the gains.

Australian markets declined as earnings started to trickle in. The benchmark S&P/ASX 200 Index dropped 59.50 points, or 0.9 percent, to 6,821.20, with financials and healthcare firms pacing the decliners. The broader All Ordinaries Index ended down 58.70 points, or 0.8 percent, at 7,102.10.

Energy stocks ended broadly lower despite oil prices hitting 13-month highs on the back of supply cuts by major producers and optimism over fuel demand recovery.

Commonwealth Bank of Australia gave up 1.4 percent ahead of its first-half results due on Wednesday. Healthcare stocks such as CSL, Resmed and Mesoblast slipped 1-3 percent.

Investment bank Macquarie Group surged 6.6 percent and fibre cement maker James Hardie rose over 1 percent after both reported strong quarterly numbers.

Australia’s business conditions weakened from the December high, while business confidence strengthened in January, survey results from the National Australia Bank showed today.

Seoul stocks ended lower for the second straight session as traders locked in profits ahead of the expiration of stock options and the Lunar New Year’s holiday.

The benchmark Kospi dipped 6.57 points, or 0.2 percent, to close at 3,084.67, giving up earlier gains on optimism over progress in the U.S. stimulus talks.

Hyundai Motor climbed 1.1 percent after heavy losses in the previous session, while its affiliate Kia Motors declined 1.6 percent.

Europe

European stocks have moved lower on Tuesday as investors took profits from the recent rally powered by the vaccine rollouts, falling coronavirus infections and U.S. stimulus hopes.

The downside remained limited after China’s central bank pledged a “stable” monetary policy, helping ease recent concerns about liquidity squeeze.

The pan-European Stoxx 600 Index has edged down by 0.2 percent. The German DAX Index has also fallen by 0.3 percent, while the U.K.’s FTSE 100 Index and the French CAC 40 Index are both nearly unchanged.

Osram Licht, the German maker of lighting products, has fallen after announcing that it is looking to sell its digital business unit.

Travel firm TUI AG has also moved to the downside after reporting a wider net loss for the first quarter of fiscal 2021.

British online retail company Ocado has also moved lower on the day despite narrowing its annual loss.

Meanwhile, ArcelorMittal has risen. The company said that it will sell 40 million Cleveland-Cliffs common shares for gross proceeds of $651.6 million and that it will use the proceeds to buy back shares in AccelorMittal.

Bellway shares have rallied. The property developer said it now expects housing completions for the full year to July 31, 2021 to increase to around 9,800 homes versus 7,522 last year.

Software company Micro Focus has also moved sharply higher on the day after reinstating its dividend.

Total SE has also risen. After reporting better than expected fourth quarter earnings, the French energy company pledged more cash for greener energy.

In economic news, German exports rose marginally in December, data from Destatis revealed. Exports gained 0.1 percent month-on-month, slower than the 2.3 percent increase in November. Economists had forecast a monthly fall of 1 percent.

At the same time, imports decreased 0.1 percent following the 5.4 percent rebound logged a month ago. Imports were expected to decline more sharply by 1.1 percent.

Elsewhere, data out of U.K. showed the country’s retail sales declined for the first time since last spring.

Total sales decreased 1.3 percent on a yearly basis in January as the current lockdown has hit non-essential retailers harder than in November, data from the British Retail Consortium showed. Like-for-like sales grew 7.1 percent.

U.S. Economic Reports

St. Louis Federal Reserve President James Bullard to is due to give the “2021 Dow Lecture: U.S. Economy and Monetary Policy” before a virtual event hosted by the National Institute Of Economic And Social Research at 12 pm ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $58 billion worth of three-year notes.

Stocks In Focus

Shares of Coty (COTY) are seeing significant pre-market weakness after the cosmetics company reported fiscal second quarter adjusted earnings that beat estimates but its revenues came in slightly below expectations.

Carrier Global (CARR) may also move to the downside after the maker of heating, ventilation and air conditioning systems reported weaker than expected fourth quarter earnings.

On the other hand, shares of Simon Property Group (SPG) are likely to see initial strength after the mall operator forecast an increase in its 2021 profit.

Education technology company Chegg (CHGG) is also moving notably higher in pre-market trading after reporting better than expected fourth quarter results and raising its earnings guidance.